CHAPTER 2

Learning Outcomes
1. Define poverty
2. Identify category of poverty
3. Explain types of poverty
4. Discuss problems associated
with poverty
5. Elaborate on strategies to
eradicate poverty
 CONCEPTS
AND
MEASUREMENT
“Poverty is the parent of
revolution and crime” -
Aristotle
 Definition/what is poverty?

l Poverty is a condition in which a person or

community is deprived of, or lacks the essentials
for a minimum standard of well-being and life.

l Lacks of basic needs and the essentials for a

minimum standard of well-being and life

l Since poverty is understood in many senses, these

essentials may be material resources such as food,
safe drinking, and shelter, or they may be social
resources such as access to information,
education, health care, social status, political
power or the opportunity to develop meaningful
connections with other people in society.
l Since 1970s, Malaysia has reduced the poverty from 49.6 %
(1970) to 5.7 % (2005) and to 0.4 % (2019).
l Poor households in Malaysia : 5.6% in 2019
l Urban poverty reduced from 2.5 % (2005) to 0.2% (2017)
l Rural poverty reduced from 11.9 % (2004) to 1.0% (2017).
l 0.4% of people are living under the poverty line
l Rate of poverty – 8.4% (2020)
l Without aid, 1.2m households risk falling into poverty – Up to
1.2 million households in the country are at risk of absolute
poverty if no financial assistance is given during the
reimplementation of the Movement Control Order (MCO).
Three concept of poverty
l Absolute poverty

l Relative poverty

l Hardcore poverty
 Absolute poverty:

l Absolute poverty is when household income is below a

certain level, which makes it impossible for the person or
family to meet or gross monthly income of a household is
insufficient to purchase basic needs of life including food,
shelter, safe drinking water, education, healthcare, etc.
l According to Department of Statistics Malaysia, absolute
poverty is defined as a situation in which household
income is insufficient to meet basic needs of food, shelter
and clothing.
l Is measured in terms of the Poverty Line Income.
l Income earns less than PLI (RM2,208/month).
l The absolute poverty - 5.6% (2019), increased 8.4%
(2020/2021)
l According to a UN declaration that resulted
from the in Copenhagen in 1995, absolute
poverty is "a condition characterized by severe
deprivation of basic human needs, including
food, safe drinking water, sanitation facilities,
health, shelter, education and information.

l It depends not only on income but also on

access to services."
l David Gordon's paper, "Indicators of Poverty &
Hunger", for the United Nations, further defines
absolute poverty as the absence of any two of
the following eight basic needs :

1) Food

2) Safe drinking water: Water must not come from

solely rivers and ponds, and must be available
nearby (less than 15 minutes walk each way).

3) Sanitation facilities: Toilets must be accessible in

or near the home.
4) Health: Treatment must be received for serious illnesses and
pregnancy.

5) Shelter: Homes must have fewer than four people living in

each room. Floors must not be made of dirt, mud, or clay.

6) Education: Everyone must attend school or otherwise learn

to read.

7) Information: Everyone must have access to newspapers,

radios, televisions, computers, or telephones at home.

8) Access to services: education, health, legal, social, and

financial services.
 Example
l A person who lives in a home with a mud floor is
considered severely deprived of shelter.

l A person who never attended school and cannot read is

considered severely deprived of education.

l A person who has no newspaper, radio, television, or

telephone is considered severely deprived of information.

l All people who meet any two of these conditions — for

example, they live in homes with mud floors and cannot
read — are considered to be living in absolute poverty.
 Relative poverty :

l A group whose mean income is less than another group

l Defined in terms of inequality between groups and is
measured by using income disparity ratio of income group
ethnic, urban and rural area.
l As the proportion of household earning in incomes less than
half the mean or median income.
l Relative poverty is when households receive 50% less than
average household incomes, so they do have some money
but still not enough money to afford anything above the
basics. This type of poverty is, on the other hand,
changeable depending on the economic growth of the
country.
• Relative poverty is sometimes described as “relative
deprivation” because the people falling under this category
are not living in total poverty, but they are not enjoying the
same standard of life as everyone else in the country. It can
be TV, internet, clean clothes, a safe home (a healthy
environment, free from abuse or neglect), or even education.

