EXPLODING markets belie the claims of declared incomes in the country. Rising inflation and unemployment have not dampened the spirit of consumers. From high premium car sales to huge success of education business, from capital to assets market, from makeshift Sunday bazars to super markets, stereotype Pakistanis are happy to be crushed beneath an endless variety of stuff. It is an open and shut case. The consumer class is better off than ever before and out at shopping spree.
Leave other facts aside, a phenomenal expansion in retail business holds testimony to the fact. Rich alone cannot possibly feed a change of a magnitude as this. Middle class that constitute biggest chunk of the total population of 152.53 million must have been instrumental in the making of the boom in the market.
Elite in the country, who probably owned many times more than they can spend in a lifetime, prefers to shop in Dubai and Singapore. Besides, the base of the very rich class is too narrow to feed the type of expansion that the retail business is experiencing in Pakistan. Malls, forums, plazas and centres of shopping are no more confined to upper class localities in mega cities. Hundreds of modern shopping centres have come up in recent past all over the country especially in smaller towns of Punjab. Management of chains of departmental stores and shopping centres are shy of disclosing their turnover figures for obvious reasons. The rush of customers, however, that popular stores attract, go a long way to show that at least a section of middle class is more prosperous than projected.
Does this mean that middle class in the country is expanding? Not necessarily. It can actually be shrinking. It may just be the composition of the class that has changed or is in process of a transformation. There are no ready data available to support this position. The poverty reduction has been in focus for the last six to seven years as a development issue internationally. Therefore, there are a number of studies highlighting different dimensions of poverty and its estimation in Pakistan as well. Unfortunately, there seems to be no in-depth study on middle class in the country.
The fact remain, that the reality of economic life in Pakistan is incomprehensible without proper understanding of the middle class. This huge potent class influences economic trends more than others. Their preferences make and break big companies. They indirectly keep the wheels of industry turning. Without demand there cannot be any production or import. It is this class that chip in the biggest chunk in overall demand for most consumer items. They indirectly control the boardroom decisions in key areas of what, when and how much to produce at a certain point in time. Numerically they are more than both upper and lower classes.
Before attempting to quantify or qualify middle class it needs to be defined. In an economic survey a few years back it was stated that disparity between classes is rising. For this, the population was categorized in the upper twenty per cent and lower twenty per cent. People falling in between these two extremes were taken to be the middle class. If this loose definition is accepted in absence of any other, the middle class has a strong base of 90 million Pakistanis.
To be fair to policy makers, it is not easy to define the middle class in the country by income levels also because of massive concealment of earnings. Neither would it be appropriate to convert living cost in Pakistani rupees to dollars to draw parallels amongst middle classes in the country with their counterparts in the West. Any such exercise could prove to be misleading.
In Pakistan there is often a big gap between the declared salary of the family head and the real disposable income of this unit. (A family comprises of six individuals on an average). Corruption is not the only factor. Most families have more than one person earning. Many people work more than one job. In some cases people maintain a small time family business of a sort. Sometimes they share some assets within their extended family that supplements their income. Many inherit a house that saves them expenditure on rent. Support from extended family, tribe, clan, community, etc. (substitutes for social security cover to quite an extent) also has a role in carving the psyche of consumers. All these or some combination of these factors empower middle class in Pakistan to spend more than what is expected of them.
Who are these people? They are professionals, (doctors, engineers, accountants, lawyers, bankers, teachers, etc.,) servicemen, (civil servants, military officers, etc.,) traders, corporate employees, self-employed business people, media people, artists, small business persons, etc.
The middle class, however, is too broad a category. There is a lot of diversity within this class. For deeper understanding it may help to further classify it into three categories. Consuming class (the upper-middle-class), climbers (the middle-middle-class) and aspirants (the lower middle class).
An intelligent estimate put consuming class at about 20 per cent of 90 million that adds up to 18 million, climbers about 30 per cent or 27 million and aspirants 50 per cent or 45 million.
An average value of house of consuming class is three to five million today, while they earn Rs75,000 per month. Ninety per cent have college degree and live in cities, 80 per cent have a car. They send their children to private elitist schools and colleges. The rate of growth in consuming class may be neutralized by negative growth in aspirant class bordering on poverty line.
Even if the economic momentum of current growth rate is maintained the mass consumption will still be confined to necessities. There, however, is scope for business that caters to consuming class that may grow at the rate of six per cent to 10 per cent over the next five years if the trend in the neighbouring India can be assumed to be applicable in Pakistan as well.