How can Budget 2023 help the M40?

KUALA LUMPUR: As the pandemic eases, many of those in the Middle 40 (M40) group are still recovering from the impacts of multiple lockdowns over the course of two years.

Economist Professor Dr Geoffrey Williams of the Malaysia University of Science and Technology noted that many of them had either lost their jobs or had shorter working hours during this time.

“We know that more people in the M40 group during that period fell below the income level that previously would have defined them as B40,” he told Astro Awani.

While some would have been able to return to work and recover their income losses as the economy improves, many are still reeling from the effects of COVID-19.

“There’s always a lot of scarring when you have some type of impact affecting hundreds of thousands of people.”

Last year, Minister in the Prime Minister’s Department (Economy) Datuk Seri Mustapa Mohamed revealed around 600,000 M40 families had slipped into the B40 group due to losses in monthly income.

The Statistics Department also found that the average monthly household income had decreased by 10.3 per cent in 2020.

Geoffrey noted that the M40 made up a significant portion of those who took advantage of special withdrawals from the Employees Provident Fund (EPF).

“They’ve not just seen their income fall or their job being dislocated, but they’ve also seen their savings and wealth fall. Now they have to rebuild all of that.”

Universal schemes over targeted subsidies

Ahead of Budget 2023, the government has assured it would focus on efforts to revive Malaysia’s economy post-pandemic.

Geoffrey said it would be important to focus on the M40 as they played a large role in terms of the country’s economic growth.

With rising global pressures expected in the year ahead, he said it was crucial to protect domestic consumption.

“The M40 group are a very important component of domestic consumption because they spend a lot more money than the B40 group, and they tend to spend it here in Malaysia,” he said.

This contributes to the recovery of small and medium enterprises (SMEs) and helps them improve their revenues.

However, Geoffrey warned that targeted subsidies may not be the most effective measure to alleviate the burdens shouldered by the M40.

“Every person in that category will have different challenges so you couldn’t say there’s a particular package that will be good for everyone.”

A more suitable approach, he said, would be to implement universal schemes that are applicable to all.

These should be focused on helping with universal basic income or a pension scheme for the people to recover their pension funds, he suggested.

“The general principle is that individuals and households know best how to spend their own money.

“So you should give as many opportunities as possible for them to keep as much of the money that they earn themselves, and choose how they want to spend and save it. That is true for every group of people at every income level.”