THE country’s subsidy rationalisation drive is facing renewed scrutiny amid growing calls for a fairer and more realistic welfare framework, with experts warning that the country’s reliance on rigid income classifications risks excluding financially vulnerable households from crucial government assistance.
The debate has intensified as Putrajaya moves towards reducing petrol subsidies for the T20 income group in an effort to contain rising fiscal pressures and curb subsidy leakages.
However, critics argue that categorising households solely through the B40, M40 and T20 income framework no longer accurately reflects the financial realities faced by millions of Malaysians, particularly in major urban centres where living costs have surged sharply.
Senior lecturer at the Graduate School of Business, Universiti Kebangsaan Malaysia, Dr Roslan Ja’afar said income-based classifications may simplify government administration and policy implementation, but warned they fail to capture broader economic vulnerabilities.
He argued that monthly income alone is an increasingly unreliable measure of financial well-being, particularly given the vast differences in living costs between cities and rural areas.
“A household earning RM6,000 in a major city may still face financial difficulties after accounting for rent, transport, children’s education and daily expenses,” TheSun quoted him saying.
“On the other hand, a family earning the same amount in a rural area may enjoy greater financial stability due to lower living costs.”
Roslan said the existing classification model overlooks critical variables such as household size, number of dependents, debt burdens, healthcare needs and regional living expenses.
He noted that two families earning identical incomes may experience vastly different financial realities depending on family responsibilities and commitments.
“For instance, a family earning RM7,000 while supporting six children, elderly parents and chronically ill family members would certainly face far greater financial pressure than a smaller family with the same income,” he said.
The academic also highlighted the growing pressures faced by Malaysia’s so-called “squeezed middle” — households that do not qualify as poor under official classifications but continue to struggle with escalating living costs, loan commitments and stagnant wage growth.
According to Roslan, rigid income thresholds can create significant social imbalances where relatively minor differences in earnings determine access to government support.
“For example, a household earning RM5,200 may still fall under the B40 category and qualify for certain forms of aid while another household earning RM5,300 may immediately be categorised as M40 and lose access to several forms of assistance,” he said.
“In reality, the RM100 difference does not significantly alter their living conditions.”
He warned that assistance systems overly dependent on fixed income categories risk reducing citizens to statistical classifications while ignoring wider social vulnerabilities.
Single mothers, persons with disabilities, elderly individuals living alone, chronically ill family members and recently unemployed workers may require substantial support regardless of whether their official income places them outside lower-income categories, he added.
Roslan said economic uncertainty has further exposed weaknesses in the current framework, as households previously considered financially stable can rapidly become vulnerable due to sudden job losses, inflationary pressures or income reductions.
“Someone categorised as M40 today may quickly become economically vulnerable due to unexpected economic shocks,” he said.
He called for the government to adopt a more comprehensive and multidimensional approach when determining eligibility for subsidies and financial aid.
Under such a system, income would remain an important benchmark but would be assessed alongside factors including residential location, local living costs, disposable income, household debt, health conditions and social vulnerability.
“In addition, social assistance mechanisms should not merely focus on gross household income but also consider disposable income — the actual remaining income after deducting essential commitments such as housing, education, healthcare and family responsibilities,” he said.
Roslan stressed that subsidy rationalisation should not focus solely on fiscal savings, but must also uphold principles of social fairness and economic inclusivity.
“The middle-income group, in particular, is facing increasing economic pressure. They may not be poor, yet at the same time they are not financially secure enough to cope with rising living costs without some form of assistance,” he said.
“If this issue is not managed carefully, social inequality within society may continue to widen.”
He added that the ultimate objective of government assistance should be to ensure that no Malaysian is excluded from the country’s economic progress.
“To achieve this goal, an approach that relies too heavily on income categories alone must be reassessed so that policies genuinely reflect the realities of life faced by Malaysians today,” he said. - May 12, 2026
The views posted by Senior lecturer at the Graduate School of Business, Universiti Kebangsaan Malaysia, Dr Roslan Ja’afar first appeared in TheSun.
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