Thursday, August 09, 2012

The Middle Class: The Key to Our Nation’s Progress

There were many talks about the middle class before---who are they and where are they found? In the Philippine settings, identifying this sector of our society is never an easy task for this idiom, which has found its root in western economic theories, does not easily apply to our own principalities.

Who are the members of our middle class? Where are they? How can we identify them?

Generally, the determining factor in ascertaining the middle level of our society is primarily the earning capacity of a certain group of people and secondarily their social mindset. In a society like us, where for many centuries we were in virtual serfdom, we are mainly a nation of the rich on one side and the rest of the poor in the other. There is nothing much in between. We had at many times in the past a classless society.

We must only remember that even as we speak and while we kept again and again to break away from this stranglehold of unfair distribution of wealth in our nation, we have not effectively evolved from the virtual serfdom society that we have inherited from our Spanish colonizers of many centuries ago and if there were changes, they came in stifling trickles. We tried our best to escape this ugly past by adopting two versions of comprehensive land reform programs, one during the Marcs years and one in the freedom government of President Corazon Aquino, yet we are still presently hounded by the sad state of gregarious amount of land in the hands of a meager few.

I remember too well the lasting images that I have seen in the not too distant movie “Far and Away” which featured Tom Cruise and Nicole Kidman as protagonists and chronicles in a fictitious manner the onset of emigrants in a time of the birth of a nation, the land of milk and honey, America. Irish settlers and some other nationalities, were lined up in a multitude by the authorities with their horses and cavalcades readying themselves in a mad rush towards a wide open plains to which each family unit was given a white flag to identify the territory they have gotten for themselves. As they rush along towards more favorable plains, the very site that they could plunge their flags to the soft ground would immediately be theirs and theirs alone for eternity as long as they hold on to it and nobody, not even the State could take it away from them. The actors who took part in the rushing multitude of men, women and children perhaps captured so well the elation and joy of many American settlers who became part of such exercise, when as each flag was trusted to the ground, tears would roll down from their eyes and relief was all too apparent on their faces. The movie made me appreciate all the more the power of land and its role as the sustainer of life. What I saw in the movie was perhaps the most singular reason to the astounding progress that America has attained even up to the present, especially in the 20th century.

The government in America of past centuries had made sure that each men and women of their society became able to produce by themselves and become contributors to their young nation’s productivity. In short, the ordinary man was empowered with an economic capacity that was best brought for by the ownership of land. Thereon, everyone was capacitated to etched their own living and with money in their pockets, they had become voracious buyers that for every garment and T-Model Ford vehicles manufactured in Industrial Age America, a horde of middle class have the money to consume them. When there are many potential buyers who waits in the by side, bloating with consumer power, any product or material put on sale will surely find their own buyers and thereon, more and more factories would rise from the ground to produce more and more products with waiting consumers ready to pounce and more and more hands are hired to man these rising industries. The end effect of this would be more and more money in the hands of a growing middle class, consuming perniciously the produce of the nation’s productivity and thereon sustaining the economic cycle.

In the 1990’s, the economic world were parading the term “consumer power” and it is consumer power of the population that becomes one of the primary motivations for any foreign investor that aims to put money in any developing nation. We have seen the rise of new tiger economies and the most recent among them are Malaysia and Thailand. One of the veritable characteristic of their economies was a better than fair consumer appetite. It is mainly an illusion or perhaps a passing exception to think that multinational companies are putting shop in our shores just because they just want to manufacture products aimed at other markets. They come thinking partly that whatever they produce, the local market is mature enough to help consume them. This is the main reason for China’s economic juggernaut. American companies started trooping to the star of the orient as early as the late 80’s initially because they were staring at one billion possible drinkers of softdrinks and one billion eaters of burgers and one billion possible drivers of Chevrolets. Cheap and skilled labor in that territory of course remains a great come-on for companies who aims to save on overhead costs. A bludgeoning local consumer made it easier for many multinationals to decide on locating their businesses in China.

How we always go back to that most basic economic law of supply and demand even in a world of gargantuan complications. As the demand grows, supply rises in collateral amount and still remains that when supply overlaps demand, prices would certainly go down. Increase in the unit of supply certainly generates the expectation that more economic activity is done and when economic activity is humming with enough fervor, more labor is needed and employment statistics improved greatly. Aside from this, resources are much more sought after, especially raw materials one gets from low-end sectors like farmers and sea traders and therefore the GDP ticks at a higher scale.

