Urban Middle Class Estimates in Pakistan

[deepak75]

Pakistan is more urbanized with a larger middle class than India as percent of population. In 2007, Standard Chartered Bank analysts and SBP estimated there were 30 to 35 million Pakistanis earning more than $10,000 a year. Of these, about 17 million are in the upper and upper middle class, according to a recent report.

As to India's much hyped middle class, a new report by Nancy Birdsall of Center for Global Development says it is a myth. She has proposed a new definition of the middle class for developing countries in a forthcoming World Bank publication, Equity in a Globalizing World. Birdsall defines the middle class in the developing world to include people with an income above $10 day, but excluding the top 5% of that country. By this definition, India even urban India alone has no middle class; everyone at over $10 a day is in the top 5% of the country.

According to development economist Lant Pritchett, fewer than 25% of people in the richest quintile in India complete 9 grades of school. "An upper limit of the 95th percentile, while on the high side, is just about sufficient to exclude the country's richest," Birdsall adds.

This is a combination both of the depth of India's poverty and its inequality. China had no middle class in 1990, but by 2005, had a small urban middle class (3% of the population). South Africa (7%), Russia (30%) and Brazil (19%) all had sizable middle classes in 2005.

Haq's Musings: Urbanization in Pakistan Highest in South Asia

DAWN.COM | Columnists | The rise of Mehran man

India has no middle class? - India - The Times of India

Sir, I am dazed by the way you have quoted statistics here. Especially the section that I have highlighted. Let me try to summarize to get a grip on the situation.

You say that in 2007 as per estimates between 30 to 35 Million individuals in Pakistan earned above USD 10,000.

Going by this yardstick the annual income in 2007 of these 30 - 35 million individuals itself was either of the following two or between them:

1. 30 Million x 10,000 = 300 Billion USD.
2. 35 Million x 10,000 = 350 Billion USD.

This is only a fraction of the total gross services income which in turn is mere part of the GDP.

Now, we are not even considering the median/average household income which though will be relatively less per household but considering the increase in the households (spread across the economy) will be surely a much higher number. I could have used the Gini index to calculate the income distribution and hence the total household income in Pakistan in that year but I already see that it will be a waste of my time.

Okay now we see the number above and we then see the GDP of Pakistan.

So what was the GDP of Pakistan in 2007?? = USD 144 Billion.

Would you now like to remove the reference to the Pakistan economy so that we can debate Nancy Birdsall's upcoming paper? Are you sure that this is not PPP?


So to the topic:

Ms. Birdsall has written several papers as her current role in CGD and I would look forward to see her new hypothesis regarding the referencing of "middle class" basis universal currency parameter notwithstanding the PPP adjustments for real value which will be different for each economy and which are the real indicators of the purchasing power and hence the disposable income of a household in an economy. That paper seems not published yet and I am one of those that are waiting for it to be published and find out why Keynes theory of Marginal Savings (Delta S?) is not in vogue anymore when identifying the famed "Middle Class".

You also drew reference to Mr. Pritchett who has expounded the new category of "Flailing Class" only to define the performance of Indian state. Considering that his caliberation is a factor of infrastructure, administration, labour efficiency, investment efficiency and amonst others, lastly (surely not the least) the brains (soft skills).

I tend to agree with him a bit till he discounts the incremental rural development in the country and is actually categorizing infrastructure as a benchmarked reference.

But mind you, he has categorized your country as a failed state!

Also he has elaborated a particular phenomenon as "Goat Economy". Though he wrote it basis his experience in Nepal but considering that he is actually expounding on the efficacy of Aid programs, please read it and you will find it quite relevant w.r.t Pakistan today.

I hope that you will delete the misguiding part of the post before you lose credibility amongst even your friends who thanked your post. Of course, you know about what I will think of your credibility from now on.

Now after you have deleted the misinformation highlighted in bold please research a paper from one of the ex-governors of the Pakistan central bank. We had discussed that paper while researching the evolution of middle class in asian countries during my business education. You will find that it is a PPP based estimation and not something that Ms. Birdsall intends to expound upon and hence is irrelevant for the numbers that you quoted in bold. I will be happy to share the summary of our research with you but I fear that it will also include a lesson about Pakistan's huge underground economy and the non-existend tax net for your elites. But if you are prepared to face the facts, I promise to do that for you.

