World Bank: Study shows income divide within races more an issue than between different races

Yahoo

05-02-2025

KUALA LUMPUR, Feb 5 — Malaysia has the highest rate of income inequality among peers nearing high-income status, with inter-ethnic disparity being the biggest contributor despite the widely-held belief that wage gaps between races are bigger, according to the World Bank's latest report released this morning.
The report, which deep dived into the evolution of inequality and mobility in Malaysia over the last two decades and into the post-Covid era, bucked previous studies that only focused on ethnic gaps or regional disparity.
The Bank said the latest study emphasises that a great extent of inequality occurs within these groups and highlights the intersection of ethnicity and location as a salient marker of inequality.
'Nationally, the majority Bumiputera's average income is still lower than that of Chinese Malaysians and Indian Malaysians, although the gap has slowly narrowed over the last 20 years,' it said.
'(But) averages mask differences within groups. In 2022, only 13 per cent of total income inequality in Malaysia was explained by differences in average income across ethnicities; 87 per cent reflected differences within each group.'
The report includes income inequality trends since the Covid-19 pandemic, utilising the most recent household survey data from the 2022 Household Income, Expenditure and Basic Amenities Survey (HIES/BA).
Widening divides
Inequality in Malaysia isn't the highest regionally but is higher than in higher income economies.
Malaysia's Gini index, which measures the extent to which the distribution of income or consumption among individuals or households within an economy deviates from a perfectly equal distribution, is 39.
It is higher than that of both economies that recently achieved high-income status (mean of 31) and established high-income countries (mean of 30), the bank noted.
Among regional peers, Malaysia has the third-highest Gini after the Philippines and Thailand.
Inequality between rich, middle class and poor Bumiputera remains the highest, with disparities between states in the Eastern and Peninsular regions recording a persistent or even growing source of inequality.
'Mean incomes across states have not converged, because average incomes in the richest states grew faster than average incomes in the poorest states, particularly those in East Malaysia (Sabah and Sarawak),' the bank said, adding that
Data indicated the wide gap between the richest place (the Kuala Lumpur Federal territory) and the poorest state (Sabah) remains unchanged and has instead increased.
In 2004, Kuala Lumpur's income was 2.5 times Sabah's.
By 2019, just before the Covid-19 pandemic, it widened slightly to 2.7 times.
The gap remained up to three years after, when the world was reopening from lockdown.
There was some progress, however.
The income growth rate of the poorest 75 per cent of the Bumiputera between 2004 and 2022 was more rapid than it was among ethnic Indians and Chinese in the same decile of the national income distribution, the report noted.
This is reflected in a remarkable fall in the share of the population that is persistently in poverty among the Bumiputera, which went from being 2-3 times higher than from Indian and Chinese in 2004-07 to relatively similar rates in the latest period.
'Some Bumiputera have fared worse. Bumiputera in East Malaysia—Sabah and Sarawak—are the most disadvantaged group, with the lowest mean income of all subgroups,' the bank said.
'Bumiputera on the Peninsula, the second-poorest group on average, have much higher average incomes than Bumiputera in the East, with average incomes that are more similar to those of Indian Malaysians on the Peninsula or Chinese Malaysians in the East.'
The Chinese and Indians continue to be more economically secure than the Bumiputera, with data suggesting more income growth stability between 2004 to 2022.