Rethinking the measurement of the middle class: Evidence from Arab countries Khalid Abu-Ismail Niranjan Sarangi UNU-WIDER Conference on ‘Inequality – measurement, trends, impacts, and policies’ 5-6 September 2014, Helsinki
Why study the middle class? • Instability of economies and societies such as in the Arab countries are better understood by closely examining the middle class. • With right policies in place, the middle class can be a potential force for change towards the process of socio-economic-political transformation.
Who are the middle class?
How to define and measure the middle class? • Absolute measures : – Individuals with daily per capita income or expenditures between $2-$20 per day (Asian Development Bank 2010) or $10-$100 per day (UNDP 2013) or between $2 -$4 or between $6-10 (Banerjee and Duflo 2008) or between $2-$13 (Ravallion 2009). • Relative measures: – People between second, third, and fourth quintiles of income distribution (Easterly 2001), or individuals earning between 75-125 per cent of median per capita income (Birdsall et al 2000). • Combination of both absolute and relative definitions: – People who consume the equivalent of $10 or more per day, but who fall below the 90th percentile in the income distribution (Birdsall 2007).
The definitions and measures vary across regions
Existing definitions yield wide range of estimates of the middle class size: For instance, it ranges between 1 - 77 per cent in case of Arab countries 85.4 90.0 77.1 76.6 74.8 80.0 70.2 69.0 65.9 65.9 70.0 60.0 ADB 44.6 50.0 AfDB Lower MC 39.0 38.1 AfDB Upper MC 33.0 32.7 40.0 31.0 30.7 30.8 30.2 30.0 29.0 Ferreira 28.5 23.6 Ravallion 30.0 20.8 Birdsall 20.0 8.5 8.0 6.9 6.0 4.9 4.2 10.0 3.2 2.2 1.5 1.0 0.6 0.8 0.8 0.0 0.0 Arab Countries East Asia & Eastern Europe Latin America & South Asia Sub-Saharan Pacific and CIS Caribbean Africa Source: Authors
Estimates of global middle class Based on a measure that defines middle class as people earning or spending $10–$100 a day, in 2005 PPP terms 5.69% (105 1.73% million) • Arab region has105 million people out of the 1.9 billion global middle class population. 9.81% 35.99% (664 • What does this imply for the Arab million) region? 18.32% • Average per capita of most countries in the region is much lower than the lower cut off of $10 per day, 28.46% (525 million) • which results in underestimating Europe Asia-Pacific North-America Central and South America the middle class in the region, and Middle East and North Africa Sub-Saharan Africa in other developing regions as well. Source: Human Development Report 2013
Common problems associated with these methods • Arbitrariness in deciding the thresholds (whether absolute or relative thresholds) in any consumption/income distribution • Overlooks consideration of country-level or regional specificity in consumption pattern or any qualitative attribute that distinct class structure in a consumption/income distribution • A fixed line (any absolute threshold) undermines disparity across as well as within countries and may not be applied to compare welfare or classes • Inherent biases of using purchasing power parity (PPP) in deciding the thresholds for the purpose of international comparison – similar as fixing a global poverty line of $1.25 PPP • Economies with different levels of per capita income, expenditure patterns, life style, makes it difficult to find a unique definition of the middle class applicable to all countries.
An alternate approach to measuring the middle class • Conceptual questions – The degree of choice that households in each society have over how they spend their budget is a critical factor in deciding their social class. For example, the consumption basket that provides calorie requirements for daily consumption is used to set poverty line in a specific society. Can this normative approach be extended to define the middle class threshold in each society? – Class is also associated with sociological aspects and it goes beyond just an economic construct in any society. What are the elements that best proxy social status -- education, occupation, wealth or any other characteristics? • We translated these concepts to an empirical exercise in defining the middle class using information from household survey expenditure of Egypt and other Arab countries, taking into account country specific assessments. We also stayed away from the controversy of using $PPP.
Economic definition • The economic perspective assigns the middle class status to the group of individuals whose level of consumption expenditure lies above an appropriately defined upper poverty line but whose level of expenditure on non-essential non- food items is less than the value of a lower poverty line.
Economic definition
Sociological definition • Closer to the sociological perspective, the middle class are those who are employed within the formal private or public sectors within one of the ‘white collar’ occupational categories and who possess secondary or higher education degree. We call them “professionals”.
