New Khazanah study reveals valuable insights into socio-economic mobility in Malaysia

Socio-economic mobility among Malaysians has steadily risen since 1957, with one in two children born to parents aged 35 and above in the period between 1980 to 1995, now earning more than their parents.

In fact, more than 63 per cent of Malaysians adults are better educated than their parents.

Khazanah Research Institute's latest publication 'Climbing the Ladder' sought to discover the state of socio-economy mobility among two generations of Malaysians.

The findings have been nothing short of spectacular for Malaysians belonging to the lower quantile or Below 40 per cent of the society.

74 per cent of children raised by parents in the lowest quantile, the poorest, have risen at least one quantile higher than their parents.

11 per cent of them, astonishingly, now belong to the 5th quantile, or the Top 20 per cent. This somewhat legitimises the much-hyped notion that even a child from the most modest of backgrounds can become CEOs and captains of industry.

Factoring in intergenerational earnings elasticity (IGE) for socio-mobility, KRI found that less than 19 percent of an individual’s income is influenced by their parents.

This considerably low percentage puts Malaysia on par with countries like Finland and Norway.

This also means that the second generation, that of the child, is able to rise in status much faster than their parents, regardless of their starting point.

On the flip side, KRI Research Director Dr Muhammad Abdul Khaled said that kids from middle-income and high-income families are more likely to move down or earn less than their parents.

"We noticed that this trend seems to be prevalent among Bumiputeras, and women especially. There is no evidence yet that can point out the cause of this phenomenon but the lack of women participation in the labour force despite access to tertiary education is a factor.

"This gap in workforce participation happens after they reach age 25 and can be attributed to marital and family commitment.

"We also need to remember that this study measures individual income. A person who might not be earning as much as their parent could still enjoy the same lifestyle," he said at the report launch, here, today.

The report also found that across ethnic lines, social mobility happens the fastest among the ethnic Chinese, followed by Bumiputeras, and Indians.

Among the factors identified that contribute to social mobility are education, location or proximity to urban centres, parents savings and gender.

Children of parents with savings are 1.7 times more likely to climb up the social mobility ladder than those who don't, while children brought up in the city are 1.5 times more likely to do so.

Meanwhile, boys were found to be 3.6 times more likely to earn more than girls.

Factors that contribute to downward mobility are found to be similar, with gender and access to tertiary education being the two main factors.

Downward mobility generally effects the Middle 40 and Top 20 income -- children raised by a single parent are 2.5 times more likely to earn less than their parents.

For Bumiputeras, only 27 per cent children born to parents who belong to the 5th quantile, remain in the same income bracket as their parents -- lower compared to Indians at 32 per cent and Chinese at 42 per cent.