The vanishing middle class

The best political community is formed by citizens of the middle class. —Aristotle (384 BC-322 BC), Politics

Where justice is denied, where poverty is enforced, where ignorance prevails, and where any one class is made to feel that society is in an organized conspiracy to oppress, rob and degrade them, neither persons nor property will be safe. —Frederick Douglass (1817-1895), Speech, April 1886

‘UPPER classes are a nation’s past; the middle class is its future,” Ayn Rand (1905-1982), American novelist and philosopher, once said.

Sad to say, this dictum doesn’t seem to apply to the Philippines. The ranks of the middle class—according to the study by statisticians Romulo Virola, Mildred Addawe and Ma. Ivy Querubin—are in fact shrinking.

Mr. Virola, it should be noted, is secretary-general of the National Statistical Coordination Board (NSCB).

The trend doesn’t augur well for the stability of this country. It’s an irony that we need to worry about as we ponder the validity of the encouraging gross domestic product (GDP) figures that we have started to see in the last several years.

Entitled “Trends and Characteristics of the Middle-Income Class in the Philippines: Is it Expanding or Shrinking?”, this study was one of the papers presented during the recent National Statistical Conference. And the results are disturbing.

First, from 1997 until 2003, the ranks of the middle class were shrinking. In terms of absolute figures, the same study found out that while the number of middle-income families increased from 1997 to 2000, it decreased from 2000 to 2003.

That trend suggests the ranks of the poorer segment of society are expanding.

“As of 2003, less than one in 100 families belongs to the high-income class; about 20 are middle-income and 80 are low-income. And in a span of six years from 1997 to 2003, close to four families for every 100 middle-income families have been lost to the low income category,” said the study.

The study highlights what the authors say is the “increasing vulnerability” of the middle class that could translate into increased poverty incidence in the future. We could interpret the results to mean that we do have a shaky and insecure middle class that is prone to slide down the social scale.

The study, albeit limited, has identified certain predictors of incomes for Filipino households, like ownership of stereo, having air-conditioning units, and educational attainment and household size, for which government action could be anchored. The authors called for “timely intervention” from both the public and the private sector, specifically increased investments and reforms in the country’s education system.

These interventions are important because, according to the study, the mean income of the families with overseas workers is much higher by 75 percent in 2000 and 93 percent in 2003 than the mean income of all Filipino families. Out of the total number of families with one or two of their members working abroad, more than half are classified as middle-income families.

These statistics reveal to us just how difficult it is to rise up the Philippine social ladder. The study is telling us that the only way for someone who aspires to get a better life is through overseas labor migration. This is a serious indictment not only of the country’s political leaders but also of the behavior of its private business leaders, who resisted policy reforms intended to hasten economic growth.

And not to be ignored, of course, is a major factor: the worsening graft and corruption under the Arroyo administration, its complete lack of transparency, and its utter lack of moral direction.

And we are also talking here about entrenched monopolies and oligopolies in aviation, the shipping and port operations, and utilities, among others, which stranglehold on the Philippine economy have prevented us from attaining global competitiveness.

Recently, the country’s leaders from both the public and private sectors were heard lamenting the continuing drain in the country’s brains. Indeed, officials of the Philippine Overseas Employment Administration have been saying the Philippines has increasingly been deploying skilled professionals and technicians, thus making it hard for local industries to retain talent. But unless we do something that could raise the hopes and dreams of the middle class, from which most of the country’s talent comes, we could never solve the “brain-drain” problem.

For far too long, the country’s policymakers have largely been focusing their attention on the so-called poorest of the poor, through measures like minimum-wage setting and subsidies on prices of cereals through price supports, among others. They seem to assume that the middle class is doing just fine.

The NSCB study, however, indicates that we also need to attend to the needs of the middle class for the benefit of greater society. It’s from the middle class where we get the talent needed to run the bureaucracy, as well as manage businesses, offices and factories.

The middle class is usually well- educated, highly skilled and well- informed. It’s through an expanding middle class where we could attain political stability and real democracy.

But when a big chunk of the middle class is away, the country is left to two vastly different classes: the tiny elite who have a grip on most of the resources, and the overwhelming number of the poor and wretched and their increasingly angry voices. It’s an understatement to say that’s not a good environment for doing business. (Note: drafted as editorial for the BusinessMirror, 30 October 2007)