Middle class meltdown

The size of the Mauritian middle class is decreasing while it is swelling in other developing countries. The size of this social class has dipped by 2.7% over five years, from 79.9% in 2007 to reach 77.2% in 2012, according to the World Bank Report “Mauritius – Inclusiveness of Growth and Shared Prosperity.” There are no signs that this decline has halted since 2012, low economic growth rates, high prices, and stagnant wages are contributing factors. In this special report, economist Eric Ng gives five reasons to explain the dwindling middle class. Consumer rights’ advocate Suttyhudeo Tengur considers that the middle class is heavily taxed and highly indebted. Sociologist Ibrahim Koodoruth lays emphasis on the main characteristics of the lower and upper middle class. Financial expert Afsar Ebrahim recommends that earnings need to be stable and sustainable and expenditure needs to be well planned. A few facts have been unveiled by the World Bank report. The much coveted middle class status is dependent on the number of persons in a household. The more persons there are in a household, the lesser the potential of that household to belong to the middle class. So says the World Bank. Households consisting of six or more people tend to belong to the poor category. A high percentage of such households is poor or vulnerable, and only a small share is rich. Hence, the major difference between the vulnerable groups and the middle class was household size. Nearly half of households classified as poor (49%) had four to five persons, and a third (33%) had six or more. Another surprising fact, slightly over half of all vulnerable households (51%) had four to five persons, and one out of every four families (25%) falling in the vulnerable category had six or more persons. Comparatively, large households make up a much smaller portion of the middle class. Between 2007 and 2012, the only discernible trend of middle class status by household size was an overall reduction in average size, especially for large households with six or more people. This structural change likely explains part of the overall increase in the size and share of the middle class. Over time, households with six or more persons had the largest decline in the share among the lower middle class (4.7 percentage points) and the largest increase in the share vulnerable (4.2 percentage points). This World Bank report points out that employment in public administration or public enterprises is a key to middle-class status, with 75 percent of those working in these sectors being upper middle class, compared with 53 percent in private enterprises, 43 percent in export-oriented firms, and 32 percent in household services. Employment in public administration or public enterprises constitutes only a small portion of the country’s labour force. Roughly 85% of all jobs were in the private sector in 2012, an even higher share than in 2007. In this five-year period, household services saw an increase of 4.4 percentage points in the poor, an increase of 2.8 percentage points in the vulnerable, and a decline in the middle class.