Saturday, April 6, 2013

Redefining the class system

During the past week the Israeli media have been discussing what it means to be "middle class" in Israel.

This debate was sparked by our new Finance Minister, Yair Lapid, describing a meeting he had with Finance Ministry officials, in which he told them to discuss the financial situation of a fictional middle-class family. He described the wife as a school teacher and the husband as working in high-tech. They owned a house and travelled abroad once every two years, but could not expect to be able to buy a house for any of their three children.

At first, the discussion focused on the sum he mentioned as representing the income of a middle-class couple, NIS 20,000 per month. If this referred to their net income, this would actually be the income of a couple in the 9th decile, rather than a couple around the 5th decile, which would perhaps be more "middle". Even if this was the couple's pre-tax income, they would still probably be quite a bit above the average income.

I should explain that here in Israel the statistics tend to divide the population into deciles, groups of 10%, and then describe the income of each of these ranks.

In Israel, class refers largely to people's economic status, though other factors such as educational level and cultural interests, are also taken into account. There are other categorizations, such as degree of religious observance and ethnic background, which are used to describe groups within the Israeli population, but these are not necessarily linked to class, and the wealthy among any category could be considered upper class thanks to their money alone.

The current discussion focused on the Minister's policy of seeking to help the "middle class", described as professionals who pay their taxes and contribute to society (also by serving in the army and reserve forces), but still struggle to reach financial security. However, so many different people consider themselves middle class that this has created confusion. Those around the 4th-6th income deciles, a group you would expect to represent the middle of society as judged by income level, are actually relatively poor, and in many cases will never afford their own home.

The sort of family Minister Lapid described represents a wide segments of society, probably most of the 7th-9th deciles. These people indeed earn more than the average wage and have more security than those below them. However, there is a growing sense that even such incomes are no guarantee of financial security, and that members of this group are less well-off in various ways than people who were in this group 20 or 30 years ago.

It is well-known that Israel has one of the highest levels of inequality in the OECD, with a small minority of very wealthy people who pay relatively low tax rates, and a larger proportion of low income families compared with other countries. There are various social reasons for this, and attempts are being made to increase the participation in the workforce of various groups. However, recent governments have not been attempting to raise the tax contribution of the wealthiest group, and the media often focus attention on CEO's earning tens or over one hundred times the wages of the average workers within their companies.

All of these factors make it difficult to create a consistent definition of "middle class" in Israel, and it seems that this is also true in other countries. The assumption that the population is divided into "working class" people with unskilled jobs and low educational and cultural levels, "middle class" people with professional jobs and higher educational levels, who are consumers of culture and can afford things like holidays, and "upper class" people who have family wealth and connections with the political elite, seems to be becoming less relevant.

In particular, there are fewer people who fit the definition of "working class" in our changing economy, and the middle class now contains a wider range of different sub-groups.

A recent BBC survey in the UK has redefined the British class system into seven groups. While these groups would not apply here in Israel, they seem to use interesting criteria, such as the sort of friends people have and their use of social media, along with their cultural interests. It would be interesting to see this sort of research conducted in Israel.

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