Time for a universal child grant in Malaysia

29/10/2022 04:53 PM
Opinions on topical issues from thought leaders, columnists and editors.

By DEREK KOK | RESEARCH ANALYST, Jeffrey Cheah Institute on Southeast Asia

Children are often left out in conversations about poverty and welfare, despite the fact that poverty affects children more disproportionately.

In Malaysia, the proportion of children in absolute poverty and in low-income households is higher than that of working-age adults or elderly persons – a trend that has been observed in the last three household income surveys since 2009. In 2014 for instance, 18 percent of children in Malaysia were in low income households, compared to 11 percent of working-age adults and 14 percent of elderly persons. As of 2014, the then absolute poverty rate among Malaysian children stands at 1.7 percent – this is nearly three times higher than the average poverty rate of 0.6 percent across all age groups.

Malaysia is set to be an ageing nation by 2030. As such, Malaysia needs every child in the country to reach their full potential, unencumbered by the vicious effects of poverty.

However, Malaysia’s social safety net for children is woefully lacking.

The Department of Social Welfare’s current per capita financial assistance for children of RM253 per month is the lowest since 2013.

A 2018 study of children living in low-cost flats in Kuala Lumpur also found that 34 percent of households did not receive support from Malaysia’s Bantuan Rakyat 1 Malaysia (BR1M) cash transfer programme while only 4 percent of households received support from the Department of Social Welfare despite being eligible.

The Government recently announced that eligible households from the B40 segment (bottom 40 percent of households with lowest incomes) would receive an additional RM120 per child under its flagship cash transfer programme. According to the UN Special Rapporteur on extreme poverty and human rights however, this cash grant is too small and infrequent.

This is where a universal child grant can make a difference.

Universal Child Grants

Universal child grants (UCG) are cash transfers given to every child in the country assist parents and caregivers with childrearing costs. It would be paid on a regular basis and to all children regardless of family income – hence its ‘universal’ moniker.

Therefore, basic common properties of a UCG is that it is a cash transfer, universal to the population of children, unconditional and paid on a regular basis.

These grants have been shown to have very positive effects on children’s wellbeing. Evidence from around the world documents improvements in multiple indicators such as health, nutrition, education, living standards and even women empowerment, with the potential for long-term productivity gains that benefit not just the child but society as a whole.

Research also shows that investments during early childhood are one of the most cost-effective ways to alleviate poverty and reduce inequality.

The fungibility of cash means that it is inherently flexible, unlike vouchers and in-kind assistance. With cash, families themselves can choose which needs to prioritise. This especially pertinent as the financial costs of childrearing are not insignificant and can fluctuate with time.

The Employees’ Provident Fund of Malaysia calculated that having just one child in the Klang Valley raises the minimum expenditure needed for a reasonable standard of living from RM4,420 to RM5,730 – an increase of nearly 30 percent.

There is often vocal opposition against giving out cash on the basis that it discourages work and leads to abuse, but these common misconceptions have been extensive debunked by evidence from across the world.

A 2005 British study in fact showed that parents who were given cash benefits to help raise their young children ‘increased spending on items such as children’s clothing, books, and toys, and decreased spending on alcohol and tobacco’.

Poverty targeting can miss the point

Why should this aid be given to all children, instead of only targeting those from poor or B40 families?

Evidence increasingly shows that poverty-targeting methods can miss large numbers of its intended beneficiaries. A 2019 study of 38 social protection schemes showed that 25 of the programmes had exclusion errors above 70 percent, with the most effectively targeted scheme incorrectly excluding 44 percent of its intended coverage.

In contrast, universal schemes had the lowest exclusion errors and were the most effective in reaching the poorest target recipients. For instance, Mongolia’s Universal Child Money scheme had virtually no exclusion error and reached 99 per cent of the poorest 20 per cent of children.

The exclusion error of BSH/BR1M is also significant, especially in Putrajaya, where 30.8 percent of the B40 who live there do not receive BSH/BR1M. At 28.4 percent and 16.8 percent respectively, exclusion errors are also relatively high in Kuala Lumpur and Negeri Sembilan.

If the poorest beneficiaries are left out due to high exclusion errors, this would defeat the very purpose of targeting in the first place – which is to ensure that those who are most in need receive aid.

Avoiding the stigma

Targeting also does not account for income fluctuations. Being ‘poor’ is not a permanent category as household finances can be affected by sudden and unexpected economic shocks at any time. A universal approach would ensure that children from near or newly poor families are included.

Crucially, targeting can be stigmatising. Negative connotations surrounding welfare recipients can even worsen poverty by discouraging the take up of welfare assistance.

In the United States of America, recipients of the Women, Infants, and Children Program reported that they were reluctant to use their food stamps as it signalled that they were poor and reliant on welfare.

Evidence also continues to grow on the relationship between poverty and shame, with particularly serious effects on children. A scheme that provides the same benefit to all children would avoid this particular pitfall.

Costs less

A universal programme would also be more efficient in terms of cost and usability. Many poor families are either simply unaware or face administrative barriers and complicated application processes to access targeted schemes.

According to the International Labour Organisation (ILO), universal schemes have the lowest average administration cost at 2.5 percent of total programme costs.

In contrast, targeted programmes bear an average administration cost of 11 percent. For instance, the hardware and software system for Malaysia’s targeted petrol subsidy alone cost the government RM25.03 million.

With a universal approach, more money can directly go towards the children instead of these expensive and bureaucratic targeting systems.

Using 2017 figures, a universal child grant of RM200 monthly to all children below the age of 5 would only cost 0.45 percent of Malaysia’s GDP, well below the ILO’s estimation of 1.4 percent of GDP for low-income countries.

Implementing a universal child grant in Malaysia would therefore not be a fiscal issue, but a reflection of political will. Malaysia’s expenditure on social protection has not risen in line with GDP. As of 2017, our spending on social protection was the lowest of all Southeast Asian countries for which data was available. Thailand has recently expanded their Child Support Grant to include eligible children under six while Myanmar is widening their universal programme to cover more states as Vietnam considers a similar scheme.

Malaysia in danger of falling behind our neighbouring countries. A universal child grant represents an opportunity for us to change this and invest in our future generations’ success and wellbeing.

(The views expressed in this article are those of the author(s) and do not reflect the official policy or position of BERNAMA)