Defining class in Mexico: Politicians and statisticians hunt for the middle class

Defining class in Mexico: Politicians and statisticians hunt for the middle class

Oct 12th 2013 | MEXICO CITY |From the print edition

IN THE hallowed name of the middle class, Mexico’s politicians have been doing a lot of huffing and puffing lately. The source of their indignation is the president’s plan to raise income tax on annual salaries over 500,000 pesos ($38,000) and impose value-added tax on private schooling and mortgage payments. That, the people’s representatives complain, would beat the stuffing out of ordinary, hard-working families, so they plan to spare them the tax on schooling and housing.

If only the middle class were so lucky. According to measurements by the national statistics institute (INEGI), most of its members earn nowhere near the 500,000-peso threshold, let alone send their children to private school or pay mortgages.

Defining the middle class in Mexico has become a subject of fierce debate since two pundits, Luis de la Calle and Luis Rubio, published a book last year called “Mexico: A Middle Class Society. Poor No More, Developed Not Yet”. It claimed that more than half of Mexico’s population had joined the bourgeoisie. INEGI’s statisticians were sceptical, partly because the book used access to technology as a measure of social status (“Who hasn’t seen a street-sweeper talking on his mobile phone? That doesn’t make him middle class,” as one official put it). So the institute set out to develop a new definition, not based on any preconceptions of what a middle-class household should look like.

First, INEGI looked at spending rather than income. It reckoned spending is less likely to be underreported in its household surveys, and may also incorporate information about savings and expected future earnings. Household spending, however, can be a slippery gauge of social status. It may rise in families with many children and fall among the elderly. It can be distorted by one-off events, such as illness or funerals. So INEGI focused on 17 categories of spending that are recurrent and to some extent discretionary, such as the number of rooms in a home, or outlays on chicken, education or haircuts.

This allowed INEGI to sort households into seven groups. It then analysed these using more typical variables, such as income per head, education, age, family size and type of work. The combination of the two forms of analysis allowed it to establish levels of income at which consumption patterns tend to change (the levels differ in urban and rural areas).

INEGI concluded that Mexico’s middle class, at 39% of the population, was much smaller than Messrs De la Calle and Rubio had estimated, but in keeping with the estimates of institutions like the World Bank. Moreover, middle-class Mexicans are not nearly as affluent as the politicians imagine, even if they are a lot more secure than those beneath them. Annual incomes reach only about 120,000 pesos—less than a quarter of the sum needed to enter the top tax bracket. Only 29% of the middle class have children at private school, and just 9% pay mortgages.

Politicians, in contrast, earn upwards of 1m pesos a year, which makes them almost ten times wealthier than a middle-class person as defined by INEGI. No wonder they are out of touch.