The middle class — can it be saved?
IT IS A LITTLE RETRO FOR ANY POLITICIAN TO BE USING THE WORD ‘CLASS’ AT ALL. — COSH
How frightened should we be about the shrinking of the middle class? On Friday our Tom Blackwell discussed a big Oecd report on the apparent contraction, and the potentially grim economic fate, of the middle class in the organization’s industrialized member countries. This is a statistical venture well choreographed to match current political trends. Canada’s Liberals, under Justin Trudeau, are particularly fond of talking non-stop about the defence of the middle class.
If you think about it, it is a little retro for any politician to be using the word “class” at all. This is oldschool talk for a world of low intergenerational mobility, a world in which class status was inherited and probably permanent. There are fashionable parallel concerns about whether we might be returning to such a world, but the Oecd report isn’t about those at all. It doesn’t really touch the topic of social mobility. Places like Canada that have fairly high amounts of that don’t get extra credit.
When a politician promises to create policies helping your own economic class, he is implicitly avoiding the social mobility question. The message is: don’t worry about escaping upward from the middle class, or helping your children escape it! your suspicion that there is not a chance in hell of that happening is probably justified! We’ll just try to make life comfortable in the particular box enclosing you and your posterity.
The trick here is that in general, and throughout the Oecd, almost everybody considers himself “middle-class” whatever his position in the real income distribution. The exceptions are Britain and the old Soviet bloc, where the “working class” label still has contrarian prestige. Outside those zones of lingering socialist intellectual influence, an appeal to the middle class is psychically received by everyone who is not, at that exact moment, either cooking meth on a camp stove or hiring stewardesses for his Gulfstream jet.
In fact, any quantitative analysis of the “middle class” is bound to be sensitive to the definition of it. In the social sciences that aren’t economics, the divisions made between the “middle class,” the “working class” and the various other boxes are often occupational. They ignore income measures altogether: an equipment operator making $140,000 a year in Fort Mcmurray would be considered working class.
If you’re doing economics rather than sociology, defining “middle class” by income rather than culture, education or occupational prestige makes sense. The well-being of the “middle
class” is practically important in a world where a successful state is bound to survive by (directly or otherwise) taxing incomes broadly. As a matter of pure technique, a country needs its middle class to not feel too disloyal to the ruling authority.
So the Oecd, which exists to advise those authorities, defines the “middle class” with regard to the median disposable income in each individual country. If you’re taking home between 75 per cent and 200 per cent of that, you’re middle class. (In Canada the bounds for a person living alone would be $29,432 and $78,485.)
This makes the analysis stronger in one way: sometimes you’ll see lousy analyses of income distribution that use an average income as a peg rather than the median, and these end up not being scale-invariant. The Oecd definition is. If everybody’s disposable income just increases tenfold overnight, the “middle class” stays the same size.
On the other hand, disposable income doesn’t include taxes or the services received in return for them, and the 75 per cent and 200 per cent boundaries are a bit arbitrary. There’s a certain amount of concealed math, involving matters like adjusting household incomes for (the square root of!) family size. The mathematical abstraction that emerges from this is still a relative rather than absolute measure: a lot of the Oecd report is tacitly concerned with comparing the growth of a Mexican “middle class” with the middle classes in other countries, like ours, whose disposable incomes (at either bound) are six times as large.
When you hear that the “middle class” is shrinking slightly across the Oecd — declining from 64 per cent of the population to 61 per cent over a 30-year period — you may still get a little nervous. But more of the escapees, as my colleague Blackwell noted, were climbing rather than falling: the higher box grew from nine per cent to 10 per cent. The entire premise of the report is that this is a bad thing, since it makes the relative influence of the upper income class larger.
And, as the report acknowledges, if you throw out national borders and put the whole human race on one income distribution, the “middle class,” none of which resides in Canada, is growing and getting richer at a phenomenal rate. The last 30 years are arguably just one huge donation of sharp middle-class income growth to the developing world (outside the Oecd). If you told a communist or a Catholic Worker in 1950 how our era would shift the world’s income pattern, and you left out the neoliberal details, they would surely take a pre-emptive victory lap. They would never suspect how little they deserve the credit. Nor could they imagine that the possibility of becoming rich in countries where that was never possible before had anything to do with it.