KUALA LUMPUR, Nov 2 — The Department of Statistics Malaysia (DOSM) today launched its Basic Expenditure of Decent Living (in Malay: Perbelanjaan Asas Kehidupan Wajar, PAKW) indicator today, describing it as a better tool to improve policymaking.

This PAKW will essentially let Malaysians know how much they actually need to “live decently”.

It is a culmination of Prime Minister Datuk Seri Anwar Ibrahim’s previous announcements:

  • In March 2024, Anwar announced that the National Action Council on Cost of Living (Naccol) agreed for DOSM to develop new indicators to measure the cost of living standards down to the district level.
  • In July 2024, Anwar told the Parliament that a new cost-of-living indicator will be used to enhance the Consumer Price Index (CPI) by incorporating monthly income measurements.

So what is new, and why now? Malay Mail explains:

What is different with the PAKW?

Some things are upgraded for the PAKW:

  • It will account for key metrics that were previously excluded: household size, geography (urban or rural), ethnicity, age group and education level.
  • These new metrics are meant to give a more detailed calculation of how much a household must spend monthly — to live “decently”.
  • “Decent living” is defined as: the ability to buy a list of goods considered essential, both food and non-food items such as clothing, security and shelter.

Previously, we explained why a new cost-of-living index was needed rather than the CPI that measures inflation:

  • The CPI only measures the changes in price, and is influenced by the supply and demand for goods and services.
  • The new indicator — which will measure the cost of living based on each district — will now complement the CPI.
  • This is a continuation of a proposal made during Pakatan Harapan’s short-lived 2018 administration.

The index will focus on the amount of salary needed to live a normal life instead of just the bare minimum. — Picture by Choo Choy May .
The index will focus on the amount of salary needed to live a normal life instead of just the bare minimum. — Picture by Choo Choy May .

How does the PAKW work?

“Decent living” is borrowed from the concept of “living wages”, as opposed to the “minimum wage”.

The former is defined as the amount of salary needed to live a normal life instead of just the bare minimum, which was the standard used to calculate the minimum wage.

For example, how does PAKW find out how much is needed for a household to eat “decently”?

For food items, the indicator uses the Required Nutrients Intake per demographic prepared by the Ministry of Health. This is then used to determine the price of food to be calculated, to get an estimate of how much an individual or a household needs to spend a month to attain a decent living standard.

The launch of PAKW will be accompanied by a calculator that the public can use. Put in the necessary information like the size of your household, the number of children and their ages and where you live, and you can get an estimate.

The estimation will be the amalgamation of metrics like the real estate, travel, and food cost in the specified location, as well as your children’s education level and the rough cost to support it.

Using this calculation, Malay Mail can estimate that a family of four (with one child in primary school and the other still a toddler) living in Kuala Lumpur would need to spend roughly RM6,000 per month to have a decent living. That amount may be a little smaller in an urban area like Seremban.

What will the PAKW be used for?

DOSM said the indicator is meant to help policymakers and empower households.

Minister of Economy Rafizi Ramli said the government will take into account variables like household size and location to decide who is eligible for government assistance, under a revamp of existing welfare distribution systems.

The addition of variables means policymakers could design assistance programmes with minimal exclusion errors. For the middle class, this means many could still be eligible for some government aid.

Households, on the other hand, can use the indicator to make informed choices.

DOSM chief statistician Dato Seri Mohd Uzir Mahidin during a media briefing ahead of PAKW’s launch said the indicator can be a basis to help unions or workers set what is considered to be acceptable salary rates, among others.

This comes amid concerns over the Anwar administration’s plan to rationalise RON95 subsidies, which many middle-income earners feel could affect them.

The government is also planning to revise the definition of who constitutes the T15 — or the top 15 per cent households exempted from certain subsidies.

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