Friday, March 27, 2015

Median Incomes and Middle Class Bangladeshis, Indians and Pakistanis

Pakistan's per capita median income is $73.26 per month in terms of 2005 PPP (purchasing poverty parity) US dollars as of 2010. It is higher than India's $60.48 and Bangladesh's $51.67 per capita per month, according to the World Bank.

Source: World Bank


Median income is the amount that divides the income distribution into two equal groups, half having income above that amount, and half having income below that amount. Mean income (average) is the amount obtained by dividing the total aggregate income of a country by the number of people in that country.  A country's median income is a better indicator than the average income to gauge how a population is faring economically.

Median income also helps assess the size of the middle class in India, Pakistan and Bangladesh based on the definition used by Asian Development Bank and World Bank. Both of these institutions define middle class as those earning $2 or more per capita per day in terms of 2005 PPP US$.

Pakistan median income of $73.26 per month translates into $2.44 per day, higher than $2 per day income level used by ADB and WB to define middle class. It means that more than 50% of Pakistanis are in middle class. India's $60.48 per month puts 50% of Indians in middle class while Bangladesh's $51.67 means fewer than 50% of Bangladeshis are in middle class.

Source: Asian Development Bank 2010



A 2010 Asian Development Bank's report titled "Asia's Emerging Middle Class: Past,. Present, And Future" reported Pakistan's middle class size as 40.12%  of the country's population as of 2005.  It also estimated Bangladesh's middle class at 20.25% and India's at 25.05% of their total populations.

Source: Institute of Business Administration Karachi Pakistan


More recently, research conducted by Dr. Jawaid Abdul Ghani of Karachi School of Business and Leadership (KSBL) concluded that Pakistan's middle class rose to 55% of the country's population in 2010.

Even though Pakistan's GDP growth has been relatively low compared to India and Bangladesh in recent years, the country's middle class has continued to grow rapidly. It's explained as follows: It's not the overall GDP growth and average per capita income increases but the median per capita income growth that tells you how the GDP gains are shared among the population.

Data shows that economic gains in Pakistan are shared better than India and Bangladesh because of lower inequality. Income poverty rate (those below $1.25 per capita per day) in India is 33% and Bangladesh 43% versus 13% in Pakistan, according to WB data on povcalNet.  Gini Index for India is 33, Pakistan 29 and Bangladesh 32, indicating that Pakistan has lower inequality.

Related Links:

Haq's Musings

Pakistan's Middle Class Estimated at 55% of Population

Comparing Bangladesh and Pakistan in 2012

India-Pakistan Comparison in 2014

Pakistan's Official GDP Figures Ignore Booming FMCG Sector

Musharraf Accelerated Human and Economic Development in Pakistan

Pakistan's Growing Middle Class

Pakistan's GDP Grossly Under-estimated; Shares Highly Undervalued

Fast Moving Consumer Goods Sector in Pakistan

3G-4G Roll-out in Pakistan



Mobile Money Revolution in Pakistan

7 comments:

Riaz Haq said...

Population below $2 a day is the percentage of the population living on less than $2.00 a day at 2005 international prices.

World Bank data on percent of population living on less than $2 a day per capita:

Bangladesh 2010 76.5%

India 2012 59.2%

Pakistan 2011 50.7%

http://data.worldbank.org/indicator/SI.POV.2DAY

Riaz Haq said...

Shahid Burki Op Ed in Express Tribune:

I don’t have a great deal of confidence in the numbers the government in Pakistan puts out about the economy and the state of society. I believe that the estimates of the GDP and its recent growth don’t reflect the real picture: both the size of the economy and its rate of increase are underestimated. Since the country has not held a population census for 17 years, we are proceeding on guesswork about the size of the population, its regional distribution, the size of the urban population and the rate at which it is increasing. There are no reliable estimates of the distribution of income among different segments of the population. The claim that Pakistan has the lowest income inequality in the South Asian region is hard to accept. Sometimes, it is better to trust one’s eyes than official data. The levels of consumption one generally sees in the large cities suggest significant inequality.

