The Quality of Life Malaysia Report (EPU, 1999) states that two broad concepts of poverty are normally used: absolute poverty and relative poverty. Absolute poverty is defined as a condition in which the gross monthly income of a household is insufficient to purchase
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certain minimum necessities of life. Relative poverty is defined in relation to inequality between groups by looking at the income disparity ratios of income groups, ethnic groups, and urban and rural dwellers. In this study, I will only consider on absolute poverty as this study is interested to measure the standard of living during old age.
Poverty is determined based on an individual’s level of income that is sufficient to enjoy the society’s minimum standards of living (Zin, 2004). It is measured based on a minimum expenditure or the Poverty Line Income27 (EPU, 1999) that is set by each country. Income that is below the Poverty Line Income (PLI) is considered as living in poverty. Women’s income at old age faces higher risk of attaining below the Poverty Line Income.
The World Bank has indicated that living standards data may contain errors due to differing needs between households. There is also uncertainty about the preciseness of both the Poverty Line Income and measurement of poverty (Chen et al., 1994). Studies have shown that poverty among families, communities, and older people can be reduced by appropriate and effective social pensions (HAI, 2009).
Poverty can be used to measure the economic well-being of an individual (Magrabi et al., 1991). Goedhart et al. (1977) has defined poverty is a condition of having insufficient resources and that it falls below the poverty line. This shows that individuals with low level of resources especially in terms of income, may have difficulties in living comfortably, especially during old age. However, the poverty is relatively defined based on each country or society.
27 Poverty Line Income is defined as an income sufficient to purchase a minimum food basket to maintain household members in good nutritional health and other basic needs such as clothing and footwear, rent, fuel and power, transport and communication, healthcare, education and recreation.
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There is an extensive body of literature in developed and developing countries on poverty and the elderly due to inadequate income during old age. Malaysia is no exception. Previous research has found that women who live alone in Malaysia are more vulnerable to poverty than men (Vartanian and Mcnamara, 2002; Smeeding and Sandstrom, 2005; Masud et al., 2008). Given the challenges of an ageing population, the additional concerns regarding income in later life among elderly women take on even greater salience. Previous research indicates that women face a much higher risk of poverty and are twice as likely to be poor compared with elderly men (Zaidi, 2007). These gender differentials are found not only in developing countries but also in developed countries (Levine et al., 1999; Lee and Shaw, 2003; Masud et al., 2008).
Smeeding and Sandstrom (2005) used the Luxembourg Income Study (LIS) to analyse the patterns of poverty and low income across seven countries28. Due to the different definitions of Poverty Line Income in these countries, the study used 40% and 50% of median income as the national poverty line. The United States, United Kingdom and Italy were found to have the highest overall poverty rate among elderly women which was particularly outstanding among elderly women living alone.
The Poverty Line Income that is used in Malaysia to measure the poverty level in terms of living standard indicators is RM691 per month (219.57 USD). According to Economic Planning Unit Malaysia, 22.7% of the elderly population are categorised as living in poverty (Masud and Haron, 2008). To be more precise, older women in Malaysia are reported to face a high risk of poverty than elderly men (Masud et al., 2006). This indicates that older women
28 The regions include United States, Canada, United Kingdom, Italy, Germany, Finland and Sweden.
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are clearly exposed to the risk of not having adequate income during old age and living in poverty.
Consistent with the aim on analysing how pension policy can be used to prevent elderly women from falling into poverty (Zaidi, 2007), poverty level can be used to measure the adequacy of retirement income in old age (Masud et al., 2008). Retirement income policies should be properly designed to reduce poverty among the elderly by ensuring the financial security of older women in old age. This can be done by taking into account women’s employment pattern due to family responsibilities and having more years to spend in old age than men, discussed earlier in Sections 3.2 and 3.5.
The increasing ageing population and high life expectancy among women have important implications for financial security in later life. The low labour force participation rates among women, discussed in the previous chapter, and longer life expectancy has increase the probability of women facing the risk of poverty due to their low length in service and not having an adequate income to support the ‘extra’ years during old age.
During old age, one loses one’s ability to earn a regular income (ILO, 2010). Choudhury and Leonesio (1997) looked at the relationship between women’s economic status earlier in their lives and their poverty status in old age. This study showed a strong and statistically significant role of earlier-life economic well-being. Even though older women are out of the labour market and are not earning a steady income from employment, they are nevertheless expected to receive income from other sources, such as a pension fund, children and relatives or other sources (refer to Section 3.3).
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Given the extra years they will spend in later life due to longevity, women’s retirement income would not be sufficient to maintain their standard of living and will face greater insecurity during later life. Previous research has found that older women who live alone are more disadvantaged and more likely to be living in poverty. Choudhury and Leonesio (1997) also stated that older women are twice as likely to be living in poverty as older men. Table 3.11 below shows the percentage of older persons living in poverty. For all ages and for all races, women who are not married and living alone face a higher risk of living in poverty than men and those who are married. In another study, about 90% of older people living alone in Malaysia were living in poverty and the majority were women (Masud et al., 2008).
Moreover, Vartanian and McNamara (2002) has argued that women’s economic vulnerability in old age can be understood as a product of longstanding life course characteristics combined with the effects of later life events. This showed that women’s employment histories does have affect towards their standard of living during old age. Due to that, this study aims to look at different employment patterns, especially women with disruptions during employment.
Table 3.11: Percentages of older persons living in poverty by marital status, 1994
All Races Married Not Married
Aged All All Men Women
55-64 6.24 22.89 20.01 24.48
65-74 4.50 20.21 15.22 22.06
75-84 4.65 20.12 13.88 21.74
85 or older 7.03 20.87 16.83 21.86
Source: Choudhury and Leonesio (1997)
3.8 Chapter Summary
It is important to discuss on the issues that affect women’s life course and retirement income, as the main objective of this study is to investigate the impacts on women’s retirement
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income due to disruptions during employment. The discussion above has shown that women’s employment history, gender pay gap and longevity issues affects women’s retirement income during old age. Women are also expected to received their income during old age mainly from children or relatives rather than employment related (Ofstedal et al., 2004; Masud et al., 2008). Apart from that, women in Malaysia who are out of the labour market due to care-taking responsibilities are not protected by the social security provision, hence, those in this category face higher risk of living in poverty during old age.
Chapters 2 and 3 have discussed on pension system issues and also the factors that lead to women being highly exposed to poverty during old age. The next chapter will discuss approaches to modelling income in later life that can be used to assess the impact of pension policy in countries. For example, the simulation model is used in Britain and Canada to analyse the effectiveness of the pension system design in these countries: for example PENSIM and LIFEPATHS simulation models (Hancock et al., 1992; Rowe and Gribble, 2007). The next chapter also reviews the literature on types of simulation models and explains the reasons for using a hypothetical simulation model that has been chosen as the research methodology in this study.
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