Analyzing the Household Income and Consumption Expenditure: Reality of Rising Cost of Living in Malaysia

Abstract

Malaysia has been experiencing rapid socioeconomic transition over many years and achieved remarkable socioeconomic development and economic growth in the last few decades. Basically, such growth and development brought significant improvements in the level of income of low- and middle-income households. However, the cost of living in Malaysia has increasingly become a serious economic issue due to the increase in inflation. This paper addresses the question of how the cost of living can affect household income and expenditure. The finding of this research is threefold. Firstly, the income gap between households is increasing every year. This implies that the program to increase the income of the lower-income group should be given priority so that national development can be felt by all levels of society to achieve the goal of inclusive national development. Secondly, the monthly income average of households shows a steady increase. However, B40 earnings growth needs to be improving greater as an effort to reduce the income gap between the highest with low- and medium-income groups. Thirdly, income growth for each household group is still greater than inflation. This shows that on average households can still cope with the burden of rising costs and thus deal with the cost of living depending on how they model their spending patterns. This study highlights that to address the cost of living problem, the policy or program planned by the government should touch three important elements of income, price, and spending patterns. Also, this study highlights that to address the cost of living problem, a holistic approach is essential. This study also proposes that each of the economic agents, the government, the private sector, and the households have their roles in economics to develop better economic welfare among society. Keywords: cost of living, income, low-income, middle income, living standard, spending patterns