Malaysia has in many ways become asuccess story in shared prosperity. Shared prosperity meansthat all households experience income growth, but growth ishigher for those households at the bottom of thedistribution, a pattern that leads to lower inequality. Inthe past 40 years, Malaysia drew on its natural resources tonearly eradicate absolute poverty, from 49 percent in 1970to 1 percent in 2014. The number of Malaysians vulnerable tofalling into absolute poverty has also declined in thisperiod. To accelerate Malaysia s transformation into amiddle-class society, Malaysia may consider prioritizingreforms that: (i) close the educational achievement gaps atthe post-secondary levels by compensating for familybackground, including pursuing universal pre-primaryenrolment and otherpolicies to boost the qualityof the poorest performing schools; (ii) provide moredemand-driven post-secondary skills training for thosealready in the labor markets; (iii) create an integratedsocial safety net including both social insurance mechanismsto protect households against shocks and old age (forexample by introducing unemployment insurance andredirecting subsidy savings to matching contributions toretirement accounts), and higher levels of social transfers(by consolidating, improving targeting, and increasingbenefits of existing programs); and (iv) this safety net maybe financed through more progressive tax policy (for exampleby reviewing the top marginal personal income tax rate andexpanding the number of taxpayers).
PDF
download
878987797
028-85220240