• Relative poverty can also be permanent, meaning that

certain families have absolutely no chance of enjoying the
same standards of living as other people in the same society
currently have access to.
 Hardcore poverty:
l Was introduced in 1989 to give special emphasis to the needs of the very
poor.

l Household whose gross monthly incomes were below half the PLI were
classified as hardcore poor.

l A household is considered poor if its income is less than PLI. A household is

considered hardcore poor if its monthly household income is less than the
food PLI.

l In Malaysia, the incidence of hardcore poverty shows higher for the states of
Sabah, Terengganu, Perlis, Kedah and Kelantan compared to the other
states.

l Hardcore poverty percentage saw an improvement from 0.62% (2018) to only

0.4% in 2019 and increased 1% in 2020
Rural poverty:
l insufficient income to obtain basic necessities
l usually exist in rural area among rural area people

Causes:
1. Is a rural phenomenon and agricultural biased
(a) The majority of rural household are involved in small
scale agricultural production (farmer) and involved in
traditional agricultural sector
(b) poor farmers are associated with small sized farms
with a very low productivity

2. Educational standards among children of the poor are

low thus they unable to get better paid jobs

3. Rural family had more family members

4. Lack of capital and affordability to acquire
technology

5. Salary and wage earned below the PLI rate

6. Poor educational achievements

7. Profits taken by the middlemen

Rural Poverty Eradication Objectives / Strategies

l To intensify development in rural area and narrow

economic gap between urban and rural areas
l Modernize their traditional methods of production
l Providing them with support and opportunities to be
involved in modern farming and value-added
processing of agricultural produces
l To increase access of the rural community to generate
better income through various cottage and craft
industries
l To further improve the quality of life of the rural
population, health and education facility
l To provide better access of the rural community to ICT
and new technologies and improve farming practice
Factors of failures in implementation of various policies in
eradicating rural poverty:

l Budget constraints

l Allocations are not reaching the poor

l Mentality of the poor

l Unsuccessful implementation of the policy

l External factors - global economic crisis

Urban poverty:

l The majority of new household in poverty as a

result of the crisis was from the urban areas
where contraction in economic activities in the
construction and manufacturing sector resulted
in retrenchment and unemployment and
inflation were greater.
Causes:

l High cost of living in urban areas

l Some have little access to basic goods and amenities such

as electricity, piped/clean water.

l Increased cost in basic goods and amenities – continuous

increase in the price of goods and services (nothing is free).

l Lack of job opportunities in the rural areas – competition

from foreign workers who are willing to work for a lower
wage, lack of academic qualification, lack of skill

l housing problems in town – squatter areas

l Continuous increase in the price of goods and services

Strategy:

l Housing
l Job opportunities
l Educational facilities
l Better town planning
l Infrastructure development
l Educating the people on importance
to work hard
POVERTY LINE INCOME

l The incidence of poverty is based on the poverty line

income (PLI).

l The PLI is defined as an income sufficient to purchase a

minimum basket of food to maintain household members
in good nutritional health and other basic needs such as:

l Food, clothing and footwear, rent and utilities, fuel and

power, transport and communications, medical and
health care, education and recreation (minimum level of
income needed to buy the basic necessities of life) – PLI
Component
l Used to count the number of poor households & the
incidence of poverty
l PLI is an income separates those who are poor from those
who are not poor (Habibah, 2008)
l The PLI was constructed for a household of five persons: two
adults (male and female aged between 20 - 39 years) and 3
children (of either gender, aged 1-3 years, 4-6 years and 7-9
years).
l Over the years, the Malaysian PLI was updated using a
Consumer Price Index (CPI).
l The national poverty line income (PLI) have been revised by
the Department of Statistics Malaysia (DOSM), with the
poverty line revised from RM908 to RM2,208 in July 2020
INCIDENCE OF POVERTY BY ETHNIC

