Dear Editor,
Mr Khemraj Tulsie wrote an interesting letter about political polarization, the rise of the middle class and its potential impact on politics, and thus economics (SN, December 30, 2015). He says that “a growing middle class has emerged, one characterized by the acquisition of higher education; strong commitment to professionalism …” The dire paucity of data makes it most difficult to estimate Guyana’s middle class. Nevertheless, the data I have assembled here suggest that Guyana’s middle class has emerged already.
In the US, Stateline defines the middle class as those making between 67 per cent and 200 per cent of the state’s median income. This results in a range of $40,667 to $122,000 for a middle-income American household of three in 2013. Most states saw median incomes fall between 2000 and 2013, an ominous sign for the well-being of the middle class. A Pew Research Center study in 2015 shows that the share of adults in middle-income households has fallen from 61 per cent in 1970 to 51 per cent in 2013. Note: The median is the ‘middle value’ in a list of numbers arranged in increasing order. When the totals of the list are odd, the median is the middle entry; when the totals are even, the median equals the sum of the two middle numbers divided by two.
Obviously a middle-income household in the developing world is not the same as that in rich countries. Both the African Development Bank and the Asian Development Bank include anyone who lives on more than US$2 per day in their definition of the middle class. According to the former, the middle class in Africa rose to 34 per cent of the region’s population, or nearly 350 million people. The Asian Development Bank claims that the percentage of Asians in the middle class jumped from 31 per cent to 82 per cent over the past two decades. A recent report by the ILO proclaimed that 40 per cent of workers in the developing world are now middle class, meaning that they live on $4 per day. This prompted the Economist to observe that “workers in poor countries have never had it so good,” which is technically true but somewhat misleading to readers used to a developed-world definition of middle class.
The middle class is as much a matter of perception as statistics, but any sound measure of the middle class must capture the ongoing structural changes and allow for a comparison across time and countries. Moreover, any metric for cross-country comparison runs the risk of missing important differences in the nature of the middle class. To give an example, the sociological literature adopts a rich definition of the middle class based on occupational categories, but it is close to impossible to use such a definition in international comparisons, since occupational categories are not harmonized across household surveys. For these reasons, most international comparisons tend to measure the middle class in terms of income or consumption, which is quantitatively easier to compare across countries. Even within the narrow set of income measures, another important choice awaits any comparison: should relative or absolute income (or consumption) indicators be used? Both capture important, but very different, aspects of the middle class.
A widely employed metric is a relative indicator that captures how many people are located in the middle (median) of the income distribution. A common indicator for international comparison is the proportion of the population with per capita income between 0.75 and 1.25 of the median per capita income. For the United States this method yields about 27 per cent of the population. The rest of the population is either much richer or much poorer. À la John Lennon, imagine that world is a single country. Then the statistical middle class would be about 13 to 15 per cent of the global population, a group living on between $4 and $6.50 per day.
A relative measure such as the above can be useful in assessing the extent to which a society is unequal or polarized, but it fails to capture anything related to the ‘absolute’ welfare of the middle class. Take Ethiopia and Brazil, for example. Based the relative measure described above, 43 per cent of Ethiopians earned per capita incomes between 0.75 and 1.25 of the median in 2009. That was twice as high as the proportion of Brazilians who could be defined as middle class under this definition (21 per cent), despite the fact that Ethiopia’s GDP per capita (in purchasing power parity terms) is 11 times smaller. To avoid such inconsistencies, any comparison that aims to capture the absolute well-being of the middle class must put strong weight on absolute income and consumption levels. But even in this class of measures, there exist many possibilities.
A 2013 World Bank report (Economic Mobility and the Rise of the Latin American Middle Class), employs a different metric. It defined middle class in income terms of anyone making between US$10 and $50 per day, which it said provides increased resilience to unexpected events and reflects a lower probability of falling back into poverty. The report found that the middle class in the region grew to an estimated 152 million in 2009, compared to 103 million in 2003, an increase of 50 per cent. This translates to about 30 per cent of the region’s population.
The necessary data for the estimation of Guyana’s middle class, whatever the definition, are either outdated or do not exist, which means that any calculation is a guesstimate. But there may be an indirect and tentative way around the issue. Based on data for 1993 and 1998, 43.2 per cent and 36.4 per cent of Guyana’s population lived below that national poverty line, which was roughly just under US$10 per day. This segment of the population is clearly not middle class. Based on per capita income, all Guyanese were middle class in 2013 and 2014: daily income per person was US$10.24 and 11.01, respectively. However, per capita income is not a useful measure because of the large dispersion from the mean, and the ‘per-capita-income-person’ probably does not exist. Perhaps a more satisfactory result comes from data on income/consumption distribution for 1993 and 1998. The middle quintile of these distributions shows that the middle class rose from 13.3 per cent of the population in 1993 to 14.7 per cent in 1999. While no data for later years are available, the middle quintile has probably remained stable or contracted since 1999 because of rising inequality, driven mainly by pervasive and massive corruption, marginalization, a dysfunctional educational system that produces graduates ill-equipped for the labour market, and huge health inequities across and within regions.
Suppose we accept, unreasonably, that the middle class comprises “the emerging younger generations” (Tulsie), who are more educated and have a “strong commitment to professionalism.” What does the data say? If persons under 20 years are taken as the “younger generation,” then this group as a share of Guyana’s population peaked at 85.22 per cent in 1970, and has been contracting ever since. It fell to 49.21 per cent in 2015 and will reach 27.4 per cent in 2100. If the “younger generations” is taken to mean persons below 24 years, this component of the population peaked at 65.6 per cent in 1965, fell to 51 per cent in 2015 and will decline to 30 per cent in 2100. By this gauge, then, Guyana’s middle class has emerged already and is in fact shrinking.
Tepid growth rates and rising inequality argue against an expansion of the middle class. Based on revised data from the World Bank, Guyana’s economy grew at 2.1 per cent annually during 1960 to 2014, and by 3.8 per cent from 1992 to 2014. Income per person increased at 1.1 per cent from 1960-2014. Thus, unless growth is accelerated, inequality pushed back, corruption reduced and human capabilities expanded, the middle class will remain a weak economic and political force. That is a recipe for continued underdevelopment.
Yours faithfully,
Ramesh Gampat
