• What is the rate of inequality in Perak?
• What is the comparison between Perak and Malaysia?
• What is the way forward for inclusive growth?
Equality simply means that there should be no glaring differences in living standards, quality of life, or the well-being of the people. In ensuring inclusive growth for Perak, the benefits of economic growth must be felt by the masses and distributed equitably. This will improve the quality of life for the majority of the people, and is necessary to promote social justice and cohesion, particularly in a multiracial society such as Perak.
This can be achieved by reducing income inequality which causes economic instability, social issues, and health problems. In order to determine the effectiveness of policies implemented to this end, the Gini coefficient has been used to measure income gaps between the values of 0 and 1, with 0 signifying complete equality and 1 being complete inequality. Figure 1 shows a declining trend in Malaysia from 1974-2014. As observed, inequality was highest in 1976 followed a steady decrease.
INCOME INEQUALITY IN PERAK
The rate of inequality can be seen more clearly in Table 1, which compares inequality of income in Malaysia and Perak from 1974 to 2012, measured by the standard indicator of inequality, the Gini coefficient.
The following observations can be made from Table 1: firstly, it highlights the highest (worst) recorded income inequality in 1976, with the Gini coefficient of 0.557 and 0.525 for Malaysia and Perak, respectively. Since then, the trend has been in decline.
Remarkably, it appears that income inequality in Perak is more buoyant than in Malaysia as a whole. Income inequality in the state is generally lower than its national counterpart throughout the period of 1974-2014. During this time, the average Gini coefficient is 0.464 for Malaysia and 0.415 for Perak. These figures indicate that Perak outperforms Malaysia in overcoming income inequality, figure 2 depicts this point clearly.
WHERE DOES PERAK STAND?
Perak is determined to blaze the trail. The success of its past policies and that of the other states have to be measured so as to improve effectively and anticipate future challenges more efficiently.
Figure 2 compares Perak’s performance in comparison with other Malaysian states within the period of 2012 to 2014. It shows that the most equal income distribution occurred in Pahang (0.354), and the worst in Perlis (0.455). Perak stood at number 5 from the bottom. Despite its unchanged position in 2014, the state had shown much improvement.
It is interesting to note that in just two years (2012 to 2014) Perak surpassed its neighbour, Selangor. This reversal in trend can be attributed to Perak’s commitment to implement a policy of inclusive growth focusing on the lower income demographic, which was announced in 2012.
THE WAY FORWARD
The state appears on to be on the right track in leveling income inequality. This must be reinforce so it result in income and economic growth which is inclusive.
1) The state should improve education standards as this increases the graduation rate from upper secondary school to tertiary level. Perak’s talents must be retained with existing mechanisms like PEKA.
2) The state needs to tighten its operations by preventing leakage of resources, which is a major cause of income inequality.
3) The state needs to have comprehensive Household Expenditure Survey (HES) and Household Income Survey (HIS) data from the Department of Statistics (DOS) in order to perform more detailed analyses and introduce a well-informed policy on the issue of inequality.
With the use of such available mechanisms, inequality can be targeted better.