 

[shiningindia]

i am not understanding that how they estimated indian people income and publish report that no people is earning $10 a day. my father is earning Rs 38000P/m and my mother is earning Rs32000 p/m. there r 4 member in my family, it means my family is earning $13 per day. and there r millions of family like my family in india so how can they said india has no middle class according to new definition.

 

[deepak75]

i am not understanding that how they estimated indian people income and publish report that no people is earning $10 a day. my father is earning Rs 38000P/m and my mother is earning Rs32000 p/m. there r 4 member in my family, it means my family is earning $13 per day. and there r millions of family like my family in india so how can they said india has no middle class according to new definition.

Actually my friend, given the numbers above, your household income is USD 52 per day. But going per the PPP it will be higher (USD 52 may be can get 10 Kilos of flour in the U.S but in India you can get may be more than 25 - I am not sure of the prices of flour, I never shop but just to explain to you).

So there is a necessary expenditure that has to be incurred in each household for carrying on with normal survival. This when deducted from the total household earnings gives you the savings. So historically, the middle class is defined by this disposal income (income that they can spend in the economy in future to drive the consumption and growth).

so you are surely middle class, because going by PPP, in your family in India you can afford needed consumption (food etc) + also white goods (TV, Refrigerator, Microwave, computer etc.) + also a car I am sure and distinct education (needs more expenditure than basic education). So you are middle class.

 

[Nemesis]

Riaz once again exposed for putting up a selected reading of different reports. What a surprise.

1. 30 Million x 10,000 = 300 Billion USD.
2. 35 Million x 10,000 = 350 Billion USD.

This is only a fraction of the total gross services income which in turn is mere part of the GDP.

Now, we are not even considering the median/average household income which though will be relatively less per household but considering the increase in the households (spread across the economy) will be surely a much higher number. I could have used the Gini index to calculate the income distribution and hence the total household income in Pakistan in that year but I already see that it will be a waste of my time.

Okay now we see the number above and we then see the GDP of Pakistan.

So what was the GDP of Pakistan in 2007?? = USD 144 Billion.

hilarious.

 

[niaz]

Here's an interesting Op Ed by George Fulton in Pakistan's edition of International Herald Tribune:

We haven’t got a lot to be thankful for these days in Pakistan.

But at least we are not Dubai.

Fed up with loadshedding, bombs, and TV cynicism pervading Pakistan, I recently escaped to Dubai for a holiday. Big mistake. Huge. Ten days later I returned, gasping for Karachi’s polluted, but far sweeter, air. Dubai may have the world’s tallest building and the world’s largest shopping mall, but it also has the world’s tiniest soul. It’s a plastic city built in steel and glass.

It has imported all the worst aspects of western culture (excessive consumption, environmental defilement) without importing any of its benefits (democracy, art). This is a city designed for instant gratification a hedonistic paradise for gluttons to indulge in fast food, fast living and fast women. It’s Las Vegas in a dish dash. You want to eat a gold leaf date? Munch away.

You want to drink a Dhs 3,000 bottle of champagne? Bottoms up. You want a UN selection of hookers at your fingertips? Tres bien. Let’s start with the malls. These cathedrals of capitalism, these mosques of materialism are mausoleums of the living dead. Slack jawed zombies roam around consuming food, clothes and electronics in a desperate attempt to fill the emptiness of their existence.

Whilst at the Mall of the Emirates the azan goes off. Nobody appears to move to the prayer room; everyone’s too busy performing sajda before Stella McCartney, genuflecting before Gucci, and prostrating themselves at Prada. With Dubai, one recalls F Scott Fitzgerald’s The Great Gatsby.

The people are modern day Gatsbys, buying shirts that they will never wear and books they will never read. Like Fitzgerald’s roaring 20s America, Dubai is a moral failure a society obsessed with wealth and status. Everyone is trying to keep up with the Jones’ or the Javaids. You see the goras with their perma-tans, streaked highlights and their flabby cleavages.

At least we are not Dubai – The Express Tribune

This is a rather biased view of Dubai. I have been living in UAE since 2002 and despite many faults (especially exploitation of labor), I feel these comments about Dubai are unfair and sound more like ‘Sour grapes’. Pray let me recount some of the nice things that I like about UAE in general and Dubai in particular.

