Wednesday, September 11, 2013

Documenting Income Inequality: 2012 Update

I posted the data on household income over a year ago, but the 2012 household income survey summary results have since been released, and I’ve had quite a few queries about this issue lately.

[As always, you can click on any of the graphs to view a larger version. Note that all the data presented here is inflation adjusted (2000=100); please refer to the sources linked to at the bottom of this post for the raw data]

So this post serves as an update to my original post, incorporating the latest data up to 2012 (in RM per month):


Here we see overall income gains have accelerated since 2009, while overall inequality has decreased:


…except for Malaysian Indians, where the Gini coefficient has risen from 0.424 to 0.443. Over the medium term, income inequality appears to be on the downtrend (again, except for Malaysian Indians), although progress is painfully slow.

A look at the income strata data shows where Malaysian Indian households are diverging (ratio of mean top and middle incomes against low income households):


Here’s a closer look at the “Indian” problem:


High income Malaysian Indian households are showing substantial income gains over both middle and low income groups. While Malaysian Indian incomes are close to the average for Malaysia as a whole, the distribution of that income is skewed towards the top. Anecdotal evidence suggests that this skewing of income is present even in the top 20%.

From a different perspective (ratios to Malaysian average):


High and middle income Indian households have gained in the last 3 years (the top more than the middle), but poor Indian households have seen a continuous decline relative to Malaysian averages since 1997. I should note however, that the ratios are still all above unity i.e. higher than the Malaysian average.

Which leads me to the comparison with the Bumi position, which is especially appropriate given the pending announcement by the PM this weekend. And here we can see why (RM per month; ratio to Malaysian averages):



The substantial progress of Bumi incomes relative to the Malaysian average seen since 2002 has effectively stopped, except for the bottom 40% of households, although even here progress has slowed. This is contrary to my expectations, and just as it was hard to explain the reasons for the gains seen between 2002-2009, it’s been equally hard to figure out why Bumi income growth has since lagged, especially at the top of the distribution.

For contrast, here’s what’s happening to Chinese households (RM per month):


As noted in my earlier post, incomes for Chinese households in the top 20% and middle 40% were effectively flat or declining from 2002 to 2009. Since then however, they have advanced across the board.

To underscore the point, here’s how the incomes of Chinese households have compared to the Malaysian average (ratio to Malaysian averages):


We see the same picture here of income generation stronger than the Malaysian average.

So the story that emerges is that although overall inequality and inequality within ethnic communities is being slowly reduced (except as noted, among Malaysian Indians), intra-ethnic disparities have generally begun to widen again (ratio against Malaysian averages):


Not unexpectedly given these developments, the rural-urban income gap has stopped closing as well:


These are all troubling developments.

I continue to be flummoxed attempting to explain these movements and trends in incomes across time as no single factor appears to be responsible, or at least in a way that is amenable to statistical testing. There’s certainly more than a few candidates for causality, as a read of the comments section of my previous post shows (the comments are well worth your time reading). But at this stage, they continue to be no more than hypotheses.

This is a terribly important question to answer – not knowing the manner and direction of causality means policy making based on supposition and not on evidence. And if you can’t quantify what you’re doing, there’s no objective yardstick for measuring success or failure.

Technical Notes:

  1. Data on household incomes from the Economic Planning Unit
  2. Summary results from 2012 HIS from DOS
  3. Consumer price index data from DOS (spliced series rebased to 2000=100)


  1. HIS & HES data (or methods) aside, my concern is the relatively stagnant poverty threshold.

    I think over time it will become difficult to explain the movements along blurring ethnic lines (population demographics, household characteristics or what not). Urban-rural divides and socioeconomic mobility will perhaps be more pertinent.

    1. @anon 3.04

      Pertinent yes, measurable no, at least as far as mobility is concerned. There is still no long term study on economic and social mobility in Malaysia, though I believe one is now inthe works.

  2. Hisham,

    Suggestion: maybe it's distorted by geographical characteristics

    Do it across Malaysian states, and it fits (well fits is a pretty loose descriptor for 13 states) relatively well with theory.

    Then again, if this theory holds one might think that policies to rebalance or redistribute income (if it were truly important for development at this stage) would be done on a geographical basis. If anything, the greater Klang Valley NKEA might make things worse (?)

    Anyhow, I guess the effectiveness of these policies are still slightly academic - notwithstanding BNM's take on BR1M disbursements done earlier this year.

    Side note: Are you going to the MEA dinner this Friday?

    1. Hi Jason,

      I don't know how relevant Kuznet's hypothesis would be. It might fit on a cross-sectional basis, but over time, I don't think so.

      We need more data!

      Re: MEA dinner. No, I'm not. Too busy this week.

  3. should we also look at the median value/s..?
    to manage the impact of the anandas or the bukharis shoring up the numbers...? there're many vincents or yeohs thus impact is less though being consistent would be good..

    1. @anon 6.04

      Yes, median would be better, but you should know that the income data comes from a sampled survey, not a complete tabulation of all households. The big boys aren't in there...