Economists generally consider three forms of disparity: wealth (wealth inequality), income (income inequality), and consumption (consumption inequality). Of these, income inequality is the most frequently discussed subject. It has two important aspects: interpersonal and regional inequalities. The issue of economic inequality leads to concerns about equity, equality of outcome, and equality of opportunity.

There was considerable and an excited discussion of the causes of inequality in the West following the publication of the French economist Thomas Piketty’s book, Capitalism in the 21st Century. Institutions such as the IMF and the World Bank have also given a great deal of attention to the subject. According to a June 2015 report of the IMF, “widening income inequality is the defining challenge of our time. In advanced economies, the gap between the rich and poor is at its highest level in decades. Inequality trends have been more mixed in emerging markets and developing countries, with some countries experiencing declining inequality, but pervasive inequities in access to education, health care, and finance remain.”

The interest in the subject of equality is not only on moral grounds; as social scientists began to emphasise decades ago, perception of discrimination that leads to inequality can have diverse consequences. The economist Albert O Hirschman pointed out in his book, Exit, Voice and Loyalty published decades ago, that unfair treatment on the part of a segment of the population can lead to one of three reactions: those unhappy with their situation can choose to stay within the system hoping that corrections will be made from within; or they may raise their voice, drawing attention to their situation; or they may exit from the system altogether. We have seen examples of all three in our own history.
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What are the many reasons for persistent inequality in the country? In neo-classical economics, income inequality is the result of the differences in value added by labour, capital and land. Within labour income, distribution is due to differences in value added by different categories of workers. As Piketty observed on the basis of data collected and investigated from some of the more advanced countries, the return on capital is much higher than from labour. Unless the state begins to tax those who earn their incomes from the use of capital and to raise resources that would increase the productivity of the poor, inequalities will continue to increase.

http://tribune.com.pk/story/935045/technology-and-inequality/

Riaz Haq said...

I did visit Pew Global and found a July 2015 report " A Global Middle Class Is More Promise than Reality".

http://www.pewglobal.org/files/2015/07/Global-Middle-Class-Report_FINAL_7-8-15.pdf

It shows the following:

Population Below $2 a day India 19.8% in 2011 down from 35.4% in 2001 vs Pakistan 18.1% in 2011 down from 33.3% in 2001

Median Daily Per Capita Income India $2.96 in 2011 up from $2.39 in 2001 vs Pakistan $2.95 in 2011 up from $2.42 2001

While median daily per capita income is about the same, Pakistan still has lower $2 a day poverty level than India.

Anyone above $2 a day is considered middle class by both ADB and World Bank definitions.

http://www.pewglobal.org/files/2015/07/Global-Middle-Class-Report_FINAL_7-8-15.pdf

Riaz Haq said...

The Median as a Better Measure of Development – and Better Than the World Bank’s Shared Prosperity
11/6/13Nancy Birdsall


In India, median consumption is $1.55 a day; that is associated with a $1.25 poverty rate of 33 percent.


Looking along the vertical axis at countries classified as low-income by the World Bank, median daily consumption per capita varies enormously: from $1.30 in Benin and Bangladesh to more than twice as much, i.e. at or close to $3 in Cameroon and Tajikistan.

Looking across the chart along the horizontal axis at about $1.50 daily median consumption per capita, the bubbles represent countries with a wide range of mean GNI or GNI per capita: Malawi, Ethiopia, and Guinea at less than $500; Pakistan, Senegal and Nigeria at about $1000; East Timor at almost $2,000 per capita; Swaziland at almost $3,000; and Angola at almost $4,000 (where the $1.25 poverty rate is 43 percent).

http://www.cgdev.org/blog/median-better-measure-development-%E2%80%93-and-better-world-bank%E2%80%99s-shared-prosperity

Riaz Haq said...

Here are 2014 median income/consumption estimates of countries around the world released by he Centre for Global Development:

https://www.givingwhatwecan.org/post/2016/05/giving-and-global-inequality/


Pakistan: Median Income per capita: $1204.50, Median Household Income: $6,022.50 Mean (Average) per capita $4,811.31

India Rural: Median per capita $930.75 Median Household $4,653.75 Mean (Average) per capita $5,700.72

India Urban: Median per capita $1295.75 Median Household $6,478.75 Mean(Average) per capita: $5,700.72


http://www.cgdev.org/blog/world-bank-poverty-statistics-lack-median-income-data-so-we-filled-gap-ourselves-download-available

Riaz Haq said...

