This article first appeared in Forum, The Edge Malaysia Weekly on November 11, 2019 - November 17, 2019
Oct 17 marked the United Nations’ International Day for the Eradication of Poverty, an annual reminder of the need for continued vigilance in the fight against social injustice. While much has been achieved in terms of improving global standards of living, around 736 million people — half of whom are children — continue to live under the international poverty line of US$1.90 per day.
Of course, this measure is rarely used by more developed countries, such as Malaysia, which tend to define their own poverty lines. The government’s recent announcement, made within the context of the Shared Prosperity Vision, to adopt such a relative poverty line (usually 50% to 60% of median income) is, therefore, another clear reflection of Malaysia as a developed and progressive nation.
It is worth emphasising at this point that just because poverty will be measured relatively, it does not mean that there is anything inevitable about poverty. Indeed, relative poverty rates among the Organisation for Economic Co-operation and Development (OECD) countries vary considerably, from 26.6% in South Africa to only 5.4% in Iceland. Relative poverty among children in the same group of countries ranges from 28.4% in Costa Rica to only 3.6% in Finland. And although differences in overall national economic development play a major role, so, clearly, do policy choices. To take a few examples, Belgium and Finland are similarly wealthy in gross domestic product per capita terms, but Belgium’s relative child poverty rate is three times higher than Finland’s. Chile is 33% richer than Mexico, but Mexico has a lower child poverty rate.
Although a number of factors are at play here, perhaps the single greatest explanation for variations in child poverty rates is the level of public investment in child and family benefits. OECD countries spend an average of 1% of GDP on a mixture of child benefits, family benefits and childcare allowances, with countries that spend more also tending to achieve the lowest levels of child poverty.
The most successful countries rarely try to target such benefits to poor children only. Household incomes are not static; they fluctuate over time (due to pregnancy, childcare requirements, unemployment, sickness and so on) and, in this dynamic environment, attempts to target child benefits to only those children living in poverty not only tend to be inaccurate but also create disincentives to work and can further stigmatise the poor.
Furthermore, the targeting of child benefits to only a relatively small number of poor children necessarily means that benefits need to be kept low or recipient households will become better off than households that are only just above the eligibility threshold. Unsurprisingly, meagre, badly targeted benefits rarely do much to reduce child poverty. In contrast, more inclusive and generous child benefit schemes that include hard-working, middle-income families not only deliver better poverty reduction results but also tend to be more popular with the public and can strengthen social cohesion.
So, what does this all mean for Malaysia? Well, as has been recognised in a range of official reports from the OECD, Asia Development Bank, International Monetary Fund and, most recently, the UN Special Rapporteur on Extreme Poverty and Human Rights, Malaysia’s social protection system is rather inadequate and ineffective. Indeed, only around 1% of Malaysia’s children benefit from the Children’s Financial Assistance scheme managed by the Department for Social Welfare and only around 3,000 families benefit from the childcare fee assistance scheme.
The government has, to its credit, acknowledged this and committed to policy reforms: the Bantuan Sara Hidup (BSH) was revised last year to provide additional support for children and Budget 2020, announced last month, included new incentives for new mothers who are employed in the formal sector, which will surely help with childcare costs. But overall, Malaysia’s social protection system continues to fail the child-sensitivity test.
Addressing these challenges is urgent. Analysis commissioned by the United Nations Children’s Fund (Unicef) suggests that 19% of children (1.77 million) live in relative poverty in Malaysia, with a much larger number at risk of falling into poverty in the event of their family experiencing a socioeconomic shock. These children are not only deprived, or at risk of being deprived, of a standard of living that many of us take for granted but will also have lower health, nutrition and education outcomes than their better off peers. With an ageing population that will demand higher productivity among the young, and faced with the prospect of a Fourth Industrial Revolution that is unlikely to be kind to the unhealthy and low-skilled, Malaysia simply cannot afford to lose this human capital.
At which point you might wonder — maybe the problem is not only income? Maybe wealthier parents are more educated and have better parenting skills? Certainly, parental education matters for children’s outcomes, but it has also been proved that income itself has a major direct impact on children’s outcomes, irrespective of other factors.
For example, in 2013, academics from the London School of Economics analysed 34 high-quality studies on income support programmes for families in OECD countries and found that in at least 83% of the programmes studied, higher income directly improved cognitive development, school achievement and social and behavioural development.
In these programmes, parents were not only more able to invest in their child’s development (such as healthy food, books and educational experiences) but also had lower levels of stress, anxiety and depression that made it easier for them to give children time, attention and positive support.
Therefore, celebrating the International Day for the Eradication of Poverty, the time is surely ripe for Malaysia to establish a more inclusive national child benefit scheme and expand public provision for high-quality childcare for low income families. Doing so would not only ensure a fair start in life for all children but lay the foundations for Malaysia’s transformation into a more inclusive, high-productivity economy where everyone has a fair chance in life and no child is left behind.
It is through such bold and decisive policy-making that Malaysia stands the best chance of achieving the Shared Prosperity Vision and its Sustainable Development Goal targets.
Stephen Barrett is chief of social policy for Unicef in Malaysia
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