Results
Middle class (by economic definition) are the largest population group in most Arab societies 100% 7.1% 8.7% 10.1% 9.9% 15.3% 16.3% 90% 27.1% 30.7% 80% 31.6% 44.0% 70% 59.2% 43.4% 56.5% 60% 56.2% 60.9% 50% 25.0% 57.5% 55.0% 12.0% 40% 23.7% 30% 29.8% 21.3% 20% 20.6% 34.8% 34.5% 17.4% 25.2% 10% 10.9% 11.9% 12.3% 9.6% 8.0% 5.5% 4.6% 2.5% 1.4% 0% 2009 2006 2011 2007 2007 2010 2005 2010 2010 Sudan Yemen Egypt Iraq Syria Jordan Lebanon Tunisia Oman LDCs MICs UMICs HICs Poor Vulnerable Middle Class Affluent
Middle class size in the Arab world remained almost unchanged from 2000-2011 but pattern changes after that 100% 10.3% 11.3% 13.3% 90% 80% 36.7% 70% 45.1% 47.3% 60% Affluent Middle class 50% Vulnerable 23.3% 40% Poor 21.8% 30% 21.2% 20% 29.6% 21.8% 10% 18.3% 0% 2000 2011 (with impact of crises)* 2011 (without impact of crises)
The middle class are more capable now than in 2000 Annual average percentage change in Annual average percentage change in share of incidence of deprivation to standard of living middle class across educational levels -0.3% 40.0% Oman 147.8% 6.3% 3.0% Tunisia -1.4% -4.2% 0.8% 14.8% 4.9% Tunisia -3.1% 1.0% -0.2% Tertiary and above -4.3% -4.5% Total 11.8% Jordan -4.5% -2.6% Jordan Affluent 1.4% Above secondary -7.5% 1.4% and below -2.4% -4.0% Middle class University degree 1.5% Secondary Vulnerable 1.3% -1.5% Syria 2.5% Poor -4.6% 3.9% -3.6% Egypt -2.9% Basic -1.9% 0.6% -1.9% -0.7% Egypt 2.9% No formal education 16.4% -3.5% -7.1% -8.6% 16.4% 10.9% Yemen -7.6% Yemen 10.0% -7.2% 11.9% -2.1% -6.3% -50.0% 0.0% 50.0% 100.0% 150.0% 200.0% -10.0% -5.0% 0.0% 5.0% 10.0%
Percentage change in the middle class population by economic sectors, years closest to 2000-2011 13.9% Total 8.8% -12.2% 3.8% Affluent 10.9% Tunisia -11.6% The middle 19.7% Middle class 8.2% -12.5% 28.2% class moved Vulnerable 4.0% -11.3% 22.9% Poor -2.7% -8.1% away from 1.1% Total -3.4% -5.8% 0.7% Affluent -3.6% agriculture to -1.1% Jordan 1.1% Middle class -3.3% -6.0% 2.4% services, less to Vulnerable -4.3% -5.8% 2.5% Poor 12.6% -9.8% industry, but Services 1.1% Total -1.9% -1.4% Industry 2.6% Affluent -2.2% -6.2% most of the Syria Agriculture 1.5% Middle class -2.2% -2.1% 0.2% services are in Vulnerable -1.7% 0.8% -0.5% Poor -1.3% 1.7% the low-value 1.0% Total 1.4% -1.6% 0.0% Affluent 1.2% added sectors -1.0% Egypt 1.2% Middle class 1.5% -2.3% 1.6% Vulnerable 1.8% -1.8% 2.8% Poor 2.8% -2.2% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%
Growing labor market informalization, affecting middle class youth (as well as women) Occupation of youth in the middle class households 100% 17.2% 90% 19.5% 19.4% 22.6% 28.3% 30.7% 35.5% 80% 41.5% 41.2% 42.7% 10.2% 14.5% 70% 58.2% 0.1% 15.7% 17.4% 15.2% 60% 18.3% 7.0% Other Services 9.0% 18.3% 19.6% 7.7% Transport 50% 11.5% 2.2% 19.3% Trade 14.4% 9.6% 21.8% 40% Construction 24.4% 20.5% 4.2% 17.5% 16.6% Industry 30.4% 30% 15.0% 16.1% Agriculture 53.4% 9.0% 5.2% 9.0% 20% 36.8% 6.7% 33.1% 25.6% 25.4% 18.3% 17.3% 10% 19.2% 16.1% 16.5% 12.8% 3.6% 3.0% 1.1% 0% 2009 2000 2011 2007 1997 2007 2005 2010 2002 2010 2005 Sudan Egypt Iraq Syria Tunisia Jordan Lebanon LDC MIC UMIC
Professionals remain a significant minority The share of professionals in population aged 15 and above 16.0% 15.0% 14.0% 12.6% 12.0% 9.9% 10.0% 9.2% 9.1% 8.8% 8.3% 7.6% 8.0% 5.8% 6.0% 4.0% 2.0% 0.0% 2009 2006 2011 2007 2007 2010 2005 2010 2010 Sudan Yemen Egypt Iraq Syria Jordan Lebanon Tunisia Oman LDCs MICs UMICs HICs
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