The Moorish Wanderer

The Middle Class Rip Off

Posted in Moroccan Politics & Economics, Moroccanology, Morocco, Read & Heard, The Wanderer by Zouhair ABH on October 17, 2011

Much has been made of the Feb20 demonstrations, mainly as a sign of middle class unrest and discontent with perceived unfair distribution of wealth and political power. While it is understood only too many citizens have been excluded from, or ruled themselves out of,political representation – because of the generally corrupt and inadequate partisan political apparatus, the same argument cannot be made as easily about economic retribution;

The middle class in Morocco is both a political and economic maze to the observer, remain a tricky and elusive set of individuals, and any proposed criterion to determine the broad characteristics of such population is bound to trigger gainsay and recriminations for its arbitrary, almost deterministic approach. And yet, these are the people that may well hold the key to appease social and economic resentment, drive forward both the political process and the economic transition away from its current quagmire and into genuine prosperity.

The middle income as we define it.

My proposed definition of “Middle Class” does not stray from HCP established nomenclature; first because my own back-of-the-envelope computations tend to be vindicated by HCP findings, and second because the less controversial course is to settle for the Median Income as an indicator of the economic characteristics. The modus operandi is pretty straightforward: households are ranked per income, and then broken down into uniform quintile group (that is, per 20% sub-groups). The median quintile is therefore the third 20% -as it leaves as many households on its left as it does on its right. Then, we consider each quintile’s respective share in gross national income (GNI). Unfortunately, consistency isn’t HCP forte, and the IMF world data fields only 5 dates for the income distribution, further completed with some punctual HCP late figures on the matter: 1985, 1991, 1999, 2001 and 2007.

As we set in to track the median national income between 1999 and 2007, the findings point out a marked decrease in median share, down from 14.97% in 1999, to 14.54% in 2007, and the trend is to be confirmed by subsequent surveys. This dent in median wealth (-2.87%) almost mirrors the average GNI per capita growth over the same period (+2.83%) In simple words, the median income share has gone down at almost the same rate GNI per capita has gone up. And it seems all other quintiles but one have experienced similar trends. The only quintile households with a healthy 3.41% improvement were the top 20%, that is, those earning more than MAD 207,000 per annum (2007 figures).

But let us dig deeper in the “Middle Class malaise”; while it is understood their share in income has fell over time (a tale-telling sign of income concentration in this country) their real income has also gone down. The stated implication is not necessarily true: the share pie per person has grown some 3% a year, so even though it has grown smaller with respect to the whole pie, it may have grown in absolute terms nonetheless. But sadly for the Middle Class, that did not happen; quite the opposite.

But what about real income?

Between 1999 and 2007, median income per household has grown 1.48% in nominal terms. However, when adjusted for average (CPI) inflation,the real income has been steadily decreasing at 0.18%. This means the median households have accumulated a real loss in purchasing power of MAD 13,000 over the considered period. What does this tell us about all these economic policies carried ever since 1999?

And it is not like the median households are the only ones who bore the brunt of economic inequity; again, the top 20% are the only ones who actually improved their real income by MAD 11,000 overtime.The bottom 20% have increased their real income though: an accumulated MAD 51 over the considered 8 years – the top 20% improved their real income 215 times more than the bottom 20%. This is worse than a zero-sum game, it is, quite simply, a game heavily skewed towards the affluent, and public redistributive policies (i.e. fiscal policies) have done nothing to allay the inequity; it has only made it worse.

What holds in 2007 holds equally true for 2011 (even by the most optimistic projections of a stabilized income share with respect to the 2008 survey) as the median 20% saw their income share fall further to 13.2%.

... The Middle Class have been screwed up. In real terms.

A country with a weak middle class who cannot enjoy the proper benefits of growth, cannot sustain itself without serious risks of social unrest and discontent. What is worse, these subsidies the government has been so generously putting on the table only beat the inequity further in, as they benefit those with the highest absolute consumption levels.

Now that these numbers have put in perspective the ailing of our Middle Class, the guileless observer would now understand why a deep, structural change within our institutions and the economics of wealth redistribution need to be thoroughly reviewed.

And yes, Middle Class IS radical.

2 Responses

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  1. […] have laid out the argument in a previous post, but a brief reminder would do no harm: the evidence shows that so far, growth benefits mainly -if […]

  2. […] Middle Class have lost, on average, inflation-discounted value of MAD 1,201, that is MAD 14,400. This number is higher than what I posted earlier on because between 2007 and 2010, the income share decreased 1.3 basis points. The accrued effect […]

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