A Fresh Take on Reducing Inequality and Enhancing Mobility In Malaysia

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KEY FINDINGS

1. Current State of Inequality
Malaysia has made impressive strides in economic growth and poverty reduction over the past few decades, setting the stage for its transition to high-income nation status between 2028 and 2030. The report highlights the importance of building on this progress to ensure that everyone benefits. Without further efforts to address inequality and enhance economic mobility, around 6 in 10 Malaysians could still have incomes below the high-income threshold when this milestone is reached. Strengthening access to quality education, healthcare, and employment opportunities will be key to ensuring that economic prosperity is shared by all.

2. Public Sentiment and Urgency
A recent survey shows 70% of Malaysians perceive the income gap as wide, with 63% advocating urgent government action to reduce inequality. This highlights the national demand for a fairer society and emphasizes the need for policies that drive equal opportunities.

3. Economic Mobility Challenges
Absolute mobility is high, as most Malaysians have surpassed their parents in education, health, and comfort. However, relative mobility-moving up the economic ladder compared to others-remains low. Many from the poorest 20% stay at the bottom, while those from wealthier backgrounds remain advantaged.

4. Earnings inequality
More Malaysians, even among the poor, are getting higher education degrees. But declining skills premiums in recent years, coupled with weak growth in high-skill job creation, may be contributing to the stagnation in inequality reduction. Earnings inequality is linked to early life conditions - from mothers' antenatal care to early childhood nutrition to the quality of schooling. Redressing these inequalities later in life is costly and difficult; and early intervention is essential.

6. Key Policy Areas for Action

• Enhance Opportunities: Improve productivity through targeted upskilling, ensure universal preschool access, and uplift education quality in underserved areas
• Strengthen Social Protection: Expand spending, enhance targeting, and consolidate programs for efficiency.
• Inclusive Investments: Boost health and education funding, implement tax reforms, and communicate benefits of equitable policies to the public effectively.
• Address Spatial Inequalities: Implement place-sensitive policies and improve service accessibility.
• Track Progress: Develop comprehensive inequality metrics, monitor mobility, and measure service quality to drive informed policy.
• Fiscal and Social Support Initiatives: Reforming tax policies will create fiscal space for inclusive investments.

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