With the exception of 2022, this country’s economy has been declining consistently since 2014. As a redsult of the challenging economic conditions most citizens on fixed incomes have not benefited from major increases in salaries and with rising inflation the average citizen’s purchasing power continues to decline.
It is these challenging economic circumstances that have seen more and more people slip from what would be considered to be the middle class to the working class.
By definition, the middle class is typically considered to be individuals and households who fall between the working class and the upper class within a socio-economic structure. According to Investopedia, “In Western cultures, persons in the middle class tend to have a higher proportion of college degrees than those in the working class, have more income available for consumption, and may own property. Those in the middle class often are employed as professionals, managers, and civil servants.”
Yet there is growing concern that many of these professionals are now falling into the working class or the working poor classification.
Professor Roger Hosein, the senior lecturer of economics at the University of the West Indies, explained that this could be a result of their incomes being increasingly stagnant in the face of constantly increasing costs.
“The rapid increase in prices in the last three years in the Trinidad and Tobago economy would have cut into purchasing power capacity of all households that are on a fixed income. This means that if a household was formerly at the boundary of a lower-income household and a middle-income household, with the rise in prices such a household could now be classified as a lower-income household,” he told the Business Guardian.
Professor Hosein continued, “The same applies to households at the boundary of middle-income households and upper-income households, for some of those households at the boundary the rise in prices would have turned the relevant household into the middle-income group.”
Professor Hosein said that even the suggested offers being submitted to unions would do little to abate this, as the price increases had long surpassed the percentages placed on the negotiating tables.
He explained, “Because wages, in many categories, are only earmarked to increase by only four per cent and the rise in prices in the last five years has been considerably higher than four per cent it means that all households would have experienced a decline in real income. In order to address this there would be a need to properly increase nominal wages to compensate households for the loss of income associated with the increase in price levels.”
This concern about the diminishing size of the middle class in the face of rising prices and limited wage increases was expressed by Public Service Association President Leroy Baptiste, who argued in May that the prolonged delay in improving the salaries of public servants had eroded the middle class of the country.
He said then the public service could be categorized as the “working poor” after almost a decade of no salary increases coupled with high inflation.
Professor Hosein explained that the price increases were not the only factor impacting the middle-income group, as he noted that the crime situation had also limited their potential to increase productivity and raise themselves out of this situation.
He explained, “What the country needs is a rapid increase in output per worker. This requires an important strategic intervention by the government in the relevant places. But it also requires the government to control crime. In particular, it is very difficult to see how productivity could increase with a murder level standing at 535 as we speak today and drifting towards an overall 640 number for 2022.”
The University Lecturer said the onus was on the Government to address that concern so that there could be greater emphasis on efficient output.
He recommended government that to increase productivity it would need to control the crime situation.
“People must not have to spend a significant portion of their day looking over their shoulders. They must not have to divert resources away from active direct investment towards security personnel or toward burglar proofing and other security apparatus,” said Professor Hosein, “The country is in a very very trying position and we have to be careful that the fall in nominal wages, the fall in real wages on account of the slow growth of nominal wages in relation to prices and the rapidly escalating murder level does not create the right setting for people to leave the labour market beyond what is already happening.”
Professor Hosein however explained in his conversation with the Business Guardian that it was difficult to place an estimate as to what income bracket would constitute the middle class or the working class.
“What I would suggest, is a deep intelligent look at the data. I recommend that policy makers look carefully at what has happened in economy since 2015. What has been the impact of seven consecutive years of decline on the Trinidad and Tobago economy. In particular how has it affected the distribution of unemployment, the distribution of income across different occupation and industrial groups and across geographic areas,” said Professor Hosein, who explained that in the absence of this information, it would be difficult to adopt the necessary policies to address the situation.
Data Urgently Needed:
Another Economist, Dr. Marlene Attzs similarly noted there was some difficulty in placing a finger on just where the middle class stood in Trinidad and Tobago.
“In Trinidad and Tobago we do not have either current or such a well-defined income range for persons to be considered “middle class”. Generally, we have a sense of middle class as those persons who are not “poor”, who earn monthly incomes, and are able to enjoy a “reasonable” quality of life evidenced perhaps by at least one car, three square meals and, as an add-on, the ability to qualify for a mortgage and own a proper home. In years gone by teachers and public servants would have been among most of those persons considered “middle class”,” said Dr. Attzs, who however felt the question about the standing of the current status of the working class was “interesting and relevant given that TT is now in “recovery” mode following the shocks of the last two years.”
She said the shocks include Covid-19 but also the Russia/Ukraine war and recently the flooding that has negatively impacted many communities island-wide.
“Your specific questions on “middle class” require data and clear definitions to support what is a “middle class” and “working poor”.” Dr Attzs told the BG.