Ethnic 1970 1984 1995 2002 2012 2018

Bumiputera 64.8 28.7 12.2 9.0 2.2 0.8

Chinese 26.0 7.8 2.1 1.0 0.3 0.1

Indians 39.2 10.1 2.6 2.7 1.8 0.6

Others 44.8 18.8 22.5 8.5 1.5 0.9

 INCIDENCE OF POVERTY BY STATE
STATE 1970 1984 1995 2002 2012 2018
JOHOR 45.7 12.2 3.1 2.5 0.9 0.0
KEDAH 63.2 36.6 12.2 9.7 1.7 0.3
KELANTAN 76.1 39.2 22.9 17.8 2.7 0.9
MELAKA 44.9 15.8 5.3 1.8 0.1 0.1
N.SEMBILAN 44.8 13.0 4.9 2.6 0.5 0.4
PAHANG 43.2 15.7 6.8 9.4 1.3 0.7
P.PINANG 43.7 13.4 4.0 1.2 0.6 0.3
PERAK 48.6 20.3 9.1 6.2 1.5 0.7
PERLIS 73.9 33.7 11.8 8.9 1.9 0.2
SELANGOR 29.2 8.6 2.2 1.1 0.4 0.2
TERENGGANU 68.9 28.9 23.4 14.9 1.7 0.6
SABAH & W.P LABUAN 33.1 22.6 16.0 7.8 3.9
SARAWAK 31.9 10.0 11.3 2.4 0.9
N.A
W.P KUALA LUMPUR 4.9 0.5 0.5 0.8 0.1
W.P PUTRAJAYA N.A N.A N.A - 0.0
INCIDENCE OF POVERTY BY STRATA
STRATA 1970 1984 1995 1997 1999 2002 2004

URBAN 21.3 8.5 3.6 2.1 3.4 2.0 2.5

RURAL 58.7 27.3 14.9 10.9 12.4 11.4 11.9

STRATA 2007 2009 2012 2014 2016 2019 2020

URBAN 1.9 1.7 1.0 0.3 4.8 3.8

RURAL 7.1 8.4 3.4 1.6 17.5 12.4

The situation of PLI

l The PLI based on the 12MP considers a family

poor if it earns RM750 in Penisula Malaysia,RM960
in Sabah and RM830 in Sarawak but revised of PLI
in July 2020 to RM2,208.

l In the hardcore poverty category earnings are

less than RM440, RM540 and RM520 respectively.

l Any family earning less than RM2,208 a month falls

in the category of ‘easy poor’/relative poverty
l Statistics Dept: Malaysia’s new
poverty line income is RM2,208, over
400k households considered poor
(July 2020)
INCOME RANGE BETWEEN BOTTOM 40%,
MIDDLE 40% AND TOP 20%

HIGHER INCOME GROUP

RM 8319 >

MIDDLE INCOME GROUP

RM 3860 - RM 8319

LOWER INCOME GROUP

< RM 3859
 Household Income
(RM/month)

More than 10K 5%

RM5,001 – 10K 16%

RM4,001 - RM5,000 8.5%

RM3,001 - RM4,000 13%

RM2,001 - RM3,000 20%

RM1,001 - RM2,000 29.5%
RM501 - RM1,000 9.0%

Less than RM500 5.0%

Source: Malaysia Plan
 Think about it????
l Can a family of five survive
on an income of RM1500 per
month, given the cost of
living in Malaysia today?

l Where would they live? And

l Can their children go to

school?

l Can you survive with 1200 a

month at Kuala Lumpur?
 Basic Household Expenditure
(per month)

House Loan 600

PTPTN loan 300
Groceries 450
School expenses 350
Motorbike 400
Medical/Clothes 450
Festivals/Trips 350
Light/Water/Phone 400
Insurance/savings 200
Total RM3,500
POVERTY ERADICATION: STRATEGY AND
PROGRAMS

l The main strategy for poverty eradication was

providing employment opportunities in higher-
paying job, while welfare handouts were
reserved for the aged and disabled who could
not find employment.

l Since the poor were largely engaged in

agriculture, they were encouraged to be
involved in modern farming and non-farm
activities.
Strategies Projects
Increase in the Provide electricity and water, build community
quality of life halls and mosques, roads, drainage system,
construction of new houses

Increase income New land development, village industries,

provide marketing facilities
Human resource Study tours, special training such as marketing,
development rural technology workshops

Health and Food supplement and subsidized food for

nutrition primary school children
Direct assistance Assistance to Old Folks’ Home, allowances for
handicapped workers, loan on textbooks,
scholarships
The programs implemented under NEP, NDP
and NVP

Resettling the landless and those with uneconomic

holdings in new land development schemes. The
settlers were provided with single unit houses
complete with piped water and electricity.

Undertaking in-situ development of existing

agricultural land through rehabilitation and
consolidation of the land, replanting of old
commercial crops with new higher-yielding clones
and better planting techniques.
Integrating agricultural and rural development with
downstream processing of farm products and
encouraging village industries and rural entrepreneurship
to generate additional sources of income

Introducing double-cropping or off-season cropping for

paddy, inter-cropping and mixed farming on the same
plots of land to supplement the income derived from
main crops.

