PETALING JAYA – Removing or cutting down on subsidies will only hurt the lower-income group that is already grappling with the higher cost of living.
Sunway University economics professor Dr Yeah Kim Leng said since the end of the Covid-19 pandemic, the cost of living has continued to rise while wages have remained stagnant.
He pointed out that the group most hurt by this is the B40 group – which is increasing as the high cost of living hits more people.
“Many households are on the brink of poverty and subsidies are the only thing helping them avoid relative poverty.
“Poverty will continue to be an issue as the cost of living continues to rise beyond the control of the government due to external economic issues such as the slowdown in China and the Ukraine war.
“The only option available to the government at the moment is to provide subsidies for basic items to help ease the cost of living on the B40 group.”
He said subsidies are helpful as it helps reduce the gap between income and expenses.
Yeah said one possible means of reducing the RM77 billion government subsidy is to provide help to targeted and selected groups, mainly the B40.
He said once a family in the B40 group moves up or becomes self-sufficient then the government will have the option of removing it as they no longer need help.
“Spurring economic growth and making the country self-sufficient in essential areas except food production will help reduce the burden on taxpayers and the government.
“The extra funds can be used to further promote economic activity which helps growth and create jobs for lower-income families.”
He said the government needs to ensure subsidies are not introduced too early or too late and removed once they have achieved their aim.
Yeah said it is essential for the government to recognise the groups that need help from subsidies and the type of help they need.
He said the government should let the prices of goods float but ensure help is provided to the low-income to offset higher prices.
He said that encouraging higher productivity by the B40 group will see them earn higher incomes thus reducing their reliance on government help.
Subsidies can be used in positive ways to help the people while helping them stay healthy and fit.
“The government should look at removing subsidies on, for example, sugar which, however, might be controversial with some quarters.”
Yeah said subsidies on products that might be considered to be ‘unhealthy’ leads to higher consumption because it is cheap.
He said the downside of this is that more people could fall ill from all kinds of diseases thus increasing the healthcare cost to the government and leading to a higher burden on the taxpayers. – The Vibes, September 29, 2023
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