A Tale of Two Middle Classes

By: Larry Zhang, Senior Editor

 

“Middle class” is a term that gets thrown around a lot, lately very much so in the 2016 Democratic and Republic debates. But what exactly, and who exactly, constitutes it? There are a number of measures to classify the middle class, ranging from purely numerical ones, to ones that account for characteristics of lifestyle and particular mindsets. For example, one method, income, is often used, even though wealth (which accounts for savings or investments), consumption (which accounts for non-cash government benefits), and aspiration (which accounts for middle class living ideals, such as home ownership, health and retirement security, college education for kids, cars, etc.) are alternatives that offer insight into other areas. Under income, some economists have classified the middle class as all but the poorest 20% or wealthiest 20% of people.

When narrowed down to one number, the median household income, a recent Census Bureau study found that for the U.S., the number was $53,657. At first sight, there doesn’t seem to be anything problematic with this number. But after adjusting for inflation, findings show that the middle class has barely changed since 1989 (over 25 years ago), where that number was $53,306.  In other words, the U.S. median household income has remained more or less stagnant, even though the economy has grown 83% over this period. What is there to explain for this lack of change over the long term? MIT economist David Autor turns to the increased polarization of the U.S. labor market, where many sales and factory jobs are increasingly replaced by automated teller machines and other robot technologies. His study found that these jobs accounted for 60% of the U.S. total back in 1979, though only 46% by 2012.

Even with said stagnancy, the U.S. still stands “heads and shoulders above the rest of the world.” The Pew Research Center found that 56% of Americans could be classified as high income by global standards, “living on more than $50 per day in 2011, the latest year that could be analyzed with the available data.” Combined with data that indicates a sizable 32% of Americans as upper middle income, results show that almost 9 out of 10 Americans were above the global middle income standard. This isn’t to say that the U.S. doesn’t have its share of issues dealing with poverty and income inequality, but it does indicate something about the general standard of living that many Americans benefit from. How then, do places like Africa stand in relation to the U.S. with its middle class in particular?

Because Africa’s middle class is small, the majority of the people are either wealthy or poor. Just the term “Africa” is enough to invoke association with a place that has unfortunately been constantly ravaged by civil wars, disease, and famine. Recently, however, there has been sizable growth and change in many countries. Ghana, for instance, has underwent much urbanization and development that has allowed for at least some sort of “middle class” to emerge, helped much by the recent spread of democratic policies to countries that have been ruled by dictatorships for decades. This has contributed to the recent arrival of new economic opportunities not previously afforded to the now middle class of said countries. With democratic rule, the middle class has a greater voice in demanding the necessary public services that would help spur growth. A recent study conducted by Nic Cheeseman of Oxford University also found that wealthier Africans were more likely to support democratic policies, furthering the push for greater developmental efforts.

Though the recent overhaul of urban infrastructure has contributed much to development in places like Ghana’s capital, Accra, the surrounding areas are no better off. Accra’s city center, if anything, gives off a false impression of others parts of the country, where it is clear that economic opportunities and mobility are still highly limited. Leaving Accra, for example, brings one from “high-rises to huts, suits to shoeless.”

This reality is reflected in numbers from another recent Pew Research study, which found that only 6% of Africans qualify as “middle class,” or those earning between $10-20 dollars a day. This number is only slightly larger than what it was for various countries 10 years ago, excluding the atypical South Africa. Others, such as Sudan, have been so ravaged by internal war to the point that they have actually done worse in 2014 than in 2004. Sudan has a smaller percentage of middle income and upper middle income citizens now than it did 10 years ago. Data from IEU Canback shows that 90% of Africans still fall below the threshold of $10 a day, and that the percentage of the $10-20 middle class income bracket only rose from 4.4% in 2004 to 6.2% in 2014.

This leads one to wonder why this decade of Africa’s middle class is still so “absent” compared to its economic growth, which averaged more than 5% each year (twice as fast as population growth). In order to examine this question, one must look more deeply into the income inequality rampant in much of Africa. In Agbogbloshie, just a few miles from Accra, columns of smoke burden the area below, where there exists a junkyard for old electronics. Men frequent the dumping ground, risking their health to salvage what they can. “I came from the north because I needed a job,” says Awal Ibrahim, one man who cuts copper from old computer wires just to earn $5 dollars a day. Moreover, one of the biggest ways in which Africa differs from another continent with many countries in the developing world, Asia, is that unlike the latter, it doesn’t have the magnitude of industries that provide employment for a sizable portion of its population. This lack of much of a secondary sector hinders many of Africa’s economies, which face small national markets and high barriers to trade.

Bringing back the U.S. into the picture, we see two considerably different, yet somehow similar, middle classes. America’s middle class is at risk of continuing its stagnancy and worsening the polarization of the labor market, and the middle class in many countries in Africa experiences little to no growth. Some, such as Sudan, have exhibited negative growth. Where they most drastically differ is in each one’s living standard compared to the global one. And even though it seems that while Africa still has much ground to cover relative to the U.S., the growth trends for both America and Africa’s middle classes aren’t faring very well at all, and thus, will continue to be a hot topic for debate. In the meantime, what, next, will the left and the right of America’s political spectrum have to say?