In spite of a decline in income inequality and big drop in poverty rate over the years, the
issues about poverty and income inequality in Malaysia are still unsettled. Poverty rates are
still high among the Bumiputera group compared to other ethnic groups. Income inequality as
measured by Gini Index is still high, indicating that there is appreciable level of income
inequality. Would the improvements in education over the years have effect on both poverty
reduction and decrease in income inequality? This paper intends to examine the relationship
between poverty, education attainment and income inequality among households using the
2009 Household Income Expenditure Survey(HIES2009) data with 20,087 observations
involving only Malaysian citizens. Income inequality, on the other hand, is measured by
Theil Indexand is used to measure the inequality among similarcategories of ethnic groups,
location and education. The study finds that the incidence of poverty is higher in the rural
population, increases with age groups, declines with increasing level of education, higher
among Bumiputera group, households headed by males, and households headed by nonmarried
persons. Average income is higher among urban households areas compared to rural
ones, higher among the Chinese households compared to Indian and Bumiputera in that
order, and increases with groups with more members having higher education. Income
inequality is higher among urban households, among Indians and Bumiputeras but lower
among the Chinese , and shows no clear pattern with increasing education.