Latin America's Middle Class in Global Perspective

By Rigolini, Jamele; Seshasayee, Hari et al. | Americas Quarterly, Fall 2012 | Go to article overview

Latin America's Middle Class in Global Perspective


Rigolini, Jamele, Seshasayee, Hari, Tobón, Natalia, Americas Quarterly


Though often lumped together as the BRIC middle class, the newly arrived middle classes in Brazil, Russia, India, and China have grown at different rates and will likely play different roles in the political, economic and social development of their countries.

Latin America and the Caribbean is experiencing a dramatic surge of its middle class. In just a decade, the proportion of people in Latin America and the Caribbean with a daily per capita income (in purchasing power parity) between $10 and $50 a day went from around onefifth to one-third. For the first time in history, there are as many people in the middle class as there are in moderate poverty (i.e., per capita earnings below $4 per day).

This socioeconomic shiftstems largely from the sustained rates of economic growth in the 2000s that in most-though not all- countries trickled down and generated higher incomes.

But growth in the 2000s was not exclusive to Latin America and the Caribbean. While the industrialized world was facing a challenging decade, many emerging economies surfed past the global turbulences and continued to grow, lifting people out of poverty and feeding the ranks of their middle classes.

These changes are here to stay. Thanks to more sophisticated consumption habits, the middle classes in emerging countries will influence global trade patterns. Domestically, the middle classes will have a growing voice by means of higher purchasing power-moving up the consumption chain to high-end, more technical goods- and by demanding better education. And with a growing critical mass, they will push for institutional reforms and improved service delivery in areas that are beneficial to them.

The magnitude of these changes will depend, however, on the continued growth of the middle class and on the nature of its demands on the public sector. They will likely be more dramatic in regions where the middle class will grow the fastest, such as East Asia. While it is difficult-if not impossible-to forecast these changes with precision, it is possible with some margin of error to assess in which countries the middle classes have been growing and will grow the most.

MEASURING THE EMERGING WORLD'S MIDDLE CLASS

It is essential to choose a measure of the middle class that captures the ongoing structural changes and that allows a comparison of trends across both countries and time. The need for comparable indicators of the size and nature of the middle class narrows significantly the set of measures that can be adopted.

Further, an attempt to develop a metric for broad crosscountry comparison runs the risk of also missing important differences in the nature of the middle class. To give an example, while the sociological literature adopts a rich definition of the middle class based on occupational categories, it is close to impossible to use such a definition in international comparisons, since occupational categories are not harmonized across household surveys.

For these reasons, most international comparisons tend to measure the middle class in terms of income or consumption, which is quantitatively easier to compare across countries.

Even within the narrow set of income measures, however, another important choice awaits any comparison: should relative or absolute income (or consumption) indicators be used? Both capture important, but very different, aspects of the middle class.

A relative indicator summarizes how many people sit "in the middle" of the income distribution, with a typical indicator for international comparison being the proportion of the population with per capita income between 0.75 and 1.25 of the median per capita income. While such a measure can be very useful in assessing the extent to which a society is unequal or polarized, it fails in capturing anything related to the "absolute" welfare of the middle class.

Consider the cases of Ethiopia and Brazil. Using the relative measurement described above, 43 percent of Ethiopians earned per capita incomes between 0.

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