Examining Sabah’s household income growth

The growth in household income in Sabah has been lacklustre, relative to other states in Malaysia.

This is demonstrated in the charts below. The charts represent states that have left Sabah behind, states that caught up and have surpassed Sabah, and states that are catching up to Sabah, respectively.

The first chart shows there were only three states (one, a Federal Territory), which had higher household incomes than Sabah in 1989. Penang’s household income was about 5 per cent higher than that of Sabah in 1989. By 2022, the gap had widened to 34 per cent. All three states have increased their household income gap to Sabah by multiple folds.

The second chart shows states which have surpassed Sabah in mean household income measures since 1989.

In 1989, Johor, Terengganu, Melaka, Negeri Sembilan, and Sarawak, had household incomes lower than Sabah’s. Fast-forward by 30 some years, all these states have surpassed Sabah, and some states, like Johor and Melaka, are higher by at least 30 per cent in 2022.

Terengganu recorded the largest turnaround. Its household income was 40 per cent lower than that of Sabah, but by 2022, the figure was 17.5 per cent higher.

Nationally, Sabah’s household income in 1984 was higher by 7.5 per cent than the national household income. But by 2022, the national figure had surpassed Sabah’s household income by more than 37 per cent.

There are still five states which have lower mean household incomes than Sabah in 2022. However, these states are catching up, and if things remain as they are, Perak and Pahang may soon surpass Sabah. A back-of-the-envelope calculation using an annual compounded rate shows that this could happen as early as the year 2030.

In 1989, Kedah’s household income was about 41 per cent lower than Sabah’s. Today, it is only 10 per cent less. Even Kelantan, a long-time rival for the title of the poorest state in Malaysia, has narrowed its household income gap from about 44 per cent to 21 per cent.

Here are some observations:

1. All states and one Federal Territory recorded progress against Sabah’s household income. The “rich” states became “richer,” while the “poor” ones are catching up to Sabah.

2. Sabah’s tepid household income growth is occurring over a long period and under different national and state administrations.

3. Using the median household income measure over the same period only shows marginal differences. The pattern of being left behind, catching up, and for some states, surpassing Sabah, remains.

And here’s the economic explanation for this.

Low-income households dominate the distribution of income earners in Sabah (the blue area on the left side of the chart). More than 42 per cent of households in Sabah earn less than RM4,000 per month compared to 26 per cent at the national level.

Meanwhile, Sabah’s share of households earning middling income is generally lower compared to the national income distribution. At the higher end, only 14.7 per cent of households in Sabah earn more than RM10,000 per month compared to 27.4 per cent at the national level.

The tall red bar at the extreme right, representing the share of national households earning more than RM15,000, likely indicates the high share of quality jobs that are available in other places such as the Klang Valley, Penang, and Johor. Sabah lacks these kinds of jobs.

This pattern of distribution raises the question: What kind of work is available in Sabah, and who is doing it?

To the left of the service and sales work category are management, professional, technical, and support types of jobs, which require training and higher education attainment. The blue bars, representing the job share of these skilled jobs in Sabah, are considerably lower, compared to national figures.

To the right, Sabah has a disproportionately higher share of jobs in agriculture-based occupations and, worryingly, elementary occupations. In Sabah, elementary jobs likely mean physical agriculture-related jobs, jobs in construction, logistics and delivery, and food preparation.

The lopsided number of lower-skilled jobs offered in Sabah may explain why income is persistently lower in the state.

The staggering share of Sabah labour without formal education and with only primary education, around 35 per cent combined, is consistent with the observed statistics in [1] and [2]. Without adequate quality jobs, household income distribution is skewed towards the lower end.

Yes, the Labour Force Survey 2023 published by the Department of Statistics Malaysia (DOSM) takes into account foreign labour working in Malaysia, which partly explains the mind-boggling low educational attainment statistics here.

However, the presence of significant foreign labour in physical agricultural work and in elementary occupations in Sabah is more likely due to the demand for labour in these sectors. The economy created these types of low-paying jobs and attracted foreign labour, not the other way around – foreign labour didn’t come to Sabah and create jobs for themselves in plantations, construction, and restaurant kitchens.

At the other end of educational attainment, the share of tertiary-educated labour in Sabah is relatively low, again suggesting that there are just not enough quality jobs available in Sabah.

Today, in the Klang Valley and even Singapore, you will meet Sabahans working behind fast food counters, as Grab drivers, and also as skilled professionals in multi-nationals, GLCs, and in boardrooms. If Sabah could offer decent and quality jobs, many of these Sabahans would return and contribute.

References to household income refer to the mean of household gross income as in Department of Statistics Malaysia data. Source: Select Time Series on Income, Household Income Survey, 2022, Department of Statistics Malaysia.

The views expressed here are the personal opinion of the writer’s and do not necessarily represent that of Twentytwo13.