The middle-class mirage

2012-03-03 11:19

For developing nations, the emergence of a mass middle class is a reassuring benchmark of growth: evidence of an all-important bridge between the haves and the have-nots.

For the Brics nations (Brazil, Russia, India, China and now South Africa), it is also a proud measurement of economic empowerment for the millions who would have otherwise been trapped in the spiral of poverty.

In South Africa, the positive effect of this upliftment can be seen daily, yet the wealth gap grows ever wider.

Ironically, the same applies to all the other Bric nations.

It seems that just as this emerging middle class is freed from the shackles of poverty, they fall into another trap: the honey trap of debt.

On the surface, it all looks picture perfect: they have home loans, shiny cars to drive and designer bling to prove to each other that they have indeed “arrived”. But scratch the surface and a dangerous undercurrent is exposed.

At the end of last year, the South African consumer debt report estimated that just under 9 million South Africans were trapped in debt, with approximately 16.5 million accounts – from electricity bills to retail credit – “impaired”.

That’s just a polite way of saying that we have a massive problem on our hands.

If that were not shocking enough, Investec Asset Management fund manager John Biccard warns: “Over the past 10 years, the ratio of consumer debt to disposable income has gone from 40% to almost 80%. It can’t go much higher.”

It is clear that many of us are living way beyond our means.

If you look back to the 1950s, the era when the middle class really emerged, it was still possible for a sole, breadwinner husband to come home to his picture-perfect house, his stay-at-home wife and their three or more children.

Fast-forward to the 21st century and that idyllic lifestyle is nothing more than implausible fiction. The bitter truth is that the baby-boomer generation was far better off than the standard office worker of today.

In those days, couples married younger so were able to put their children through school and university, and still have enough years to save for retirement.

Today, couples have children much later in life, which means that unless they are earning a small fortune, they will come to realise that they in essence are forced to choose between providing their children with the best possible education and saving for their own retirement.

The Old Mutual Retirement Monitor Survey revealed last year that “the primary savings motivation of respondents aged 35 to 49 was the need to save for their children’s education” and that it was “very concerning that only 54% of respondents who are 10 years or less away from retirement are actually saving for that retirement”.

The harsh reality is the later you have children, the less chance you are going to have to retire gracefully, or hope to retire at all.

The protracted economic downturn is not helping either. As the cost of living continues to skyrocket, the middle-class taxpayer in South Africa is being squeezed mercilessly.

We are being forced to turn the other cheek and be slapped with the insult of paying twice for services our tax money should buy – like personal security, healthcare, education and well-maintained roads. Middle Class Utopia is proving to be a cruel facade.

 “Middle” is now just a step away from the blacklisting abyss.

Business analysts are also tracking the gradual disappearance of the “middle class” in business. The
Gini coefficient is being mirrored in the business world. Big corporations are growing, while medium-sized businesses are shrinking. There is less and less middle ground.

In America, there is a slow but steady growth in jobs in the manufacturing sector – traditional employment for blue-collar workers – but even that growth represents only a sixth of the jobs lost during the recession. What is emerging from this growth spurt is troubling, and South Africa should take note.

The world has become reliant on a knowledge economy. The use of new technology in all industries means that a large proportion of today’s manufacturing jobs have become intellectually demanding and require education beyond high school.

If we lost half a million learners in the Class of 2011 alone, then any future hope of social mobility for millions of South Africans will evaporate – just like a mirage.

» Chang is the founder of Flux Trends. Visit www.fluxtrends.com 

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