The T20, M40 And B40 Income Classifications in Malaysia
Malaysians are categorised into three different income groups: Top 20% (T20), Middle 40% (M40), and Bottom 40% (B40).
This is based on the Department of Statistics’ (DOSM) Household Income and Basic Amenities (HIS/BA) survey of 2016. HIS/BA is conducted twice every five years and DOSM is currently conducting the 2019 survey nationwide. Over the years, the bar for each group’s income level has increased and this is one of the indicators of economic growth.
The concepts and terms used here are summarised as:
- HOUSEHOLD: A person or a group of people (related or unrelated) who usually live together in a living quarters and make provisions (expenses) for food and other necessities of life together. In 2016, the average size of Malaysian households was 4.1 persons.
- INCOME RECIPIENT: Household members who receive income in the reference period of the survey, and with at least one income recipient. In 2016, average income recipients in Malaysia was 1.8 persons.
- HOUSEHOLD INCOME: Overall income that is earned by household members, whether in cash or kind, and can be referred to as gross income. In 2016, median and mean monthly income in Malaysian was RM5,228 and RM6,958 respectively.
- MEDIAN HOUSEHOLD INCOME: is the “middle” income number within a range of household incomes, arranged from low to high. For example, in Taman Bintang, there are five household incomes of RM5,000, RM10,000, RM15,000, RM20,000, and RM25,000; the median household income will be RM15,000. The median is used because it represents a more accurate representation of the area than a mean number (the average).
- MEAN HOUSEHOLD INCOME: is the “average” income number where all household incomes are added up and divided by the number of households.
So how do we get classified into the B40, M40, and T20 income groups?
|Median Monthly Income By Household Group|
|Household Group||Median Income 2016 (RM)||Median Income 2014 (RM)||CAGR (%)|
The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods.
Keep in mind that the income group definitions are not fixed. The names, B40, M40, and T20, represent percentages of the country’s population of Bottom 40%, Middle 40%, and Top 20% respectively. The values may increase or decrease year-to-year, depending on the country’s GDP, which is why the median household income is used as the determinant instead.
Though the income levels for each group has improved over the past three years, we should not ignore the escalating costs of living resulting from inflation and slower wage growth. To be exact, if we include inflation into the picture (3.15%, 2.1%, 2.09%, and 4.1% respectively in 2014, 2015, 2016, and first half of 2017), the ringgit’s value is diminishing. It was also reported that the average monthly income of employees, based on the 2016 Salaries and Wages Survey Report by the Department of Statistics, increased 6.5% to RM2,463. In 2015, it rose 5.4% to RM2,312. Despite so, this optimistic income growth seems to be only applicable to those who are working in the Kuala Lumpur or at least nearby whereas other states are still struggling to stay on track to achieve similar income levels.
To explain this situation better, here’s the median income level for each state and you can see if you and your family are above or below the median standard.
|Median income for a household in different states in Malaysia|
|State||Median Income 2016 (RM)||Median Income 2014 (RM)|
|W.P. Kuala Lumpur||9,073||7,620|
Interestingly, you can see that Pulau Pinang’s median income level is placed in the middle among its peers despite being the second highest performing state in the country with GDP per capita of RM47,322 after Kuala Lumpur at RM101,420.
It was reported that factories have been closing down in this particular state and employment opportunities are still relatively lower compared with Selangor and Putrajaya, given the latter’s closer proximity to the city filled with better job opportunities.
Apart from Kuala Lumpur, Selangor, and Putrajaya; Pulau Pinang and the remaining 12 states’ median income level did not exceed the median income level for the M40 group in Malaysia. This means the rest still have a gap to close in order to improve the income gap between urban and rural areas.
Nonetheless, it is satisfying to see the huge jump in both Terengganu and Perak state’s median income level from 2014, most likely thanks to a boost in the tourism sector.
To give you a clearer picture, we also found out the top 20 districts in the country with the highest median household income in 2016. However, this does not mean you can get the same for moving into any of these areas. You might if you work hard and be smart about it!
Districts With The Highest Median Household Income in 2016
|Top 20 Districts With The Highest Median Household Income|
|District||Median Income 2016 (RM)|
|Timur Laut (Pulau Pinang)||5,964|
|Barat Daya (Pulau Pinang)||5,844|
|Sungai Petani Tengah||5,172|
Now that you know about the median income in different states and some districts, you should find out if your financial position is better or worse than the average Malaysians here. Making financial decisions are not easy, so remember to check out our blog for the latest insights and make your life better!
See also: Budget 2019: Summary Infographics to See