Delights of Dubai include excellent quality and variety of food. Art and culture is also available to the connoisseur. Crime is minimal, one can leave the car unlocked without fear. Women have no fear traveling alone even at night (would be a disaster in London as well). In the last 7 years no police man has ever bothered me or asked bribe. You don’t hear of suicide bombs, electricity outages are rare. Dubai airport is one the finest. There was a traffic problem but with the Metro, a solution is in sight. However if you are a non local and commit a crime, you would surely be caught and go to jail

There was a mention of Azaan in the Dubai Mall. This is the beauty of Dubai. One truly has free choice. There is hardly a place where one doesn’t hear the sound of Azaan at prayer times. Most Muslims offer prayers (farz only) and return to their normal chores. Unlike Pakistan, where prayers take abnormally long time.

The reason why in the Malls business goes on as usual is because a very large percentage of Dubai population (80&#37 is of non UAE origin; out of this majority are non Muslims. Prayers are not incumbent on non Muslims and unlike Saudi Arabia; Muslim practices are not forced down non Muslim’s throat. In Dubai one has a choice to go to the night club or to the mosque or both. IMO this is what free choice is all about.

I won’t argue your right to prefer Karachi over Dubai. Karachi is after all your city. I just don’t like criticism for the wrong reasons. Certainly not because it is den of hedonism. If you have honestly earned money, what is the harm in enjoying it? I quote Hafiz Shirazi:

Sharaab haraam shumaarand wa khoon khalq halaal.
Zehay tariqat wa millat zehay shariat wa deen

Meaning they proclaim wine haraam but shedding of innocent blood halaal. Praise to the nationhood, praise to shariat and religion.

This is certainly true in Pakistan today. That is why given half the chance most Pakistanis will move to Dubai.

 

[deepak75]

This is a rather biased view of Dubai. I have been living in UAE since 2002 and despite many faults (especially exploitation of labor), I feel these comments about Dubai are unfair and sound more like ‘Sour grapes’. Pray let me recount some of the nice things that I like about UAE in general and Dubai in particular.

Delights of Dubai include excellent quality and variety of food. Art and culture is also available to the connoisseur. Crime is minimal, one can leave the car unlocked without fear. Women have no fear traveling alone even at night (would be a disaster in London as well). In the last 7 years no police man has ever bothered me or asked bribe. You don’t hear of suicide bombs, electricity outages are rare. Dubai airport is one the finest. There was a traffic problem but with the Metro, a solution is in sight. However if you are a non local and commit a crime, you would surely be caught and go to jail

There was a mention of Azaan in the Dubai Mall. This is the beauty of Dubai. One truly has free choice. There is hardly a place where one doesn’t hear the sound of Azaan at prayer times. Most Muslims offer prayers (farz only) and return to their normal chores. Unlike Pakistan, where prayers take abnormally long time.

The reason why in the Malls business goes on as usual is because a very large percentage of Dubai population (80%) is of non UAE origin; out of this majority are non Muslims. Prayers are not incumbent on non Muslims and unlike Saudi Arabia; Muslim practices are not forced down non Muslim’s throat. In Dubai one has a choice to go to the night club or to the mosque or both. IMO this is what free choice is all about.

I won’t argue your right to prefer Karachi over Dubai. Karachi is after all your city. I just don’t like criticism for the wrong reasons. Certainly not because it is den of hedonism. If you have honestly earned money, what is the harm in enjoying it? I quote Hafiz Shirazi:

Sharaab haraam shumaarand wa khoon khalq halaal.
Zehay tariqat wa millat zehay shariat wa deen

Meaning they proclaim wine haraam but shedding of innocent blood halaal. Praise to the nationhood, praise to shariat and religion.

This is certainly true in Pakistan today. That is why given half the chance most Pakistanis will move to Dubai.

Sir, I completely agree with your assessment. Dubai offers a much better quality of life to people from the Sub-continent. More so for Muslims due to the overt religious inclinations.

Though there is some discrimation by some of the local population but that is more in Sharjah or Ajmaan. I think more in Sharjah. But outside of that in Dubai it is almost non-existent.

And you touched up on the freedom of choice. Now that is the true test of a city. Most of the cities can ban and close a practice and get on with it but the most difficult part is to provide the choice and manage it.

