Bank Negara Malaysia recently released its findings from the Financial Capability and Inclusion Demand Side Survey 2024. This report that is conducted every three years captures the financial capability of Malaysians to determine their financial literacy, behaviour and attitude to formulate the Malaysia Financial Literacy and Capability (MYFLIC) index¹. What startled and drove me to write this piece was the dire financial situation that our fellow Malaysians are experiencing.

Firstly, the survey reveals that 56% have attributed the reasons for running out of money to low income or insufficient income. This should come as no surprise, as the rising cost of living has been an unresolved problem since the Covid-19 pandemic and exacerbated by the decline in real wages. The report further reveals that wage growth has not kept up with the increasing cost. Since the fourth quarter of 2019 to the final quarter of 2024, while prices of food and beverages have gone up 17.4%, nominal private sector wages per worker have only moved up 7% (BNM, 2024)².

Notwithstanding that labour productivity had accelerated to 2.4% in 2024 from 0.7% in 2023, wage growth in 2024 was only 2.9% compared to 3.8% in 2023. With a median monthly salary of RM 2,745 (as of September 2024) and the minimum wage at RM 1,700, the Malaysian working class’s struggle to make ends meet is an unfortunate reality³. The report further reveals that 61% of Malaysians are unable to come up with RM 1,000 during emergencies ⁴. These reports should have raised a red flag among policymakers to realise that there are large sections of society beyond those identified as poor who are struggling. This means that many households are financially in a dire situation beyond the often-cited absolute poverty figure of 6.2 % (2022) ⁵. Thus, the government announcement rejoicing that they have overcome hardcore poverty, or absolute poverty is superficial, as it hardly reflects the daily challenges faced by majority Malaysians.

The fact that more than half are unable to raise funds for emergencies reveals most households have minimal residual income after paying for basic needs. Thus, it is widely misleading to determine financial wellbeing by solely looking at household income as most politicians prefer to do. The question that policy makers should be asking is what are the major household expenses seriously depleting their income? According to the DOSM Household Income and Expenditure Report, 2022, housing and utilities lead at 23.2%, followed by food at 16.3% and transport at 11.3% of total household expenditure (DOSM, 2022)⁶. Thus, instead of comprehending the severity of poverty from total household income, residual income approach offers a better measure. Households are considered ‘shelter poor’ if their actual housing cost payments exceed the income necessary to support their minimal non-housing consumption (Rangel et al., 2019)⁷ .

The incidence of households falling into poverty after paying for housing costs is known as housing cost-induced poverty. These are households that did not experience poverty until housing costs were taken into account. Increasing housing costs, either rents or paying for mortgages, are becoming a significant contributing factor pushing people into poverty even in developed countries. Joseph Rowntree Foundation’s Poverty in the UK 2024 report reveals that more than four in ten social renters (43%) and a third of private renters (35%) were in poverty after housing costs. In Malaysia, a study finds that for those in the 25th income percentile range, all types of housing currently available in the market are unaffordable, meaning that mortgage repayments are unaffordable, and they are forced to opt for renting instead (Rangel et al., 2019)⁷.

Besides, housing, Bank Negara Financial Capability Survey 2024 also reveals that students and gig workers are the two social groups who are experiencing debt stress. While students struggle with education loan repayments, gig workers are having a hard time fulfilling their monthly commitment for housing, vehicles and credit cards due to the unstable nature of their income. Furthermore the report finds that reliance on EPF savings dropped to 36% among Malaysians above 50 years old, probably due to the insufficient savings to pull through their golden years.

However, while the report clearly identifies that low, unstable income and rising cost of living are the impeding factors for Malaysians to practice sound financial management, but it offers flimsy policy solutions. BNM proposes enhancement of financial literacy, ‘Perlindungan Tenang’ insurance schemes and financial digitalisation to address the issue.

Malaysia’s decades-old cheap wage policies continue to haunt the labour market, as the true value of our workers labour is suppressed to encourage foreign direct investment. The wage floor suppression is further exacerbated by the presence of a large pool of low-skill migrant labour and refugees that are readily exploited by employers. Thus, this insufficient income of working Malaysians, need to be ‘compensated’ by social wages. Social wages are benefits directly from the government, either through cash transfer or in kind (public goods), to individuals. These public goods are usually education, health, social security, welfare and housing. Hence, I would argue that the government needs to urgently enhance the provision of social wages instead of preaching financial literacy to the frugal. The rising cost of housing and other living costs are clearly beyond the control of an individual. While the state might rebut with figures of how much has been spent on subsidies, but the hardships revealed in the BNM report cannot be solved with greater financial literacy.  Instead, the state needs to urgently reduce housing costs by either regulating housing prices or increasing the supply of public housing with affordable rents. Secondly, student debt and rising food prices have been seriously investigated to substantially ease living costs. Thirdly, with an inevitable ageing society and shrinking EPF savings, a monthly pension for all those above 65 years of age needs to be introduced.

In conclusion, the government cannot remain oblivious to the striking realities and provide solutions circumventing the core issues. A large section of the society not identified as poor are suffering in silence, unable to provide a decent living for their family with their household residual income. While minimum wages need to be increased to reflect the costs of living, the government needs to incorporate the concept of social wages as a policy measure to ensure the affordability of public goods.

A. Sivarajan

Notes

1. Bernama (2025) ‘National Strategy for financial Literacy to be launched in 4Q 2025’ 24 March 2025. Available at: https://www.bernama.com/en/region/news.php/news.php?id=2405611.

2. Bank Negara Malaysia (2025) ’Curbing Inflation, Easing Costs: The Policy Perspective’ Available at :https://www.bnm.gov.my/documents/20124/17493532/ar2024_en_box1.pdf

3. Department of Statistics Malaysia DOSM (2025) ‘Formal Sector Wages’. Available at : https://open.dosm.gov.my/dashboard/formal-sector-wages.

4. Bank Negara Malaysia (2025) ‘Financial Capability and Inclusion Demand Side Survey 2024’. Available at: https://www.bnm.gov.my/documents/20124/17493532/ar2024_en_box4.pdf.

5. Muhammad, S., (2023)’ DOSM says absolute poverty drops to 6.2% in 2022, with income inequality gap narrowed post-Covid-19’ The Edge Malaysia 28 July 2023. Available at: https://theedgemalaysia.com/node/676488.

6. Department of Statistics Malaysia (2022) ‘Income Expenditure Poverty and Inequality’. Available at: http://www.dosm.gov.my/uploads/release-content/file_20230808213608.pdf.

7. Rangel, G.J., Ng, J.W.J., Murugasu, T.T. and Poon, W.C., (2019) ‘Measuring Malaysian housing affordability: the lifetime income approach’ International Journal of Housing Markets and Analysis, 12(5), pp.966-984.

8. Joseph Rowntree Foundation (2025) UK Poverty 2025.