Construction of a Socio-Economic Status (SES) Index in Peninsular Malaysia Using the Factor Analysis Approach

The state of a country's economy plays an important role in helping it achieve developed nation status. Hence, studies on poverty, inequality and socio-economic matters should use precise measures in order to provide accurate understanding of a country's development. Accurate measures can also provide information on progress already achieved and aid in planning for future improvement and development. This study focusses on constructing a socio-economic status (SES) index and describes a statistical procedure to derive the SES index in a multivariate context for every district in Peninsular Malaysia. Factor analysis is applied to construct the SES index. Data on 19 variables measuring multiple aspects of socioeconomic status such as household amenities, basic facilities, education level and labour force are factorised into three factors that explain 76% of the total variation. The high SES index is situated in Kuala Lumpur, Pulau Pinang, Selangor and some regions in Kedah, Perak, Melaka, Negeri Sembilan and Johor, while the low SES index is situated in areas in Kelantan, Terengganu and some rural areas in Kedah and Pahang. The findings can facilitate the relevant authorities in taking proactive steps to prioritise the development of the relevant areas in order to reduce the socio-economic gap between districts in Peninsular Malaysia.