  4. Hi Hisham,

    Thanks for crunching these numbers. Really useful. Just wondering if you could indulge me and also look at the top 10% v bottom 10%, and top 5% v bottom 5%.


    1. Greg,

      This is from publicly available data. I can't publish anything more than that, unfortunately. However, whenever you're in town drop me a line...

  5. A question on wage level. How does subsidy effect our wage level. Many feel that a similar position in malaysia makes less than other countries like Singapore etc.and it also led to low increament. Does subsidy has a role in this?

    1. Purchasing power parity? The Big Mac Index?

      You might as well ask why a bus driver with SBS or SMRT in Singapore is paid around S$1,500 per month. For Singaporeans, this is "low wage". For Malaysians, apply a conversion rate of 2.5 Ringgit to 1 Sing Dollar, and watch their eyes light up.

    2. Oh, really?

      I suppose that Malaysia is now classified as a "tiger economy"?

      It has "graduated" from the ranks of the developing economies, yes?

      And I love pushing this guy's buttons - The Whistleblower aka Warrior 231. It doesn't take much to set him off....pity, though, that he's whistling in the wind.

      Btw, Hisham - I was under the impression that off-color language and derogatory remarks was off-limits in your blog?

      Have the rules changed?

    3. And, Hisham - how do you explain the reality that hundreds of Malaysians cross the Causeway daily to work in Singapore?

      Are they deluded individuals or rational practitioners of purchasing power theory and the doctrine of comparative advantage?

      Or, maybe, it's as basic as 1 Singapore Dollar fetching 2.5+ Ringgit?

      And, maybe, some Malaysians can't be choosers about where they work, seeing as how they have families to support and all.

    4. @Jasper,

      No, the rules have not changed. But generally weekends is family time, and I'm usually offline.

      As for Malaysian working in Singapore, I wasn't aware that I had to explain anything. Singapore has a higher income level, which is self-evident. But that has little to do with the nominal rate of exchange. One day, I'll write a post showing the evidence, but I'm a bit busy today.


      Yes, I'm a pig. Technically half a pig (or was it 17/32 pig - Dad says there's a Chinese great-great-great grandmother in the family tree somewhere).

      But since it's my blog you can call me Mr Pig.

    5. @Jasper Bloodstone

      I am talking about dollar per dollar, a person working in MY the same position gets paid less than Singapore.

      Does subsidy has a hand in that? As price distortion and inefficiency is caused by subsidy.


      very interesting article. Singapore's domestic purchasing power is comparable to Malaysia. Johor is really a necessity for them.too bad we dun have a country we can daytrip to for groceries and properties. maybe when South Thailand gets their act together.

  6. Hoi, hold your horses, blogger or you will burst a vein over nothing.

    You have done it again i.e, twisting comments outta their shape and spin into needless rage mode to boot.

    You see, I dint call you names, not even one of the cloven-hoofed variety. That was directed at Mr Idiot You-Who.

    Anon 12.09 was talking about something else and Mr Idiot butted in opportunistically to denigrate Malaysia. So I called him out and all hell breaks loose in your corner. Gone soft on trolls like Mr Idiot eh? Lost your marbles or just being true to form with your spineless capitulation to Idiot's childish demands.

    I think I spoke too soon of you having better sense than I imagined. Must be those 'moyang' genes at work...hahahaha but the point is, it debases your blog not to mention your good-self. With your bad self now skulking around unchained, I reckon any comment remotely whacking idiots will be canned (including this one).

    Hei Man, I am not here in some effing popularity stakes and couldnt care a hoot if my comments get canned at the behest of cowardly idiots. But to leave another's disparaging comments unmolested speaks volumes about your double standards. Remember, if you put out a blog inviting comments, you sink or swim in the drivel that pours in (and that explains why blogger, wordpress etc have options to suppress the comments section, otherwise its game on).

    Seems to me that 'truth' as expounded in your Code seems pathetically emaciated in these parts. And if we spinelessly stoop to every whinge or threat and entertain calls for bans, that sort of sums up who we really are.

    You still can do the decent thing to redeem your good name by putting up my clean comments and let the readers judge for themselves if you have a shred of decency left that is.

    P/s: Nope, despite your magnanimous invitation, I wont call you that as the rot (if what you say about your ancestry is true)in you is too diluted to qualify you to be a fully fledged one.

    The Whistleblower

    1. Whistleblower,

      If that wasn't you, then my sincere apologies.

      Clean comments of any kind will be left alone. You are free to disparage each other's opinions (or mine for that matter) to your hearts content. Foul language, racist epithets or ad hominem attacks however will be terminated with extreme prejudice.

      Unfortunately, Blogger doesn't allow editing of comments, or I would have left your links up. Your points were pertinent, but I couldn't leave your comment "as is".

  7. The links were good i must say and it is a pity, anyhow, thanks Whistleblower for sharing.

    Zuo De

    1. IN the interests of fairness, here's the links referred to:



  8. Hishamh,

    The raw data that made up these charts, do they get normalised first? That is, the billionaires, are they included in these data?