ONE of the fundamental macroeconomic goals is the narrowing of the gap between people of high incomes and those of low ones. However, data from around the world shows that the gap between the rich and the poor is widening, especially during this pandemic.
In Malaysia, the 2019 Household Income and Basic Surveys Amenities Report published by the Department of Statistics Malaysia (DOSM) in July 2020 indicates that the value of the Gini coefficient had increased from 0.399 in 2016 to 0.407 in 2019. Usually, as the value of the Gini coefficient rises, the difference between income earners between 2016 and 2019 will expand accordingly.
Since the data is only up to 2019, and with Malaysian economy is still struggling during the Covid-19 pandemic period this year, the Gini coefficient must have increased. In fact, many have been affected by retrenchment, salary cuts, unpaid leaves, etc although the increase in unemployment has been steadily slowing since its first peak in June 2020.
Logically, one will expect that the higher the unemployment rate, the higher income inequality will be. Likewise, poverty rates. But, the government has done well so far. It has announced several rescue packages to balance the action between saving the life of the people and maintaining the economy.
Moreover, in order to minimise dependency on human capital, this pandemic has also readied us for a rapid transition into the era of Artificial Intelligence (AI) and the Internet of Things (IoT) (digitalisation). Still, balancing digitalization and income inequality poses a huge task for the government.
It may continue to inject cash for digital transformation and encourage people, especially SMEs, to engage in technological transformation. Yet, it has to think also of the rural communities who, in most cases due to the lack of the right infrastructure, might not be able to cope with technological change.
As a result, they might find themselves continue to be left lagging behind in terms of improved socio-economy and quality of life. And this might be the precursor to much bigger problem such as psychological issues among the people in the country in the years to come.
Hitherto, social unrest is not a problem in Malaysia. Nevertheless, according to the International Monetary Fund (IMF), the possibility of social unrest due to income inequality especially in severely affected countries is very high.
The threat of inflation is not helping with things either. Fortunately, it is not yet over for the economy as the much-anticipated arrival of the Covid-19 vaccine brings with it a significant degree of optimism for all.
The return of economic recovery and economic growth, and the increase of aggregate consumption, are therefore expected to follow suit. Truth be told, these are conditional to political stability.
For Malaysia, especially during this pandemic, the government and the opposition must continue to set aside their political divide and put the livelihood of the people as their first priority.
Only through political unity can the economy be restored and revitalised, and hopefully the value of Gini co-efficient decreases. For the sake of the country, let us all act prudently.
The writer is a lecturer at the Faculty of Business and Management (Economics), Universiti Teknologi Mara (UiTM), Sabah