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The growing middle class

There is a visible demographic shift in Pakistan. We have been experiencing steady growth in an aspiring middle class and not just in terms of absolute numbers. Despite lacklustre growth during the last decade, the middle class has grown faster than the country’s population and nowhere has its growth and broadening been as sharp as in Punjab, especially central Punjab and the Potohar belt. Both areas are characterised by a less skewed distribution of land holdings and a more educated and skilled labour force.

How do we define ‘middle class’? It is a variable and nebulous term. The numbers or size of this class changes according to an economic or sociological definition. It is inaccurate to generalise, because the middle class is not homogenous in character. Although some values and characteristics are common for all segments that make up this class, there are differing worldviews.

In economic terms, it can be defined on the basis of incomes, consumption, and ownership of select durable assets, say the type of house one has, (all three being linked). A workable definition by the economist is that the middle class refers to people who have approximately one-third of their income available to spend after meeting their basic needs of food and shelter.

In sociological terms, it can be defined by occupation, occupational level, education or self-identification, the latter reflecting a sense of self-ascription: one belongs to the middle class because one envisions a middle-class lifestyle and identity for oneself. It is the class of seekers and strivers putting in the most effort for change in search of a secure future. For instance, they want to educate their girls for better marriage prospects in mobile, upwardly families, which would enable better social connections. For this upward mobility, migration to urban areas is an important strategic move.

The segment of the population under discussion stimulates the growth process in several ways. This class is also the bedrock of a strong and functional democracy, since the educated and younger people among them have greater exposure. Today, the penetration of middle-class values and aspirations has taken place at a much wider scale within the country, owing mainly to a rapidly growing and assertive electronic media.

The socio-economic changes that broadly explain the emergence of the middle class are rising incomes (facilitated by soaring commodity prices globally, higher government procurement prices for wheat, and rampant tax evasion), urbanisation and white-collar occupations, fuelling demand for consumer products and services.

Government policies and the nature and level of spending have also influenced the pace of the middle class’s creation. Recent, rapid growth in retail trade has been the most conspicuous outcome of this: new shopping malls and restaurants have emerged even in small towns, spawning a demand for a whole new set of skills, thereby further expanding its size.

In demographic terms, households at the lower end of the scale comprise a third to half the population (although our classification of the top 10pc as ‘the rich’ would be misleading by world standards). They are typically owners of small shops and workshops, middle-sized farmers, petty contractors, semi-skilled industrial and service workers and junior- or mid-level official cadre.

A substantial proportion of them are also beneficiaries of a large range of government handouts and subsidies, including water, fertiliser, higher education, wheat flour, etc. They typically own a refrigerator, more than one mobile phone, a motorbike or a small car. Although their expenditure budgets are stretched, they save for the education of their children and for their retirement.

Those at the upper end are senior government officials, managers of large businesses, bankers, professionals like accountants, tax consultants and architects, large farmers, academics in upmarket private schools and in public and private universities and those providing a whole range of services in the sectors of telecommunication, IT, media and retail and allied services, etc. They are brand conscious, want material possessions like designer clothes, the latest car models, electronic gadgets, have air-conditioners and can afford some kind of annual vacation.

Earlier, until the first half of the 1990s, automobiles weren’t available in large numbers. Nor was quality electronic gadgetry except in the form of smuggled goods or gifts by overseas Pakistanis. Advancements in technology and financial instruments (such as leasing) helped produce new products for mass consumption. So the ‘aspirers’ of the middle class simply did not have adequate choices even if they wanted to spend. Thus, they could not enjoy the benefits of increased incomes and wealth. Now they can.

Take the case of Punjab. The annual registration of new motorcycles is 1.2 million and of motor cars 150,000, compared with 200,000 motorcycles and 50,000 motorcars 10 years ago — plus a vibrant market for second-hand motor vehicles.

This class stimulates the growth process through savings and investments including in human capital, fostering the development of entrepreneurs who will improve productivity and create jobs. They are supporters of governance reforms, transparency, accountability and integrity of leadership, and as a vocal socio-economic interest group they can play a key role in economic growth by influencing government policies.

Although the poor are seemingly disheartened, the middle class, despite trends of discontentment and disillusionment, hasn’t given up, determined to improve the economic condition of their households through continued effort. This they can achieve because they are more skilled or have more assets than the poor.

Looking at recent political developments, the widely held view that the PPP’s support base has narrowed because of the perceived incompetence of its leadership contributed only a small part to the voters shifting away from it in Punjab. The middle class has generally never voted PPP, not being its constituency. In fact, what has happened to this class in Punjab over the last decade provides a better explanation. As the less affluent graduated to the middle class and led to its brisk expansion, the phenomenon did not produce additional supporters for the PML-N. Instead, the burgeoning Punjabi middle class found the PTI as the other contender for its allegiance.

The writer is a former governor of the State Bank of Pakistan.

Shahid Kardar, "The growing middle class," Dawn. 2014-10-28.
Keywords: Economics , Economic aspects , Socioeconomic aspects , Economic growth , Foreign trade , Higher education , Electronic media , Social policy , Economic policy , Social media , Economy-Pakistan , Government-Pakistan , Democracy , Sociology , Economists , Education , Pakistan , Punjab , PPP , PMLN , PTI