She argued that the notion of the middle class must be grounded in country-specific data and information. For example, in the US the Pew Research Centre defines the middle class [in the US] as households that earn between two-thirds and double the median U.S. household income, which was $65,000 in 2021, according to the U.S. Census Bureau. Using Pew’s yardstick, middle income in the US is made up of people who make between $43,350 and $130,000 annually.
She also felt that conversation required some assessment as to who fell into the working class or working poor bracket.
Dr. Attzs added, “The other issue that’s relevant to the conversation is that among employed persons we have those who can be described as “the working poor” - those persons engaged in either paid work or who are self-employed and who belong to households with an adult equivalent per capita household expenditure (or income) that falls below a specified poverty line. Currently, the national minimum wage is set at TT$17.50 per hour or $700 per week equating to $2,800 per month (for a 40-hour work week) or $33,600 per year.”
Targeted approach will help:
The limited data on the middle class has been an ongoing concern, one which was highlighted by Independent Senator Amrita Deonarine in an article titled, “Middle-class T&T, where is the data on us?” posted to social media in February 2021.
In the article, she noted “in 2014, the percentage of the population with such income in Trinidad and Tobago (size of the middle class) was 51.2% which accounts for almost 700,000 persons (when the population size was recorded at 1.362 million persons in 2014 – World Bank). “
That post explored the limited data since then was problematic as it was a major hindrance to implementing economic policies which would ensure necessary growth following the impact of the pandemic.
She asked in the post, “How are we measuring the real impact at the household and individual level of the last 15 years of economic growth/decline and the fallout from the covid-19 pandemic without key micro-data? Lack of clarity of the details on these social indicators brings to question the efficiency of the targeting mechanism of the existing social safety net to ensure that the vulnerable are adequately protected in times of crisis.”
Deonarine continued, “Middle-income households are a critical part of any economic recovery and need to be protected with relevant public policy that is empirically sound and targeted. In the event that we continuously fail to do this, scarce resources become inefficiently allocated contributing to welfare losses in society, not to mention a waste of taxpayers’ money.”
However, this concern about the shrinking middle class had been expressed long before the pandemic, nor was Senator Deonarine the first independent Senator to encourage the government to focus on the middle-income group.
In 2017, Independent Senator David Small warned of the shrinking middle class in his contribution to the 2018 budget debate as he warned that growing inflation and rising prices had squeezed members of the public with a “finite” supply of funds.
The Business Guardian reached out to the Central Statistical Office in the hope of getting a clearer picture of the various income brackets in Trinidad and Tobago.
However, the CSO stated it did not have data tabulated in that form and instead pointed to collection of data based on monthly income groups which were separated into four data categories; Jobs by Type of worker, Occupational Group, Administrative area and Industrial group.
Occupational groups included Legislators, senior officials and managers, Professionals, Technicians and associate professionals, Clerks, Service workers (including defence force) and shop sales workers, Agricultural, forestry and fishery workers, Craft and related workers, Plant and machine operators and assemblers, Elementary occupations and unstated occupations.
According to the 2018 figures, the last year with completed data listed for median salaries, the monthly salaries for these groups ranged from $3500 per month (earned by elementary occupations) to $10000 (professionals).
Dr. Attzs agreed that there was a need for data to properly assess the challenges faced by the various economic groups. She however noted that the government had announced plans to get this data in 2023.
She said, “The fact is that we do not have current data on what income levels define TT’s “middle class”. The Household Budgetary Survey and Survey of Living Conditions about which the Minister of Finance spoke in his presentation of Budget 2023, will hopefully be completed and provide greater clarity on what income levels may be associated with the “middle class”. These are important data to highlight what is the impact of the current economic circumstances on quality of life.”
She continued, “If we accept that the “middle class” are those who earn enough income to enjoy a decent standard of living, then it is important to know how the shocks of the past two years and the rising cost of living are impacting on such persons and whether the middle class is increasing or shrinking.”
Dr Attzs said it was important to have a healthy middle class, particularly if the goal is to revitalise an economy following the pandemic.
She said, “From a development perspective, the objective should be to grow the middle class so that their income and expenditure acts as a fillip to stimulate the economy - if middle-class families have difficulty buying goods and services then there’s a negative ripple effect throughout the economy. Not to exclude the working poor, it is equally important to know how they also are faring so that the risk of them being pushed into poverty is mitigated and to allow the myriad of social assistance programmes to be targeted to those most in need.”
New Budgetary Survey next year:
The CSO website confirmed plans for the Household Budgetary Survey, stating, “The next HBS is scheduled to take place in 2023. However, for the first time in Trinidad and Tobago, The Household Budget Survey would be combined with The Survey of Living Conditions. The both surveys would be merged in order to yield better quality expenditure data, while also providing detailed information on health, education, labour and other characteristics of living conditions.”
The last HBS survey was conducted in 2008/2009. According to that survey, the average monthly household income in Trinidad and Tobago in 2008/09 was $9,201.
Next year’s HBS is expected to be conducted from January 2023 to December 2023, the CSO website stated.