How the Middle Class is Coping in Jordan

The richest 30 percent in Jordan own 60 percent of total income

Ibrahim Saif and Yasmeen Tabbaa

Ibrahim Saif, Director of the Centre for Strategic Studies (University of Jordan), Yasmeen Tabbaa, Research Assistant at the Centre for Strategic Studies (University of Jordan), finished a  study on trends and shifts in the socio-economic conditions of the middle class in a period of economic growth and structural adjustment. Saif and Tabbaa's paper firstly identifies the parameters of the middle class in Jordan, and then explores changes in household consumption patterns among Jordanian families in order to monitor how economic reform has impacted social mobility and the share of the middle class over a period of five  years of economic growth. The paper concludes that the middle-middle class has indeed shrunk so that it has either merged with the working class or the upper middle class, leading to increased polarisation in society.

The perception of a shrinking middle class in Jordan has increased over recent years. In the 1970’s and 1980’s Jordan witnessed the growth of ‘the middle classes’ as a result of the growth in public sector employment, the development of a services sector, higher rates of education and the increasing number of Jordanians working in the Gulf.  This dynamic has changed since the economic crisis of 1989 and the ensuing economic reforms program.  This programme has succeeded in stabilizing its economy; it included embarking on a process of trade and financial liberalization, privatization and achieved economic growth at an annual average of 6 percent since 2004. However, despite these results, the ‘middle classes’ did not expand and society has been mostly characterised by large income distribution gaps.  

As a result of these reforms, a new social contract emerged in Jordan that emphasised increased dependence on domestic taxation and a retreat of state welfare as a condition of political legitimacy. Official unemployment rates are reported at 14.8 percent.  The highest unemployment rate is among young people aged 20 to 24 years old, estimated at 28.7 percent. Poverty levels also remained persistently high, ranging between 15 and 30 percent of the population falling below the poverty line.

In specifically focusing on stimulating growth, coupled with specific poverty reduction programmes that target the poor in the hope of a trickle-down effect, there was actually little emphasis on tackling inequality. It has become apparent that equitable distribution will not naturally occur. What is required then is a development strategy that seeks to actively couple economic growth with inequality-reducing policies through job creation, taxation policy, minimum wage policies, labour protection and human capital enhancement. Economic growth must be viewed as the means by which inequality is reduced, rather than the end goal.

Using employment relations in order to determine the middle class was insufficient, mainly due to the minimal share of wages as a percentage of total income, the presence of family support structures and high dependency ratios. Therefore, levels of per capita consumption were used to identify ten consumption groups. In doing so, it was relatively easy to find the determinants of the upper-middle class and the lower middle class; however the middle-middle class proved elusive. This group extends from the self-employed craft workers with meagre incomes up to professionals in groups seven, eight and nine and high-salaried managers in the top ten percent. This may mean that the middle class has indeed shrunk so that it has either merged with the working class or the upper middle class, meaning increased social polarisation.

Regarding income distribution  according to the Income and House Hold Surveys conducted by the Department of Statistics,  the study finds that the richest 30 percent own 60 percent of total income and the middle 40 percent own 30 percent of total income. The richest two percent of the population own 13 percent of total income, while the poorest 30 percent own 11 percent.

The pattern of annual household expenditures among the groups clearly corresponds with income distribution, whereby the top 30 percent earn more, spend more and own the highest share of total income. Only the poorest and the richest 10 percent increased their share of total income by 0.08 percent and 1.25 percent respectively. The most significant declines in share of total income took place in the middle 40 percent at an average decline of 0.18 percent. The richest two percent of the population increased their per capita consumption from 2002 to 2006 by an average of JD 2000; almost four folds the maximum per capita consumption of the poorest 10 percent of the population in 2006. 

The study shows that expenditure on food as a percentage of total expenditures declined for all groups, and that highest rise in expenditure occurred on clothing. These are signs of improving socioeconomic situations for households. However, expenditure on culture, leisure and sports declined for all groups. This reflects the shrinking amount of remaining expendable income for households to fulfil other aspects of their personal welfare. Households across the classes have been hit by rising inflation, which has risen from 1.6 percent in 2002 to 6.25 in 2006. The new wave of inflation (2007-8) and the removal of oil subsidies in 2008 are expected to further erode expendable income for non-essential goods. 

Expenditure on education explicitly reflects income disparities, whereby the tenth decile spends fifteen times more on education than the first decile and almost two folds the amount spent by the ninth decile. Implications for mass social mobility are almost completely predetermined in light of such a structure. Rather than providing the means for social mobility, the educational system is reproducing the same inequalities when only the children of richer families are provided with a high quality of education. There is dire need for an improvement in the quality of public education in order to increases the chances for intergenerational upward social mobility.

What is most evident is that there has been a decline in dependency on employment as a source of income among the middle classes. Wages are clearly insufficient, and cannot be called 'living wages' i.e. wages and salaries that cover all living costs. This group has suffered a squeeze in terms of declining assets and rents, leading them to seek other sources of income through transfers and self-employment. The decline in asset ownership shows that the middle classes may have also resorted to their savings and wealth in order to cover costs, meaning that they have depleted a future safety net, and may suffer more in the face of further economic difficulties in the near future.