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Friday, November 21, 2014

Compare the "mddle class" today and 10 years ago



The term "middle class" was a word that signifies progress, and it also mean stability. The "middle class" used to mean a family with a nice place call Home, drives a Volvo or vehicle of that class, goes on yearly vacation and send their kids to college. 

But those were the days. Because the middle class today varies so much in comparison to 10 years ago.

In Malaysia, the "middle class" group generally includes people who earn RM3,000 above. Between RM3,000 to RM4,999 a month, it's normally the lower middle income while the upper income earns RM5,000 above. In our country, our government data in 2012 shows that 27.8% household income was at the lower middle income while 33.6% household earn RM5,000 and above. 

Even though there is a stead increase in income in the country, the increase barely offset the country's soaring inflation rate....the rising living cost. 

Here are some of the significant items that one should compare between now and 10 years ago to gauge how the "middle class" looks like today:

A) FUEL PRICES

Petrol increase is one of the biggest burden to the "middle class"

We all know that the fuel price dropped recently in the world market but Malaysians are paying RM2.30 per litre for RON95. In 2004, it was only RM1.38 per litre (RON92). Diesel was RM0.83 per litre but today, it's at RM2.20 per litre. 

Chart showing a big jump in price from 2004 to 2014

A simple calculation will let you know that you are paying 60% more for petrol while about 165% for diesel. 

This become worse when more people are staying far away from their work place. The jam is not helping the middle income either. Of course, for those who are staying near to the LRT (which is not many at the moment), there is an option to consider the public transport. But on average, most middle income earners will have to fork out 60% more for fuel alone.

B) PROPERTY PRICE

This is also another important factor to consider....the property price today is no longer affordable. Middle income earners will definitely notice the drastic jump in the price.



Taking Klang Valley alone, you will notice this trend: 15% to 18% increase per annum. 

Today, a condominium of 1000 sqft at RM500k and above is considered reasonable. Back in 2004, for the same amount of money, you could probably get a 2,500 sqft double storey terrace. That's about RM2,100 a month for installment. If you are the lower middle income group, that's already about half of your salary. 

C) ELECTRICITY TARIFFS

Another important part of our lives....electricity...but now we have to save. That's what middle class means today. Savings, managing our increase of living cost. 

Power tariffs rose by an average of 15% effective January 1 this year, after Putrajaya announced in December 2013 that it had approved the increase by utility firm Tenaga Nasional Berhad (TNB).

The rates were purportedly raised as a measure to reduce Government subsidy and to boost development spending.



Consequently, the average electricity tariff in Peninsular Malaysia went up by 4.99% per kWh or 14.89% from the 2011 average rate of 33.54 sen/kwH.


UP NEXT: FOOD? Alright...I'm not going to talk about that....because this is already depressing enough. What I can conclude from these simple examples is this: a middle-class family today may be spending well over RM3,065 a month just on these basic essential items...these days, it's no longer about stability for middle income...it's more like sufficient for a day to day survival. 

Welcome to the middle income family!!

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