We must now see more closely at the “demand factor”, for in my view, demand is the key to the upswings in the supply and demand curve. We must create demand if need be and every economic manager should be looking at this x-factor in the equation of things. I have no professional training in economics except for a couple of economics subjects that I was forced-fed in college. My only wish is that creating demand is unlike creating a bridge when there is no river or lake. (I remember that joke about a politician who had promised his constituents in an election campaign that he would build a bridge in their locality while addressing a crowd. When someone in the crowd blurted out that there was no river in their place, the politician then declared rather pompously that in that case, he will build a river.) What I mean is that, does it take a genius to find out the way to finding demand blissfulness?

My view on the matter of supply and demand is more of that of a layman’s and yet I believe that the ordinary eye can at certain point see some complicated perspectives with a clearer vista.

This is where my soliloquy on the middle class comes in. We must keep on building and rebuilding our middle class which should compose every man and woman who puts his or her hand in labor, as apart from the excessively rich who doesn’t need to sweat anymore to make their life uplifted and from the extremely poor who at most times do not toil anymore for lack of capital or capacity to make a living. This is the Philippine middle class and almost every one of us belongs to this class—the farmer and the fishermen, the lawyer and doctors, the middle politicians, the tricycle drivers, teachers and government workers, the sellers of food in the market and of everyday gadgets in city sidewalks, the restaurateurs and those who are paid to act as clowns in many children’s’ parties, the cotton candy maker, the cigarette peddlers, the media men in some local news station, the cook and the chef, the athlete who are paid a measly allowance by the state, the radio announcer, the factory workers, the planters of camotes and cassavas, the harvesters of coconuts and the struggling artist. You name it and we got it.

We need to find a way on how to harness the potential power of the middle class. Like water rushing from a cliff, the hidden energy is just there to be discovered.

The most practical mode of developing the consumer power of the middle class is by encouraging some growth in their income and benefits. This may make our capitalists and our economic planners squirm even while they sleep yet there is no better alternative to this. It is one of those challenges that connote some sacrifices and many hardships especially in the initial stages. Our economic managers would look at this view with great disfavor since raising minimum wage so sharply would make us less competitive with our other Asian neighbors in attracting foreign investments. As a countermeasure to this apprehension, I suggest that the key towards higher take home pays of the labor sector is not by legislating a wage increase all too often (which would scare away foreign capital) but by enacting or initiating a selective and pro-active compensation scheme for the private sector where the increases would come by way of bonuses and supplemental benefits like for example such items as productivity pay and performance bonuses. The government could offer tax rebates and credits to companies who adhere to the payments of particular supplemental wages and afford them major discounts in importing duties and such other similar rewards. In this manner, the minimum wage is not disturb by sharp increases and only companies whose net incomes are in the upswing are more inclined to raise the level of income of their workers. So in lieu of a legislated wage increase, the state could enact a pro-active scheme where the pay of the workers is supplemented not by direct wage increases but by an assortment of benefits. Like for example, a company with substantial financial success could offer their workers benefits like monthly supply of a sack of rice or scholarships for the workers’ dependents. This manner of compensation, although not in terms of wage increases, would certainly alleviate the plight of our workers and increases their buying capacity.

The business world needs buyers and we can develop many more aggressive buyers through our laborers, the soul of the middle class. This is the ideal cycle of a healthy economy and not a cycle where the fruits of a nation’s economic upswing are stagnated in the hands of the few who stashes profits into some Swiss bank account. As a result, the profits gained do not redound to more resources poured into the economy by way of generated investments and higher benefits for labor. Earnings should be rolled over by putting them back into the capital market and one of the capital expenses are labor expenses.

In corporate and financial laws, companies are prohibited from retaining more than enough earnings in order to evade the circumstances where companies hide their true earning numbers by secluding a great portion of their income as retained earnings for research or development. Retaining too much earnings is considered in fraud of stockholders as well as of creditors. In the same breath, although not as prohibited, if many capitalists retain their private earnings by not distributing them back into the economy and instead hide them away in some foreign bank accounts, this is tantamount to economic sabotage where they could be acting as if they are leeches just out there to fattened themselves and run away when they have siphoned already more than enough blood. This is like a hit-and run in broad daylight.

