For too long we have been reading in the local dailies about an "expanding middle class" especially when journalists and real estate agents are trying to justify the current property boom. However, despite all this attention to the "middle class" no one has actually tried to define or even quantify them. It is important from a decision making perspective for all economic agents be it banks, real estate developers, insurers and others to have a clear picture of the "middle class" and the "poor". Given that they have target markets, they need to know their target before they can sell their products.
The issue of the "middle class" is an elusive concept and at best most definitions given are nebulous. In the U.S.A, the statistical agents describe the middle class very clinically, simply they are the ones in the middle range of income distributions. Therefore as of now, the American middle class consists of people earning roughly between $20,000 and $70,000 per annum. Mind you, these incomes would be for the "landed gentry" in Kenya. However, in Europe especially France and the United Kingdom, the term "middle class" takes on increasing complexity. Issues such as "aspiration, virtues and attitudes" come into play. The term takes on historical connotations of Marxism as terms such as Bourgeoisie are thrown around. Further to this, Patrick Hutber a sociologist says that "the middle class distinguish themselves from the class below them by their general willingness to rely on their own endeavours rather than those of the state".
Clearly the term middle class is both elusive and complex especially if you have a scientific mind. Globally, the middle class have been known to be the engines of growth, election arbiters and bastions of a nation's social values. If one crystallizes all these definitions and conceptions of the middle class, then one clearly gets a picture of the country's journalistic failures in brandishing the term middle class carelessly.
Given the American definition, one needs to get the wage distribution data. From the Kenya National Bureau of Statistics, then mathematically the middle class can be defined as anyone earning between Kshs 8,000 ($100) and Kshs 25,000 ($314) dollars per month. This translates to an earnings range of Kshs 96,000 ($1,200) and Kshs 300,000($3,750) per annum. Now from the dailies we hear that this number is growing, the truth is that it actually is. In terms of wage earnings growth, average wage earnings per employee have risen from Kshs 306,000 per year in 2004 to Kshs 384,000 per year in 2009. Further to this wage employment in absolute terms i.e. in numbers has grown by 13% from 2004 to 2009. Therefore in terms of numbers, the middle class is growing. Nevertheless, average earnings are not a good measure of true earnings because of outliers. To illustrate this, imagine a company of 10 people consisting of one boss and nine subordinates, the boss earns Kshs 2 million per month while the rest earn Kshs 10,000, the average earnings in that company are Kshs 209,000 per month. This figure is deceiving as the earnings are skewed.
From the social perspective, one really has to think clearly about this. Who are the "engines of growth, election arbiters and bastions of social values". In terms of these vague definitions of middle class, I dare to say that it is those same people earning between Kshs 8,000 and Kshs 25,000 per month who fit this description. The growth of Equity Bank, Co-operative Bank, CIC Insurance and Safaricom has been on the back of these people. Many companies have learnt the hard way that you ignore these segment of the population at your peril. Allied to this they are the election arbiters as they form the bulk of the population and thus they are also the bastions of our social values.
Now to answer the journalists, from the analysis, it's true that the middle class is growing. However the middle class they have in mind is totally different from the middle class that actually exists. The middle class they have in mind are the people who earn more than Kshs 100,000 per month, have a car and take their kids to private schools. A vision clearly influenced by western societies through the television. On the ground the middle class is in stark contrast to what they envision. The middle class will not offer the captive market for the exorbitantly priced houses in the leafy suburbs, instead, they will ensure that a developer who puts up apartments in Kikuyu, Kinoo, Kahawa Sukari and Ruiru will have a captive market for his rental income.
Analysis is extremely important from a decision making perspective and our short economic history shows that the companies and businesses who have taken time to understand the "middle class" have thrived.
Clearly the term middle class is both elusive and complex especially if you have a scientific mind. Globally, the middle class have been known to be the engines of growth, election arbiters and bastions of a nation's social values. If one crystallizes all these definitions and conceptions of the middle class, then one clearly gets a picture of the country's journalistic failures in brandishing the term middle class carelessly.
From the social perspective, one really has to think clearly about this. Who are the "engines of growth, election arbiters and bastions of social values". In terms of these vague definitions of middle class, I dare to say that it is those same people earning between Kshs 8,000 and Kshs 25,000 per month who fit this description. The growth of Equity Bank, Co-operative Bank, CIC Insurance and Safaricom has been on the back of these people. Many companies have learnt the hard way that you ignore these segment of the population at your peril. Allied to this they are the election arbiters as they form the bulk of the population and thus they are also the bastions of our social values.
Analysis is extremely important from a decision making perspective and our short economic history shows that the companies and businesses who have taken time to understand the "middle class" have thrived.
I do agree that the middle class is growing, however, at the expense of credit rather than production. It is also worth noting the gap between the have and have nots is widening.
The situation is not limited to Kenya but also in the Western world. Economies have mortgaged their future at the expense of instant gratification.
As to the question of who constitutes a true middle class, I would say it is anyone with savings, a roof over their head that they can call their own and still has a little bit of money to spare for recreation.
Thanks for the comment and your valuable insights. It is true that western economies bar Germany and the Scandinavian companies have opted for instant gratification rather than saving for the future. Our aim as a country should be to increase the number of the "middle class" that you have just defined.
Too true, the middle class is exactly that defined by income distributions. Companies such as Safaricom have done well to build their business around this class. They are the exception however and not the norm. A quick glance at the lauded Top 100 Mid sized firms will reveal very few companies that serve the middle class. Most firms are B2B interests. The classic case of a firm with 50 employees but a turnover of Kes. 700 million+. No wonder job creation is low in Kenya!
Kshs. 8,000 is just about minimum wage! Middle Class?