Sunday, November 9, 2014

Affirmative action still needed to boost low-income group

The Malaysian Insider 9 November 2014

Malaysia may have made great strides in reducing poverty levels, but now needs to grapple with inequality in wealth distribution and opportunities for upward mobility, said an economist and author of "The Colour of Inequality".
Muhammed Abdul Khalid said the widening income gap caused by inequality in opportunity for education, income and asset-ownership, will continue to affect upward mobility among low-income households.
Failure to address this was a recipe for social and political instability, and could pose a danger to economic growth, he told The Malaysian Insider in an interview ahead of his book launch next week.

Muhammed Abdul Khalid, the author of ‘The Colour of Inequality’, believes that affirmative action is still needed as there’s a widening income gap among Malaysians. – The Malaysian Insider pic, November 9, 2014.

Affirmative action was still needed, and meritocracy might not work for everyone, said the 39-year-old, whose own childhood experience with poverty was an impetus for his interest in studying economics and wealth distribution.
Such a statement about meritocracy may come as a shock to some in Malaysia, where preferential treatment for a segment of people has become a political hot potato and a source of resentment.
But, Muhammed has a qualifier: affirmative action should continue but in a targeted manner at low-wage earners instead of corporates; at poor rural kids for education, rather than across the board for a whole race.
Muhammed, who helped his mother sell kuih to make ends meet, believed that needs-based affirmative action was what was needed to address the wealth gap between Malaysians, regardless of race.
He dispels the popular perception that the Bumiputera are still poor despite the New Economic Policy (NEP), arguing instead that in 1970 before the NEP, 65 out of 100 Bumiputera were considered poor. But, now, it is only two in 100.
"This is an undeniable achievement. And let's not forget, poverty rates for all groups reduced significantly, although there are still pockets of poverty in certain areas, especially in east Malaysia.
"However, the issues now are less about poverty, but about vulnerabilities, lack of asset ownership and upward mobility," he said. 
Policy bias causes inequality
The Petronas scholar said inequality should not only be seen in terms of education, income and asset-ownership, but also in policy-making itself.
"Policy should not be shaped by certain interest groups, which we see happening now, where we don't hear the voices of those in Kelantan, Sabah and Sarawak.
"Policy-making must be more inclusive," he said in the interview at his office in Kuala Lumpur recently.
There was now less upward mobility among the bottom 40% of households in Malaysia, and the current scenario did not bode well for future generations if public policies are not put in place to address certain worrying trends.
"While I had a better chance of having a better education and better income than my parents, I doubt children from low-income families, especially the children of those in Kedah, Sabah and Sarawak, can have that same upward mobility now, and this has to do with government policy," he said.
The current requirement for all A's in order to enter public universities, and even fully residential boarding schools, was unfair to rural students and those from low-income households, who lacked the foundation in quality education.
Children from these areas and homes were less likely to be able to afford good private tuition, and they also have less access to quality food with good nutrition to help physical and brain development, which is an important factor in learning.
"The current education policy supports the urban population, they don't care about the 6As, you only get a spot if you get straight A's, so these poorer kids have to compete with the kids in Bangsar and Bukit Damansara," he said.
Access to education must give allowance to those from low-income households, whether they were Malay, Chinese, Indian, or from Sabah or Sarawak, he argued.
"However you slice it, the poor will still be Sabah, Sarawak and the Malays. Even if you take the bottom 40%, you are going to capture them anyway."
People from certain groups, despite passing university with flying colours, still faced low chances of getting hired, or getting equal pay with colleagues, as his book explores.
"This is a serious national problem that we must urgently address and correct." 
'The Colour of Inequality' will be launched by former finance minister Tun Daim Zainuddin on November 11. – November 9, 2014.'The Colour of Inequality' will be launched by former finance minister Tun Daim Zainuddin on November 11. – November 9, 2014.A hard critique
"The Colour of Inequality" is essentially a study on the wealth gap among the different races and classes in Malaysia, and an attempt to answer questions about past policies such as the NEP.
