In a democratic society, it is the middle class that scrutinizes the elected authorities and demands accountability. The larger the middle class, the more accessible are social services such as education and health, and the less corruption and bribery of government officials is prevalent. In a country where the middle class is under siege and the income gap is too big, the society becomes more divided and conflicts escalate.
In recent decades, industrialization shifted from the developed countries to the developing ones, and the economy of these regions grew steadily due to the rapid growth of the Chinese economy. As a country’s economy grows, the middle class, which is the main consumer, thrives and as the market increases and diversifies, new jobs emerge. Thus, the increased investment and savings formation allow the middle class to drive the economic growth.
Who is the middle class?
Although economists have emphasized the role and involvement of the middle class in social development, there is no consensus so far as to who exactly comprises the middle class.
For example, the Brookings Institution claims that the middle class earns between $11-110 per day, as of 2016, 3.2 billion people worldwide join this group, increasing by 140 million people each year.
Another widely accepted definition of the middle class is as those whose household income, is able to pay for food, clothing, housing, education while there remains a rest amount for savings.
A citizen from a high developed country with an income below average is wealthier than a citizen from a developing country with an average income. However, the subsistence level and poverty line which is $1.90 per capita, are accounted as well. While some researchers suggest that the middle class in developing countries earn $2-13 a day, others claim $2-10, and yet another contends $10-100.
The Economic Research Institute (ERI) conducted a survey in 2014 and 2016 to determine the middle class of Mongolia. In this study, the middle class was defined as households with an annual income equal to 67-200% of the median annual income for the respective year. The survey found that in 2002, 20% were high-income households, 51% were middle-income and 29% were low-income households; in 2014, 14% were high-income households, 61% middle-income ones and 25% low-income households. Households with a median income have increased by 10% over 12 years.
It also demonstrates how household income inequality has changed. From 2002 to 2008, the number of middle-income households increased, despite the decrease in the number of high-income families while their incomes remain at the same level. But between 2008 and 2014, incomes also had risen as the number of middle-income households increased dramatically; high-income families declined while their incomes also dropped as well.
Fig. 1 Percentage of middle class in households and income
Source: ERI
And household income inequality exists not only between the rural areas and the city, but also between the capital’s districts. The number of low-income households is significantly lower in the districts closest to the center than in the suburbs.
The government is planning for a spring session on its “The Foresight 2050” plans for the next 30 years promising: “to support the employment of the population, steadily increasing household incomes, to cultivate an active creative family, to provide micro-, small and medium-sized businesses in a competitive investment environment held by a self-sufficient family and by 2050 raise middle class to 80% of population”. The document is expected to increase the size of the middle class from 16.2% today to 50% by 2030, to 70% by 2040 and to 80% by 2050. How these 16.2 % and other percentages are calculated is not clear.
Are the objectives of “The Foresight 2050” real?
In addition to measuring income, there is a tendency to determine the middle class by educational level based on the assumption that the educated part of society is more serious about making political and economical decisions. First of all, the middle class demands to be treated by the state as equals and their dignity to be respected. Being the middle class at least implies to have a job, housing, regular income, and savings.
The middle class is the basis of social stability. Currently, instead of having a quality middle-class in Mongolia, citizens are taking their chances and aiming to go abroad in any way possible. Apart from the fact that the number of people going abroad to study, work and travel is increasing dramatically, the number of permanent residents abroad is growing continuously.
Fig. 2 Number of permanent residents abroad by years
Source: National Statistics Committee, 2020
In the last ten years, the number of permanent residents abroad was the lowest at 6768 in 2015 and the highest at 19470 in 2019. About 200 thousand people abroad (Consulate of the Ministry of Foreign Affairs), of which 120 thousand went to live as permanent. Despite having a job in Mongolia, salaries do not always cover sustenance costs, and the pension is not able to cover a day’s meals. As a result, people make the choice to move. That means the middle-class is draining.
In other words, the current political and economic system in Mongolia impedes the middle-class household’s ability to live well and detracts their hope for the future. Citizens are fleeing a politically oligarchic, clientelism system. After obtaining an education, people are going to developed countries such as South Korea and Australia to work in blue-collar jobs, attaining a much higher income and recognition than in Mongolia.
First of all, in order to stop the middle-class drain, it is necessary to abolish the political clientelist system. Then a radical improvement and upgrade to our education system is needed. Lately, the Mongolian government has been idolizing the elitist education. For instance, by providing scholarships to students who have enrolled to the Top 100 Universities in the world, and by funding (variable costs) private schools with high tuition fees with the public budget when the investment in public schools is clearly insufficient. In the long term, it is more profitable to enable 200 or 300 suburban children to learn as a group of 25 students in one classroom than to fund 2 or 3 children’s study at Harvard or Stanford. In public schools there are now 50 students crammed into one classroom. Therefore, it is important to abandon the above-mentioned policy which promotes social inequalities and it is vital that the government focuses to improve the public education which will have a major impact on long-term economic growth and the strengthen the responsible democratic political system.
2020.02.13
Trans. by Riya.T and Sungerel.U