From vulnerable to pandemic poor

The COVID-19 pandemic has taken a toll on everyone’s lives. In addition to the direct morbidity and mortality impacts of the disease, measures to control the spread of the virus have had far-reaching effects on people’s livelihoods. In poor and rich countries alike, control measures have displaced workers at all skill levels and pay grades, and upended daily activities such as going to work, attending school, and gathering with friends and family. Even people in countries without COVID-19 cases have suffered from border closures, crippling their trade, tourism and livelihoods. 

The pandemic has been especially cruel to the poor and the vulnerable. These include those with little or no assets or savings to fall back on, informal workers who are not covered by or have inadequate social safety nets, and those who have lost their jobs, been placed on unpaid leave, or experienced pay cuts because of movement control orders (MCO). 

October 17 marks the annual observance of the International Day for the Eradication of Poverty, a day for the world to reflect and engage on the actions needed to achieve the goal of ending poverty in all its forms. This year, for the first time since 1998, the proportion of the world’s population living in extreme poverty is expected to increase. In its global 2020 Poverty and Shared Prosperity Report, the World Bank estimates that 88 million to 115 million people will be pushed into extreme poverty.
Malaysia has done comparatively well in controlling the spread of the novel coronavirus and has taken unprecedented relief and stimulus measures to protect the physical and economic well-being of Malaysians. Yet, mirroring the situation globally, everyone in Malaysia has been affected, particularly the B40 and those who were already vulnerable and struggling to make ends meet prior to the pandemic. 

Our recent report Aspirations Unfulfilled: Malaysia’s Cost of Living Challenges details the challenges that low- and middle-income Malaysian families were facing even before the COVID-19 pandemic. Households’ concerns about “the cost of living” are more complex than simply rising prices. Also in the mix are sluggish wage growth among younger workers and those without tertiary education, a shortage of affordable housing in urban areas, and precarious personal finances, with high indebtedness and extremely low savings. 

Reliable data on the socioeconomic impacts of the pandemic on poor and vulnerable households in Malaysia are scarce and fragmented. Some clues are available from online surveys conducted earlier by the Department of Statistics Malaysia (DOSM), although DOSM rightly cautions that these are not official statistics because the sampling was not representative of the population. The results suggest that informal workers and those who are self-employed have been hit particularly hard, as they were less likely than formal salaried workers to receive full or partial wages during the months when they could not work. At the onset of the first MCO in mid-March, a majority of survey respondents reported having only enough savings to live on for 1–2 months; for most self-employed persons it was less than one month. Despite the introduction of government assistance programs, it is anticipated that many micro, small and medium enterprises will not survive the economic shock of COVID-19.

In the near term it is vital that vulnerable households and businesses continue to receive the lifeline of financial support needed to weather the storm. This will be especially important in public-facing service businesses, where the slowdown is likely to persist for some time after formal restrictions are eased. The pandemic has also highlighted the weak points of Malaysia’s social protection system, including fragmentation and duplication of programs. EPF and SOCSO form two major pillars of the system. However, they do not cover some 40 percent of the workforce, mostly the self-employed, gig workers and informal workers. To ensure that these measures can provide sustained support in these uncertain times, policies to help Malaysians strengthen their own financial positions through greater savings and prudent use of credit need to come hand in hand. Crucially, they will strengthen this first line of resilience in the event of future shocks.

The effects of the pandemic have placed Malaysians—the vulnerable and the pandemic poor — in a particularly precarious position. An enhanced social protection system and continued role-sharing the government and civil society will together help eradicate poverty, foster equity, and promote resilience within the economy.