I am sure you have heard about the restaurant owner that dropped Menu Rahmah from its menu. He was actually operating a loss offering the Menu Rahmah. But how can that be? When the government introduced this initiative, it was actually meant to help people who were having a hard time buying food.

However, I think programs such as Menu Rahmah, while having good intentions, unfortunately, benefit the middle- and high-income groups more. This is all rooted in the economics of implementing programs that are aimed at helping people who need it. They all inevitably help middle- and high-income groups more in this case. 

Firstly, Menu Rahmah is Supposed to Help the Poor, but the Poor don’t Eat Out That Much

Menu Rahmah at the price of below RM5 is supposed to help the poor who can’t afford to buy food. But that assumes the poor eat out most of the time, in which they don’t. Eating at home is always the cheaper option while eating out is a luxury. 

Furthermore, to get to these places that offer Menu Rahmah, they would have to spend on fuel and parking or public transportation. That resources are better spent on just buying groceries and eating at home. 

It’s the Middle- and High-Income Folks that Eat Out More and Benefit from this.

This seems so counterintuitive, but richer Malaysians actually benefit the most from this. They eat out way more than the poor as they can travel to places that offer them. Most of these families normally have two working adults, with an adequate amount for child-rearing services. The poor do not have such luxury, and one of the parents normally has to dedicate their time and resources solely to rear their children. 

Hence, richer Malaysians tend to eat out more (as they don’t have time to prepare food at home) and get access to more information related to which places have Menu Rahmah. 

Fuel Subsidy is the Same Way too with the Rich Driving More.

The fuel subsidy program embodies what is wrong with subsidies such as Menu Rahmah. The rich actually drives more, hence they benefit more from the subsidy. They drive to work everyday and take longer domestic holiday trips. The poor normally do not even have cars, and thus, do not even benefit from fuel subsidies and in this case, Menu Rahmah subsidies. 

I think some of you might be thinking now — subsidies should be targeted then to the poor, and not accessible to the rich. You have a point there, but it is easier said than done.

Targeted Subsidies Takes A Lot of Resources to Implement and Could Cost the Government Even More.

Have you ever wondered how much of the money you donate to any charity organization actually reaches the people who need them the most? The answer could be disappointing. A lot of that money is spent on paying salaries, administration, and other operational costs. The charity organization has to organize itself to effectively identify the people that they need to help, and what they need to help them with.

All of this comes at a cost to these organizations. I argue that if the government wants to implement this “targeted” subsidies program, it would actually spend more money on administration-related expenses. For one, the government would need to invest in the technology and infrastructure that enables them to identify the poor. How do you know whether the person is poor? You would need to track how much they earn in a given month and most of the poor actually work in the informal sector where data and verification are hard. And how do you know whether this information is correct? You would have to spend more money in hiring people to verify them also. 

I am in support of programs to help the poor but I think we need to think about the implementation more in this case. In my next piece, I will explore what I think is the most effective government program that doesn’t waste too much of the taxpayers’ money also.