Poverty of the new middle classes

A UN agency has identified the rise of ‘the developing middle class,’ a group earning between US$4 and US$13 a day

By Paul Mason  /  The Guardian, LONDON

Sun, Jan 26, 2014 - Page 9

When a million people swarmed onto the streets of Brazil in June last year there was consensus that the protest was a phenomenon of the “new middle class” — squeezed by corruption and failing infrastructure. As the Thai protests continue, these too are labeled middle-class: office workers staging flashmobs in their neat, pressed shirts.

However, what does “middle class” mean in the developing world? About 3 billion people earn less than US$2 a day, but figures for the rest are hazy.

Now, fresh research by International Labour Organization (ILO) economists shows in detail what has been happening to the workforce of the so-called “global south” during 25 years of globalization: It is becoming more stratified — with the rapid growth of what the ILO terms “the developing middle class” — a group earning between US$4 and US$13 a day. This group has grown from 600 million to 1.4 billion; if you include about 300 million on above US$13 a day, that is now 41 percent of the workforce, and on target to be more than 50 percent by 2017.

However, in world terms they are not really middle-class at all. That US$13 a day upper limit corresponds roughly to the poverty line in the US in 2005. So what is going on?

The ILO researchers mined data from 61 household surveys across the world to come up with these figures.

In the process they adopted a rough definition of the lifestyle of the sub-US$13 group. The key markers were: families had access to savings and insurance, were likely to have a TV in the home and to live in smaller households (four people). They would typically spend 2 percent of their income on entertainment — plus they would have better access to water, sanitation and electricity. These, then, are the “winners” from globalization: an expanding group for whom global growth has meant a serious rise in real income, year after year, compared with the recent near-stagnation of incomes for working and lower-middle-class families in parts of the developed world.

You might assume the “developing middle class” are mainly factory workers, but they are not. One of the most startling results of the ILO survey is that more than half the “developing middle class” works in the service sector. Factory workers form between 15 percent and 20 percent of each income group: They are spread from the destitute to the above-US$13 group. This, the researchers say, reflects the fact that the industrial sector of the global south now offers as much skilled, high-value work as it does sweated labor.

When Harvard economist Richard Freeman calculated the “great doubling” of the world’s workforce — as a result of global development and the entry of former communist states into the market — the assumption was that this would recreate a “proletariat” at the periphery of capitalism.

It did, but the ILO calculation is the strongest evidence to date that they are moving steadily toward stratification and more service-oriented work, just as its rich-world counterpart did in the 1960s and 1970s.

Go to the reality of being “new middle class” in Brazil, Morocco or Indonesia and the word “comfortable” does not spring to mind. It means often living in a chaotic megacity, cheek-by-jowl with abject poverty and crime, crowding on to makeshift public transport systems and seeing your income leach away into the pockets of all kinds of corrupt officials, middlemen and gray market people. This in turn has shaped what people protest about. There remain, of course, high-profile workers’ struggles: In Argentina there are still more than 180 occupied factories. The cotton city of El-Mahalla el Kubra in Egypt remains the kind of place that can pull a total work stoppage and, as in December 2012, declare “autonomy” from the government.

However, the ILO trend suggests that, by the second quarter of the century, the typical social dynamics of a medium-developed country will be a mixture of “workplace” conflicts and the more networked, sporadic and volatile ones we saw in Turkey and Brazil last year.

The Western left has lived through decades of angst over the decline of the manual workforce, and its ideology of resistance, sometimes softened by the hope that it would all be recreated somewhere else. The ILO survey suggests not.

What was unthinkable 20 years ago is now becoming tangible: that the real incomes of skilled workers, knowledge workers and managers in “developing countries” are overlapping with those at the bottom of the heap in Western society.

However, where once this prospect was understood to foretell stability, it does not. As World Bank lead economist Branko Milanovic has shown, when it comes to causing inequality, the impact of class and location have reversed: “Around 1870, class explained more than two-thirds of global inequality. And now? The proportions have exactly flipped: more than two-thirds of total inequality is due to location.”

Milanovic calls this the “non-Marxian world,” in which class struggle becomes less useful as a strategy and the logical thing to do is migrate: “Either poor countries will become richer or poor people will migrate to rich countries.”

Perhaps, on the contrary, the upsurge of unrest is a signal that the rising, poor, new middle class — which cannot migrate en masse — has decided to force poor countries to become richer in democracy, sustainability, urban infrastructure, healthcare.

They are choosing signal issues — corruption, transport, green space as in the Gezi Park occupation in Istanbul — but across the world their determination to make life on US$13 a day less arbitrary and insecure is clear.

Paul Mason is culture and digital editor at the UK’s Channel 4 News.