Middle-class issues

A debate took place on Malan, an Internet-based TV show, two weeks ago, on whether the middle class in Jordan grew or shrunk.

Gauging the welfare of the middle class does not only pinpoint the success and failure of “economic reforms”, it is also a forward indicator of the geopolitical stability of the country, since the middle class is not only the creator of growth but also the generator of chaos if sufficiently depressed or diminished.

Typically, the middle class is defined as the group that lies between the poor (lower class) and rich (upper class).

According to German philosopher Max Weber, the middle class lies socially and economically between the working class and the upper class.

The middle class as a group is split into different strata: upper middle, middle middle and lower middle classes. The middle class, therefore, is that group that works and produces the GDP, it is also the group that best motivates demand and supply.

The preponderance of the group indicates successful economic, social and political structures that result in equity; the lack of it indicates the reverse.

The simplicity of the definition belies, however, the difficulty in measurement.

When it comes to measuring the middle class in terms of size in order to benchmark it or gauge its development over time, one uses one of the following two methods or a hybrid approach: the size of consumption and income levels; or the types of consumption such as education type of work, size of household, quality of residence, etc.

One can merge the two approaches and make a better, more complete, view of what constitutes the middle class.

The Centre for Strategic Studies did several studies using similar yet varying approaches to measure the middle class.

In these studies, the middle class was deemed shrinking and in a recent study it is viewed to be under pressure, but still holding, which is an interesting view.

In this recent study, the middle class in Jordan is viewed to come mainly from Jordan’s burgeoning public sector and bureaucracy; as the public sector continues to grow so does the middle class.

Even if one accepts the view that the middle class is made up of the public sector employees, the mounting and persistent financial burden of having subsidies removed, and prices and fees increased will have adverse effects on this group and will lead to its eventual slide into poverty.

Increasing taxes lower the disposable (after tax) income; the inflation in some spending shifts expenditures away from education and other characteristics that make up the middle class; the fall in real estate and stock prices as the economy sinks more into an even deeper depression would create a negative wealth effect — as people feel poorer they will spend less.

Given that most people rely on non-wage incomes, the diminishing wealth will contribute heavily to the slide of the lower deciles in the middle class into poverty.

In other words, the size of the middle class is a dynamic, not a rigid, estimate, and it will shrink under the current economic scenario.

How big is the middle class? Some estimate it at 40-45 per cent, others believe it has shrunk to 26 per cent.

Regardless of size, the question that matters now is whether it is shrinking or not.

I believe that it has shrunk considerably and it will continue to do so, regardless of the size one starts from.

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