Establishing farmers’ markets in urban centers so that

farm produce can be sold directly and fetch better
prices.
Providing training and education on topics pertaining to
farming as well as work attitudes and values to motivate
participants to become more productive farmers.

Providing industrial and vocational training for the rural

manpower, coupled with credit facilities and related support,
to enabled them to be employed in non-farm occupations or
start their own business in rural areas and urban centers.
Improving educational access as well as providing
textbooks and financial assistance to children of poor
household

Providing infrastructure and social amenities as part of a

broader program to improve the quality of life of all
Malaysians. For the rural population, include the provision
of potable and piped water, electricity, roads, medical
and health services and schools, including rural hostels.
l During NDP - The Development Program for the hardcore
poor or Program Pembangunan Rakyat Termiskin (PPRT),
was introduced to assist the hardcore poor.

l The program establish a register on the profile of hardcore

poor household and contain a packaged of projects
tailored to meet their specific needs such as increasing
their employability and income, better housing, food
supplements for children and educational assistance.

l During NVP - To effectively implement anti-poverty

measures, all the relevant programmes and projects were
consolidated under the Skim Pembangunan
Kesejahteraan Rakyat (SPKR).
l The SPKR included the Program Pembangunan Rakyat
Termiskin (PPRT) and other related anti-poverty
programmes to address issues of general and hardcore
poverty, irrespective of ethnicity in both the rural and
urban areas as well as economic sectors.

l Rumah Mesra Rakyat

l Skim Rumah Pertamaku

l BR1M

l Special loan
 The Involvement of NGOs In Poverty Reduction
Programs

l Working in close cooperation with one another, they

provided small business loans, industrial training, job
opportunities, and educational support for children as well as
better housing.
l Amanah Ikhtiar Malaysia (AIM) – micro credit facility
l Yayasan Basmi Kemiskinan Selangor – housing, education,
training
l Yayasan Basmi Kemiskinan Kelantan – education
l Yayasan Pahang - education
l Yayasan Terengganu – education
l Yayasan Basmi Kemiskinan Selangor – education, housing,
training, small businesses
Improving the social environment and abilities
of the poor

l Subsidized housing development

l Subsidized education.

l Subsidized health care.

l Assistance in finding employment.

l Community practice social work.

POVERTY IN THE NEW MILLENIUM

l The impact of 1997 crisis has been most critical

on urban poor, the near poor and migrant
workers al of whom have been effected by
contraction in employment, escalating food
prices and inflation.

l The impact of the crisis on employment is

evidenced by contraction in employment
resulting in increasing unemployment and
retrenchment.
Government efforts…

l In short, our government continuously implements

policies and programs to ensure that Malaysians
are out of the poverty trap.

l As a result, the overall poverty incidence is

decreasing over the years but pockets of poor
Malaysians still exist here and there.

l Based on EPU statistics, there are about 42 000

poor families in Malaysia who needs financial aid
from the government
Millennium Development Goals (MDG)

l MDG was introduce to strengthen global efforts

for peace, democracy, good governance and
poverty eradication

l The main target of MDG is to free the world from

hunger and hardcore poverty
 MDG Goals and Strategies
1. Eradicate extreme poverty and
hunger
2. Achieve universal primary education
3. Promote gender equality & empower
women
4. Reduce child mortality
5. Improve maternal health
6. Combat HIV/AIDS, malaria & other
diseases
7. Ensure environmental sustainability
8. Develop a global partnership for
development
Example of Government Programs
l e-kasih
l PPR – People’s Housing Programme with monthly rental of
RM 124.00
l Single mother programs
l Bantuan Sara Hidup (BSH)
l Subsidy
l Scholarships
l Clinic community
§ The social safety net by Min of Women, Family and
Community Development focuses on vulnerable groups
example aged, disabled, single parents and disaster
victims.
l Roles by MOA in providing agricultural assistance
Conclusion

§ In general the achievements of poverty eradication

program in Malaysia carried out since 1971 have
been successful.
§ The quality of life of the poor has also improved.
§ The income of all races had also increased but there
is a need to bring the income gap closer, particularly
between races.
§ We are very lucky because poverty is not really a big
issue in our country
§ How about in other countries….?
§ We should be thankful for being born in this country.