When any growth in economy does not redound to a more uplifted living standard for our laborers, it becomes meaningless in the general scheme of things but is merely appreciated by the few who have capital in their hands.

Another mode of harnessing the consuming potential of the middle class is by a government-led widespread capacitating program by penetrating the root bases of our society—the rural dwellers and the urban poor—and instructing them on various livelihood activities. This is actually being done by the state even as we speak through the Cooperative Development Authority (CDA) and through many other agencies, at many times in coordination with NGOs and international organizations like the World Bank and JAICA. This particular effort by the state should need to be more energized and spread out.

In any sense, we must invoke a fairer social justice in the distribution of our nation’s wealth in order that we reach the next level of industrialization. An economy without a powerful middle class would lack the instigating factors that could generate more and more business activity and growth is slow if not in a stand still. Our capitalists should begin to trust our economy and not keep on testing the water where they only shell out their money when they have ultimate certainty of return.

The cycle that we see the most fair is as simple as this: when the laborers and many other members of our middle class begin to have more than sufficient income, they begin to buy more cigarettes and beer and electronic appliances and toys and fancy garments and would begin to eat more in fastfood centers So we ask, isn’t it the capitalists themselves who will reap the fruits of a middle class with a vast consumer power? The answer is of course a resounding yes.
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15 comments:

  1. I think my family is still below the middle class. We don't even own a car or property right now.

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  2. Wow, this is very extensive. The middle class really do pay the highest taxes!

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  3. We have to change our mindset of being merely consumers if we would like to move up. We have to take risks and be entrepreneurs too, so that more economic activity would be generated.

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  4. i believe that the money is in the business not employment. so, increase of minimum wage for me doesnt really help as the price of necessities also increases. Filipinos have the mindset to be workers/employees.

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  5. I believe in hard work.I came to a family who value money so much .My parents worked hard to give us education so we wont be consider as poor.Then after school ,we aimed for more, own business and that is it.Some people blame the puberty to government,which is just an excuse. Work harder, set your goal, go for it.

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  6. @ Archie : That's the case, we could not have exact classification, but statistician classify through income the middle class, the middle income families, earning about 100,000 per year to about 300,000...Try reading this link http://mb.com.ph/articles/358350/middle-class

    @ Rizza : Yes, in America they're touted to be the main moving force in the economy there...

    @ maspaborito: I must agree with you. The economy is not merely a two way street, it should revolve like a web of life does...

    @ Janine : Yes, in business, the potentialities is boundless, unlike periodical wages...

    @ Tess : Oh, that's just how we were also brought up Tess. We were almost in poverty when we were growing up but my parents had valued work and money too that we have learned their ways...

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  7. well written and well-researched opinionated article here.

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  8. This comment has been removed by a blog administrator.

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  9. Thanks for the appreciation bayenmd :-)

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  10. I wonder how many percentage of our population belong to this category when majority of the Filipinos are considered poor. Can they still make an impact to our economy?

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  11. I think it is the middle class who gets affected most by the daily nuances of the economy. This is the group that has to make the biggest adjustments since one factor can easily make today's necessity a luxury tomorrow.

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  12. Great Post! I must say that I belong to the middle class and Taxes really sucks! On my basic pay tax is about 20% but if I had overtimes and night differential tax is almost 30%.

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  13. its true and its is terrible, most of our earnings go to the bir :/

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  14. @ Gigi : the percentage is estimated to between 30% to 40% with poverty levels in our country about 26%, those earning 15,000 a year per family, the so-called poverty line. Then theres the lower-middle class which economists in our country hopes to be expanded, to increase consumer base growth.

    @ Teresa : It is the case Teresa, with every price fluctuation, the middle class gets to be the hardet hit.

    @ Aylin : Thanks Aylin. Yeah, taxes seem to become burdensome sometimes. I wonder it there'd be changes to be made, like deducting several necessary expenses from the gross deductible income, that way, our taxes are reduced.

    @ fashioneggplant : Yes, and we end up just hoping that it does not go waste and end up well-utilized for infrastructures and projects.

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