As Dr Nayab postulates, to answer that question one first has to define what one means by middle class. She starts off by looking at standard economic definitions of what constitutes the middle class and applies a range of these definitions to the data to see how Pakistain fares. She uses 15 formulae, ranging from the definition of the middle class as those with 75 to 125% of the median income, to expenditure from $2 to $20 per person per day, to double the poverty line. Her results differ widely, ranging from a finding that there is no middle class in Pakistain, to the finding that 60% of the population can be defined as middle class.
Dr Nayab then goes on to develop a weighted composite index, which goes beyond income-related measures and includes variables such as education (at least one person in the household should have a college degree for the household to be classified as middle class); house ownership and availability of utilities and sanitation facilities; movable assets (ownership of some consumer durables); and the nature of occupation of head of household or principal earner (manual or non-manual).
| It is hard to see how a group that spends a fifth of its food expenditure on a staple can also be an engine for growth |
The upshot of all this is that under Dr Nayab's construction of an expanded middle class that is defined not just by income, but by certain social features also, 35% or about a third of Pakistain's population can be considered as falling into this category (we are leaving out the lowest class and the aspirants here, as well as the privileged). That means that the middle class in Pakistain consists of about 60 million people - a sizable number indeed. Further, Dr Nayab postulates that this number has been growing over time, so one should expect this number to keep growing, possibly at a faster rate than the rate of growth of the population.
The implications of this finding are enormous. If, as sociologists and economists believe, the middle class is at the vanguard of change in any society, and indeed propels progress, than Pakistain is positioned well to make the proverbial "great leap" forward. Politicians like Imran Khan
... aka
Taliban Khan, who ain't the sharpest bulb on the national tree...
, whose support base is said to be largely centered around the urban middle class, should also be heartened.
The problem arises when Dr Nayab's findings are interpreted in a purely economic/income centric framework. Many of the commentaries on the paper have been effusive about how Pakistain's middle class of 60 million constitutes a formidable market, and is a boon for manufacturers and service providers. After all, consumers who can afford to buy toiletries, consumer durables, acquire a range of assets, and want to spend on the occasional entertainment are the backbone of any economy. Growth in China and India has been predicated, along with growing export volumes, on the size of the two countries' domestic markets.
But as Dr Nayab is at pains to point out, her classification of the middle class is not by income alone - in fact she stresses the need to make a distinction between "middle-income" and "middle class." In her classification, the 35% who fall into the middle class may or may not have the disposable income needed to generate a spurt in aggregate demand.
Nevertheless, the paper has an optimistic tone and a positive message. According to its findings, Pakistain has a larger middle class (in terms of proportion of the total population) than India (where the size of the middle class is estimated to be about 25%). This in itself is an interesting finding given that Pakistain's annual average GDP growth rate from 2000 to 2007 was 4.7%, while India's was 7.7%. But this result (that Pakistain's middle class is bigger than India's in terms of proportion of the population) was also touted in an earlier study by the Asian Development Bank (in a paper by Natalie Chun). If we believe that, then given that India's (apparently smaller) emerging middle class is repeatedly touted as a growth engine in economic literature, Pakistain too should experience some of the positive impacts of this development.
As is often the case in this country, the problem is that what the data shows is often contradictory in itself, and is not borne out by what one observes on the streets.
Although Dr Nayab has added on non-money metric measures to her composite index, her core data is still expenditure based. The HIES dataset of 2007/08, which was the one used by Dr Nayab, showed that poverty incidence in Pakistain was of the order of 17% (at a time when poverty in the US, admittedly using a different yardstick, but nevertheless; was estimated at 15%). But the same dataset also shows that the third income quintile (which would roughly correspond to the middle class) allocated 21% of its monthly food expenditure to the purchase of cereals alone. It is hard to see how a group that spends a fifth of its food expenditure on a staple (as opposed to spending on meat, milk and vegetables for instance) can also be an engine for growth. Real wages declined after the mid 2000s, and unemployment was stagnant. Support prices had not been raised then, as they were post 2008 (a move that undoubtedly benefited rural incomes). None of this meshes with an emergent, prosperous middle class or for that matter, a significant dip in poverty.
Having said that, researchers are constrained to use whatever data is available to them, and to do the best they can. Dr Nayab has made a significant contribution to the literature by using a sound methodology, and doing a robust analysis. It is a pity that the raw data does not hold up when scrutinized..