3.2 INCOME DISTRIBUTION

INCOME DISTRIBUTION

Total income divided between individual/group in an economy

Government action that changes the income position from individual/group to others.Eg : Tax , Welfare , Charity and etc

REDISTRIBUTION OF

INCOME

INCOME DISTRIBUTION IN MALAYSIA

The Malays were a small class (rich and

powerful).

Formed the majority group that controlled

the government.

The Chinese also privately owned plantations and

mines

Chinese dominated the cities. They were the upper echelons of commerce, industry and

finance

AT INDEPENDEN

CE

Echelons = level or

rank

Mean income for all major races increased reflecting the direct effects of economic

development

DURING NEP

Malay mean income

improved

Chinese mean income

expanded

Indian mean income

expanded

Urban and rural

expanded

Growth with equity

DURING NDP

Household income of all ethnic groups had increased

Mean income of the bottom 40% if household increased

Income per capita in rural and urban area increased

Balanced development

Income distribution Comparison between…

RACES STRATA SECTOR STATE

MARCH 2012

Ways to reduce the income gaps among

races in Malaysia

(5m)

RACE

MARCH 2014

Reason why races in M’sia have unequal

income distribution

(5m)

1990 1997 2002 2004

RM940

RM2,038 RM2,376

RM2,711

RM1,631

RM3,738

RM4,279 RM4,437

RM1,289

RM2,896 RM3,044

RM3,456

RM955

RM2,244 RM2,165 RM2,312

Household income distribution-Ethnic1990-2004

Bumiputera Chinese Indian others

2002 2004 2007 2009

RM2,376 RM2,711 RM3,156

RM3,624

RM4,279 RM4,437 RM4,853 RM5,011

RM3,044

RM3,456 RM3,799

RM3,999

RM2,165 RM2,312

RM3,561 RM3,640

Household income distribution-Ethnic1990-2004

Bumiputera Chinese Indian others

Chinese Indians Bumiputra othersRM0

RM1,000

RM2,000

RM3,000

RM4,000

RM5,000

RM6,000

RM7,000 RM6,366

RM5,233

RM4,457

RM3,843

Households income 2014

AVERAGE OF MALAYSIAN INCOME

2012

RM5,000

Mean Monthly Household Income by Ethnicity

2012

4 187

65 4 3

2

Hereditary wealth

(Harta keturunan)

Economics activities

Malay- monthly wage earner

Indian- professional worker/estate ownerChinese- owner of big

company

Why each ethnic have different monthly income?

STRATA

MARCH 2015Solutions to

reduce inequality

between rural and urban

(5M)

OCT 2012Factors

contribute to income inequality

between rural and urban

(10M)

URBANAREA

RURALAREA

2004 2007 2009 2012

RM3,956 RM4,356

RM4,705

RM5,742

RM1,875 RM2,283

RM2,545 RM3,080

INCOME DITRIBUTION BETWEEN STRATA,MALAYSIA

2004-2012URBAN RURAL

SECTOR

-

Industrial sector

Agriculture sector

WHY THIS HAPPEN??

STATE

SEPT 2014Reason why

income distribution

unequal between state

in M’sia

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

RMRM8,586 RM8,101

RM7,023

RM5,055 RM4,658 RM4,576 RM4,576

HOUSEHOLD INCOME DISTRIBUTION BY STATE MALAYSIA

2012

REASONS FOR INEQUALITY

Differences in human skills

Differences in educational attainment

Differences in ownerships of

assets

Differences in access to capital

Differences in employment pattern

Ways to solve unequal distribution: Conventional perspective

MEASURES TAKEN TO SOLVE

1)Employment restructuring

2)Upgrading education and

skill level

3)Participation of private sector

4)Upgrade Bumiputera skills and capabilities

6)Achieving zero inflation rate

5)Participation in SMI

7)Implement the public low cost-

housing programme

Ways to solve unequal distribution: Islamic perspective

Positive measures

Law of inheritance-When a Muslim dies there are four duties which need to be performed. These are

payment of his/ her debts

distribution of remaining estate amongst the heirs

according to Sharia

payment of funeral expenses

execution his/ her will

But if a woman or man dies without an relatives, his property will be given to the

state in benefit for all the citizen.

Zakat

It is compulsary in islam.

Zakat is collected from the muslim to give to the poor.

It is an organised charity.

Which is collected and disbursed through the state.

Prohibitive Measures

Interest is not allowed in Islam for it is unjust irrespective of the nature of loan or the rate charged.

Prohibition of interest(Riba)

Prohibition of hoarding of wealth

The wealth must be utilized to get more wealth for the use and benefit of the community.

Islam prohibited all wasteful and unnecessary expenditure which encourage rich people to include

luxuries

Wasteful expenditure

Unhealthy business

Any business which create inequalities of wealth in the community are prohibited in Islam. This include speculation,

hoarding of goods and service which are essential and beneficial to the people.(corruption)

Optional Measures

Optional charity

In islam, it demand all of its followers to spend their wealth freely on the common good of society

It is moral obligation on the muslim to spread the national wealth. This required people to spend what

they can spare out their wealth merely for seeking the pleasure of God.

Charity of Surplus(Sadaqah)