Malaysia’s evolving economy has sparked a heated debate on what it truly means to be “rich.”
The introduction of the T15 (top 15%) classification in the 2025 Budget has challenged the long-standing B40 (Bottom 40%), M40 (Middle 40%), and T20 (Top 20%) income groupings, sparking discussions about their relevance and accuracy.
Khazanah Research Institute (KRI) researchers Gregory Ho and Dr. Suraya Ismail have argued that these categories give a misleading impression of affluence. “Income classifications are often mistaken as absolute indicators of wealth,” they noted, highlighting the failure to account for disparities within each group.
The Misleading Nature of Income Classifications
While the B40, M40, and T20 focus on income levels, they blur the lines between wealth and income. Wealth includes assets, properties, and social capital, making it a much broader metric than income alone.
In Malaysia, what defines “rich” is complicated. While poverty has clear thresholds like the national poverty line, affluence is relative, shaped by national and global contexts. For example, in wealthier nations, being “rich” might involve owning luxury properties or financial portfolios. In Malaysia, it might simply mean having financial security and a decent home.
KRI’s New Framework: From B40 to B20, M50, and T30
KRI has proposed a new classification system based on equivalised income, which adjusts household income to account for size and composition differences. This creates three groups:
- Bottom 20% (B20): Households with the lowest equivalised incomes.
- Middle 50% (M50): A diverse group representing Malaysia’s economic backbone.
- Top 30% (T30): Households at the higher end of equivalised income.
This approach challenges assumptions that all T20 households are affluent.
Understanding Equivalised Income
Equivalised income is a method of adjusting household income by considering family size and composition. For instance, a household earning RM4,000 per month with four members faces more financial strain than a single-person household with the same income.
This system ensures an “apples-to-apples” comparison, enabling policymakers to better understand household vulnerabilities.
Key Insights from KRI
- M50 Households Are Financially Vulnerable
Despite their “middle-class” status, many M50 households lack access to government aid and high-end opportunities. They are excluded from welfare programs yet struggle to achieve upward mobility. - T30 Is Not Homogeneous
Not all T30 households enjoy the same level of affluence. The upper T15 may experience considerable wealth, but the lower T15 faces challenges more akin to the M50 group. - Policy Challenges
Policymakers must grapple with the difficulty of targeting resources effectively. Excluding “rich” households from government benefits without a nuanced understanding of income and wealth disparities can lead to inequities.
What This Means for Policy and Society
KRI’s findings suggest the need to redefine how Malaysia addresses economic vulnerabilities. Instead of focusing solely on identifying the “rich,” policies should aim to tackle the financial fragility of the M50 and lower T30 groups.
For Malaysia’s economy to thrive, addressing these disparities will be key to fostering an inclusive and sustainable future.