Though I never agreed with the economic policies that the rulers of U.A.E /Dubai pursued (specially after Shiek Zayed and Sheikh Rashid - God bless their souls) but I have nothing to complain about the quality of life that I see there whenever I get an opportunity to visit. I think that regarding the economic policies of Sheikh Mohammed, being a real estate oriented economy and services economy there was no need to artificially sustain demand and they should have let normal equilibrium be attained before they went on developing more crazy buildings and cities. But otherwise, the place is good and a lot of my friends are enjoying life there. Guess what, some of the best friends of Indians in Dubai are Pakistanis!!

P.S: Is the Metro going up to Jebel Ali now?

 

[k_n]

The Chowk post you are referring to is a story from "The News", a Pakistani newspaper, that cites no real data from any credible source in it. What I have provided is real data from Standard Chartered Bank, and endorsed by former State Bank governor Dr. Ishrat Husain.



Economy of Pakistan - Wikipedia, the free encyclopedia

Sir , stop making excuses again .

You are giving us an estimate by STANDARD CHARTERED Bank and SBP and comparing it with the details given by Nancy Birdsall in her report .

What does Nancy Birdsall has to say about Pakistan's 'Urban Middle Class' in her report ?
Please give us the answer by comparing ORANGES TO ORANGES

 

[RiazHaq]

You say that in 2007 as per estimates between 30 to 35 Million individuals in Pakistan earned above USD 10,000.

Going by this yardstick the annual income in 2007 of these 30 - 35 million individuals itself was either of the following two or between them:

1. 30 Million x 10,000 = 300 Billion USD.
2. 35 Million x 10,000 = 350 Billion USD.

This is only a fraction of the total gross services income which in turn is mere part of the GDP.

Now, we are not even considering the median/average household income which though will be relatively less per household but considering the increase in the households (spread across the economy) will be surely a much higher number. I could have used the Gini index to calculate the income distribution and hence the total household income in Pakistan in that year but I already see that it will be a waste of my time.

Okay now we see the number above and we then see the GDP of Pakistan.

So what was the GDP of Pakistan in 2007?? = USD 144 Billion.

Would you now like to remove the reference to the Pakistan economy so that we can debate Nancy Birdsall's upcoming paper? Are you sure that this is not PPP?


So to the topic:

Ms. Birdsall has written several papers as her current role in CGD and I would look forward to see her new hypothesis regarding the referencing of "middle class" basis universal currency parameter notwithstanding the PPP adjustments for real value which will be different for each economy and which are the real indicators of the purchasing power and hence the disposable income of a household in an economy. That paper seems not published yet and I am one of those that are waiting for it to be published and find out why Keynes theory of Marginal Savings (Delta S?) is not in vogue anymore when identifying the famed "Middle Class".

You also drew reference to Mr. Pritchett who has expounded the new category of "Flailing Class" only to define the performance of Indian state. Considering that his caliberation is a factor of infrastructure, administration, labour efficiency, investment efficiency and amonst others, lastly (surely not the least) the brains (soft skills).

---
Also he has elaborated a particular phenomenon as "Goat Economy". Though he wrote it basis his experience in Nepal but considering that he is actually expounding on the efficacy of Aid programs, please read it and you will find it quite relevant w.r.t Pakistan today.

I hope that you will delete the misguiding part of the post before you lose credibility amongst even your friends who thanked your post. Of course, you know about what I will think of your credibility from now on.

Now after you have deleted the misinformation highlighted in bold please research a paper from one of the ex-governors of the Pakistan central bank. We had discussed that paper while researching the evolution of middle class in asian countries during my business education. You will find that it is a PPP based estimation and not something that Ms. Birdsall intends to expound upon and hence is irrelevant for the numbers that you quoted in bold. I will be happy to share the summary of our research with you but I fear that it will also include a lesson about Pakistan's huge underground economy and the non-existend tax net for your elites. But if you are prepared to face the facts, I promise to do that for you.

You are misinformed about Pakistan's GDP and the basis of using incomes to classify people as poor, middle class or upper class.

In developing countries, it's the PPP values that are used for this purpose. Pakistan's GDP in PPP terms exceeds $450 billion, not $144 billion as you erroneously assert.

