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 2022 (conducted twice every five years), results showed that the average household income in Malaysia has increased to RM8,479 per month, from RM7,901 per month in 2019. This is an increase of 2.4%. The median household income also increased to RM6,338 per month in 2022, from RM5,878 per month in 2019. This is an increase of 7.2%. Over the years, the bar for each group’s income level has increased and this is one of the indicators of economic growth.

Related: Our Comprehensive Personal Income Tax E-filling Guide

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 living quarters and make provisions (expenses) for food and other necessities of life together. In 2022, the average size of Malaysian households was 3.8 persons.
• INCOME RECIPIENT: The average number of income recipients in a Malaysian household in 2022 was 1.83. This is a slight increase from the average of 1.8 in 2019. The increase in the number of income recipients is likely due to the increasing number of women entering the workforce and the rising cost of living.
• HOUSEHOLD INCOME: Overall income that is earned by household members, whether in cash or kind and can be referred to as gross income. The average monthly household income in Malaysia decreased from RM7,901 in 2019 to RM6,338 in 2022. This is a decrease of 19.1%. The decrease in household income is likely due to a number of factors, including the COVID-19 pandemic, the rising cost of living, and the economic slowdown.
• 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?

Household median income for T20, M40, and B40 in 2022 and 2019

Income range for T20, M40, dan B40 in 2022 dan 2019

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 have improved over the past three years, we should not ignore the escalating costs of living resulting from inflation and slower wage growth.

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.

Source:  Household Income and Basic Amenities Survey Report 2022, Department of Statistics Malaysia

Based on the above data, we can conclude that:

W.P Putrajaya: The Federal Territory of Putrajaya (W.P. Putrajaya) is the richest state in Malaysia because it is the seat of the federal government and home to many government agencies and departments. The high concentration of high-paying jobs in Putrajaya has led to a high median income.

In addition, Putrajaya is a relatively small state with a population of only around 80,000 people. This means that the state's resources are not spread out as thinly as they are in larger states, such as Selangor and Kuala Lumpur. This also contributes to the high median income in Putrajaya.

Kuala Lumpur: Kuala Lumpur is the capital of Malaysia and is also one of the richest states in the country. The median income in Kuala Lumpur is RM8,259 in 2022. This is due to the city's status as a financial and commercial hub, as well as its high concentration of high-paying jobs.

Johor: Johor is one of the richest states in Malaysia due to its strategic location, strong economic growth, high human capital, and government policies. The state is located at the southern tip of Peninsular Malaysia, making it a gateway to Singapore and other parts of Southeast Asia. This strategic location has made Johor a popular destination for businesses and investors.

Kelantan: Kelantan is one of the poorest states in Malaysia, with a median income of RM3,156 in 2022. This is due to the state's relatively low level of economic development. Kelantan also has a lower educational attainment rate than other states in Malaysia.

Perak: Perak is another relatively poor state in Malaysia, with a median income of RM3,804 in 2022. It relies heavily on agriculture, has a high unemployment rate, and a low human capital. The agricultural sector is a low-paying sector and many farmers live below the poverty line. The high unemployment rate is due to the lack of job opportunities in the manufacturing and services sectors. The low human capital makes it difficult for the state to attract businesses and investments.

Now that you know about the median income in different states, 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!