This Is Just How Unequal is #India with top 1% Owning 58% of Wealth. #Modi #BJP http://blogs.wsj.com/indiarealtime/2017/01/17/this-is-just-how-unequal-india-is/ … via @WSJIndia

The richest 1% of Indians hold 58% of the country’s total wealth, according to Oxfam India.

The stark inequality in India is worse than the global data put out by the organization, which show that the richest 1% have more than 50% of the total world wealth, Oxfam said.

The anti-poverty advocacy group released a report, “An Economy for the 99%” this week to coincide with the meeting of some of the world’s wealthiest business leaders and most powerful policymakers in Davos, Switzerland.

It said recently improved data on the distribution of wealth, particularly in countries like India and China, indicate that the poorest half of the world has less wealth was previously thought. Oxfam singled out India repeatedly in the report.

It said that companies are increasingly driven to pay higher returns to their shareholders. In India, the amount of profits corporations share with shareholders is as high as 50% and growing rapidly, the report said.

The report said the annual share dividends paid by from Zara’s parent company to Amancio Ortega – the world’s second richest man – are equal to around 800,000 times the annual wage of a worker employed by a garment factory in India.

Oxfam said that the combined wealth of India’s 57 billionaires is equivalent to that of the country’s poorest 70%.

“India is hitting the global headlines for many reasons, but one of them is for being one of the most unequal countries in the world with a very high and sharply rising concentration of income and wealth,” Nisha Agarwal, chief executive of Oxfam said in a statement.

Oxfam said India should introduce an inheritance tax and raise its wealth levies as well as increasing public spending on health and education. It said it should end the era of tax havens and crack down on rich people and corporations avoiding tax.

Riaz Haq said...

World Happiness 2017 ranks Pakistan well ahead of the rest of SAARC nations. Nepal's at 99, Bhutan at 97, Bangladesh at 110, Sri Lanka at 120, India at 122 and Afghanistan at 141 among 155 nations surveyed.


http://www.hindustantimes.com/india-news/norway-named-happiest-country-in-the-world-india-among-the-saddest/story-zxfv1HSduc5skZRV8saH1H.html


Norway moved from No. 4 to the top spot in the report’s rankings, which combine economic, health and polling data compiled by economists that are averaged over three years from 2014 to 2016. Norway edged past previous champ Denmark, which fell to second. Iceland, Switzerland and Finland round out the top 5.

Studying happiness may seem frivolous, but serious academics have long been calling for more testing about people’s emotional well-being, especially in the United States. In 2013, the National Academy of Sciences issued a report recommending that federal statistics and surveys, which normally deal with income, spending, health and housing, include a few extra questions on happiness because it would lead to better policy that affects people’s lives.

The entire top ten were wealthier developed nations. Yet money is not the only ingredient in the recipe for happiness, the report said.

In fact, among the wealthier countries the differences in happiness levels had a lot to do with “differences in mental health, physical health and personal relationships: the biggest single source of misery is mental illness,” the report said.

“Income differences matter more in poorer countries, but even their mental illness is a major source of misery,” it added.

Another major country, China, has made major economic strides in recent years. But its people are not happier than 25 years ago, it found.

The United States meanwhile slipped to the number 14 spot due to less social support and greater corruption; those very factors play into why Nordic countries fare better on this scale of smiles.

“What works in the Nordic countries is a sense of community and understanding in the common good,” said Meik Wiking, chief executive officer of the Happiness Research Institute in Copenhagen, who wasn’t part of the global scientific study that came out with the rankings.

The rankings are based on gross domestic product per person, healthy life expectancy with four factors from global surveys. In those surveys, people give scores from 1 to 10 on how much social support they feel they have if something goes wrong, their freedom to make their own life choices, their sense of how corrupt their society is and how generous they are.


http://worldhappiness.report/


https://s3.amazonaws.com/sdsn-whr2017/HR17_3-20-17.pdf