As to your stretching of Nepal's "goat economy" description to include Pakistan's economy, you are simply confirming your own ignorance, if not your bigotry against Pakistan.

Regarding India's situation, there is plenty of data, documentation and literature that confirms India's deep poverty and vast rich-poor gap that leaves little room for middle class. Birdsall also makes a reference to this fact.

Haq's Musings: 1999-2009: Pakistan's Decade of Urban Middle Class Growth

 

[RiazHaq]

i am not understanding that how they estimated indian people income and publish report that no people is earning $10 a day. my father is earning Rs 38000P/m and my mother is earning Rs32000 p/m. there r 4 member in my family, it means my family is earning $13 per day. and there r millions of family like my family in india so how can they said india has no middle class according to new definition.

If what you say is true, then your parents belong in the top 5% of India's population ( about 55 million people) which Birdsall excludes from her definition of middle class.

You are missing the whole point of Birdsall's paper. It is the depth of India's poverty and its great inequality that leaves India with no middle class by her definition.

 

[karan.1970]

You are misinformed about Pakistan's GDP and the basis of using incomes to classify people as poor, middle class or upper class.

In developing countries, it's the PPP values that are used for this purpose. Pakistan's GDP in PPP terms exceeds $450 billion, not $144 billion as you erroneously assert.

As to your stretching of Nepal's "goat economy" description to include Pakistan's economy, you are simply confirming your own ignorance, if not your bigotry against Pakistan.

Regarding India's situation, there is plenty of data, documentation and literature that confirms India's deep poverty and vast rich-poor gap that leaves little room for middle class. Birdsall also makes a reference to this fact.

Haq's Musings: 1999-2009: Pakistan's Decade of Urban Middle Class Growth

But Riaz, are we saying the middle class's income in Pakistan is 78% of its GDP?? and everything else contributes only 22%

 

[RiazHaq]

...I feel these comments about Dubai are unfair and sound more like ‘Sour grapes’. Pray let me recount some of the nice things that I like about UAE in general and Dubai in particular......

This is certainly true in Pakistan today. That is why given half the chance most Pakistanis will move to Dubai.

The author of this piece titled "At least we are not Dubai" is a man named George Fulton who is European, not Pakistani. He lives in Karachi by choice.

And I personally live in the United States and I have been to Dubai on many occasions. The last time I was there was in 2009. I tend to agree with at least some of of what Fulton says about Dubai.

Haq's Musings: July in Dubai

 

[k_n]

You say that in 2007 as per estimates between 30 to 35 Million individuals in Pakistan earned above USD 10,000.

Chill mate ! What the estimate by SBP says is that AVERAGE INCOME of approx 30 million Pakistanis is $ 10,000 .
So , we are talking about the AVERAGE Income of the 30 million group and not that each individual is worth $10,000 or more because had that been the case the average income of this group had been much higher than $10,000 ! ( So , its DEFINITELY the 6.8 million pushing the AVERAGE income up )

Measured by PURCHASING POWER , Pakistan has a 30 million strong middle class, according to Dr. Ishrat Husain, Ex-Governor (2 December 1999 - 1 December 2005) of the State Bank of Pakistan.[22] It is a figure that correlates with research by Standard Chartered Bank which estimates that Pakistan possesses a "a middle class of 30 million people that Standard Chartered estimates now earn an average of about $10,000 a year."[23] Latest figures put Pakistan's Middle Class at 35 million strong.[24] In addition, Pakistan has a growing upper & upper middle class, which was estimated at 6.8 million in 2002[25] and has now grown to 17 million people as of 2010, with relatively high per capita incomes.[26]

 

[k_n]

Sir Riaz , make correctoin in your following statement :

In 2007, Standard Chartered Bank analysts and SBP estimated there were 30 to 35 million Pakistanis earning more than $10,000 a year.

 

[RiazHaq]

But Riaz, are we saying the middle class's income in Pakistan is 78% of its GDP?? and everything else contributes only 22%

Why is that surprising? According to available data, 60% of Pakistanis and 75% of Indians live on less than $2 a day.

List of countries by percentage of population living in poverty - Wikipedia, the free encyclopedia

http://hdrstats.undp.org/en/indicators/103.html

 

[RiazHaq]

Sir Riaz , make correctoin in your following statement :

Yes, I agree it's average. I accept your suggested correction.