South Africa’s middle class is smaller than we think

New research suggests that South Africa’s stable middle class may be much smaller than previously thought.

In an opinion article published by BusinessDay, Murray Leibbrandt, an economics professor at UCT, and Rocco Zizzamia, a Southern Africa Labour and Development Research Unit researcher and graduate student at Oxford University, noted that data from Statistics SA found that 55% of South Africans are poor, unable to meet their most basic needs.

And of those who aren’t poor, many are in precarious economic situations, with the duo’s research showing that almost one in two South Africans who are not poor are at risk to falling into poverty.

According to Leibbrandt, being in the stable middle class is not only about location in the literal middle of the income distribution, “it means being free from poverty, not only today, but also tomorrow,” he said.

“It is about the freedom and stability to engage in mid-and long-term planning. It is about access to opportunities to move ahead in life, and about the financial cushion that enables risk-taking and protection against shocks.”

“By these criteria, what many celebrate as SA’s emerging middle class – which we term the ‘vulnerable’ middle class – still has shallow roots,” he said.

The Southern Africa Labour and Development Research Unit said it uses data from the National Income Dynamics Study (NIDS) to distinguish the “stable” middle class, from the “vulnerable” middle class.

Classifying the middle 

NIDS identifies five main social classes: the elite, the stable middle class, the vulnerable middle class, the transitory poor and the chronic poor.

“Only one in four South Africans are part of either the secure middle class or the elite. Altogether 14% fall into the category of vulnerable middle class and about 13% could be classified as part of the transitory poor. The rest — about half of the population — are chronically poor, with scant chance of moving into the middle class.

“The most stable of these classes are the elite (stably not poor) and the chronic poor (stably poor). The bulk of the poor are chronically poor,” Leibbrandt said.

He said that the vulnerable middle class are those who have been poor and who are likely to become poor in future. This, he said, suggests that the proportion of the population that experiences poverty with some regularity may be greater than Stats SA’s 55% figure.

“As with the transient poor, the vulnerablility of the middle class is determined by its insecure position in the labour market. Gaining or losing a job for those on the margins can mean the difference between being poor or not poor. Indeed, high levels of vulnerability can be directly attributed to precarious forms of employment.”

Leibbrandt said that while the share of the middle class remained relatively stable between 2008 and 2014-15, “it is encouraging that the share of black Africans in the middle class has been expanding and comprise half the middle class.

“However, black Africans are still underrepresented in the middle class compared to their share in the overall population. Race remains a strong predicter of chronic and transient poverty.”

The NIDS research, published a year ago found that the middle class in South Africa is ‘relatively small’… “growing its share by only two percentage points in the past 23 years…”

The study defined middle class by using a monthly per capita expenditure range of R2,920 to R10,678, based on January 2015 prices. Using this threshold, the middle class in South Africa is only about 15% of the total population.

The Global Wealth Report 2015, published by Credit Suisse, found that middle class South Africans accounted for 13.7% of the adult population in the country, while middle class and above adults make up nearly 15% (14.8%).

Credit Suisse defines the middle-class in terms of a wealth band instead of an income range and uses the US as the benchmark country where a middle-class adult is defined as having wealth between $50,000 and $500,000 valued at mid-2015 prices.

According to a Standard Bank report, using data compiled by the Bureau of Market Research (BMR),  the middle class in SA comprises 18% of the working age population.

Leibbrandt highlighted several ‘strategies’ to promote the growth of the stable middle class and provide avenues out of poverty for disadvantaged South Africans.

“Better access to high-quality education, proximity to urban centres that provide economic opportunity, and the presence of a formally employed member in the household reduce inequality of opportunity and limit the effect of parental socioeconomic background in determining vulnerability to poverty.

Read: SA middle class needs to increase by 30% to sustain economic growth