Daily Times

On October 31st, a panel of development policy researchers convened at the Urban Institute in Washington D.C. to discuss Pakistan’s emerging middle class. The event was co-hosted by the Urban Institute and the Consortium for Development Policy Research, a Lahore-based research dissemination organization. It was attended by students, researchers, journalists, and staff from the World Bank, IMF, USAID, and other international development agencies.

The event began with a discussion of key features that characterize the middle class globally. Homi Kharas, Co-Director and Senior Fellow of the Brookings Institution’s Global Economy and Development program, defined the middle class conceptually as a segment of people who are afforded the ability to make new kinds of choices with fewer budgetary constraints. Kharas added that given Pakistan’s rate of growth, structural transformations to the economy such as the creation of a middle class are to be expected. At the current rate of middle class growth, he said that Pakistan’s middle class can be projected to represent two-thirds of the population by 2030. This would amount to 160 million people, giving Pakistan the 15th largest middle class in the World.

At its current rate of growth, Pakistan’s middle class can be projected to represent two-thirds of the population by 2030. This would amount to 160 million people, giving Pakistan the 15th largest middle class in the world

Kharas also noted problems with the data used for these projections. He said there are two measures used to track Pakistan’s middle class: National Income accounts and household consumption surveys. These two data sources have not yet converged, providing a very different picture of wealth depending on which one is used. National Income Accounts show a much larger middle class than household consumption surveys.

The discussion then moved to a more granular look at the data used to measure the middle class. Ghazala Mansuri, Lead Economist at the World Bank’s Poverty Reduction and Equity Group, noted that statistically, Pakistan’s middle class is ill-defined. She attempted to resolve the difference in the household survey and national income accounts methods of arriving at the size of the middle class. She also emphasized the rural-urban differences in the size of the middle class, and talked about the challenges of poor service delivery for the rural middle class. She noted that while globally, the middle class is expected to continue using public services, their rise in Pakistan has not resulted in a marked improvement in the quality of public service delivery.

The middle class’s effect on education was then discussed, specifically on increasing girls’ enrollment in secondary and higher education and the resulting effect on women’s labor force participation. Reehana Raza, Senior Research Associate at the Urban Institute, pointed out that although an increase in female enrollment in high school and college has coincided with the rise of the middle class, it has not translated into a significant increase in women’s employment.

The final presentation was delivered by Ali Cheema, Senior Research Fellow at the Institute of Development and Economic Alternatives (IDEAS), who discussed whether the rise of the middle class has led to an increase in women’s political participation. Before sharing insights from his research, he emphasized that the rise of the middle class in Pakistan has been an urban phenomenon. He then summarized his work on women’s election turnout and political attitudes in Lahore, which shows that the gender gap in political participation has actually worsened in urban areas. According to Cheema, this is because patriarchal norms within political campaigns mobilize male voters far more than women. He added that even if women had the permission to vote from their families, political parties’ relative lack of enthusiasm for engaging women led to the perception that they were invisible in the electoral process. Cheema concluded that to better understand the gender gap in political participation, structural issues within the political process must be further studied.

The panel then fielded questions from the audience. The ensuing discussion focused on three themes: Sustaining Pakistan’s middle class, delivering services for the middle class, and the importance of increasing women’s labor force participation.

Homi Kharas pointed to service sector jobs as the key engine for sustaining middle class growth. This is especially important as the manufacturing sector continues to stagnate as a job-creating industry. However, the services sector will only drive growth of the middle class if services are of high enough quality to compete in global markets. This level of quality is currently not observed in Pakistan.

Ghazal Mansuri noted that as the middle class grows, it will have increasing demands for services such as public transport, education, and healthcare. She emphasized that the focus on the middle class as an urban phenomenon should not lead to the neglect of service delivery in the rural areas, where more than half of Pakistanis currently live. She also lamented the poor state of service delivery in Karachi, which has witnessed a rapid growth of its middle class. Mansuri stressed that improving the quality of public services in both urban and rural areas must be central government policies that help the middle class realize its aspirations.

Finally, Kharas highlighted the problem of low women’s labor force participation in Pakistan as a distinguishing feature of its middle class relative to the global middle class. Women’s labor force participation in Pakistan remains under 30 percent despite the growth of the middle class. To further sustain and unlock the contributions of the middle class to Pakistan’s economy, Kharas argued that it is necessary to increase women’s employment so they can provide a second source of income to households. He added that this was how the transition to middle-income country status was made in East Asia.

As the middle class grows, it will have increasing demands for services such as public transport, education, and healthcare

Published in Daily Times, November 11^th 2017.