The economist also said there were myths and anecdotal accounts about the NEP's bias, and his book was an attempt to answer questions about the policy's impact on brain drain, investment and growth.
"Does the government penalise non-Malays and promote the Malays? These are serious questions and uncomfortable issues, but we must be comfortable talking about uncomfortable things," said Muhammed of his book which was published a month ago.
One point when talking about affirmative action, which he stressed in the book, was that race-based policies were unavoidable.
"Maybe it is not sexy or not politically correct to have race-based (policies), but sometimes you need it.
"But it cannot be permanent, it needs to be temporary but certain inventions require race-based approach, we cannot run away from it," he added.
Here is where he puts forward his argument that race-based policies are still needed for Bumiputera ownership of assets.
But he is quick to stress that these policies should be for the working class, and not the corporates.
Muhammed anticipates that this part of the book, where he addresses hiring preferences and higher salaries benefiting the Chinese community, will raise some eyebrows.
He has noted in his foreword that some readers might get the impression that the book is biased against the Chinese and paints them unfavourably.
"Let me reassure the readers that this is not so, as this book also criticises the Bumiputera community, especially the key stakeholders that are entrusted to uplift the socio-economic state of the group, as well as addressing issues facing the non-Bumiputera community," he wrote.
Ultimately, different policies require different approaches, depending on the target objective. Approaches can be needs-based, gender-based and even regional-based when addressing issues in Sabah and Sarawak. 
Unlocking the low wage, low education cycle
Muhammed's book draws heavily from facts and figures in a joint study with Dr Lee Hwok Aun from the University of Malaya.
Among their findings was that between a Chinese and a Malay graduate, the latter had a lower probability of being called for an interview, despite having better grades and  English proficiency.
"And in the job market, all things being equal, the salary of a Chinese would be 20 to 30% higher," he said.
For this reason, Muhammed feels the time is right for an Equal Opportunity Act, where those who feel discriminated against in the labour market should be able to make a complaint to a commission.
He added that this would also address perceived discriminatory practises in public sector hiring.
Muhammed warned that if discrimination in hiring and salary was not addressed, it would affect the ability of working class non-Chinese to accumulate assets, adding that this was the reason he felt that race-based policy was still needed for Bumiputera-ownership of assets.
Compounded with the problems of lower income and lower chances of accumulating assets, this group would not able to help their children and future generations get a proper education and achieve upward mobility.
From selling kuih to doctoral studies
Muhammed grew up in a village in Tanjung Tokong with 10 siblings. He helped his mother sell "kuih" with his twin brother until he went off to a science school in Kedah after getting good results in his Sijil Rendah Pelajaran examinations in Form Three.
"The Colour of Inequality" is thus a very personal endeavour for Muhammed, who grew up observing wealthy families in Penang, and was concerned that kids from low-income families like his were not getting the same opportunities  to improve their lives.
Concerned about the widening income gap, he even posed a question to then prime minister Tun Dr Mahathir Mohamad when he was a finance student in Los Angeles in 1995.
"He came to LA and I remember asking him about the widening income gap and why is it happening.
"I never imagined that 15 years later, I would be doing research on this. The reality is that we cannot run away from the widening gap between the rich and poor in Malaysia," he said.
Muhammed, who pursued his master’s in economics at Universiti Malaya after completing his bachelor’s degree in finance in the United States, went to France to do another master’s, this time in public policy majoring in economic governance.
He stayed on in Paris to write a PhD thesis on economic distribution.
He returned to Kuala Lumpur in 2011 and now lives here with his wife, who was his university course-mate in Paris, and a two-year old son.
Muhammed previously served at the Institute of Strategic and International Studies and as a chief economist with the Securities Commission.
He is currently working on a second book on a related topic which will be ready in a year.
"The Colour of Inequality" will be launched by former finance minister Tun Daim Zainuddin on November 11. – November 9, 2014.

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