Brazil's New Middle Classes:
The Bright Side of the Poor
Marcelo Neri
middle class using an income-
Chart income-based classes'
past performance and forecasts
using household surveys (and
beginning).
longitudinal survey data).
Sustainability
Values & Perceptions
The sustainability of the middle
class by measuring stocks of
SECTION
based measure (only the
A preview of somewhat richer
profile of different income based
productive assets and of durable
economic classes' (current or
consumption goods (permanent
permanent) attitudes and
income) .
perceptions.
SECTION
The concept of the Brazilian
Evolution
SECTION
Concept
SECTION
Outline:
Conceptualizing
the Middle Class
absolute or relative measures?
w.r.t. each country or w.r.t. the world?
Incorporating the probability
of becoming poor or rich?
Derive it from a social welfare function?
The Relevance of
the median
GDP X Mean NHHS X Median NHHS X
10% Poorest
Real Per Capita 2003 = 100
210
206,17
190
180,78
178,4
170
165,88
150
140,69
130
151,7
127,8
127,70
110
90
2003
2004
2005
2006
2007
Fonte: IPEA a partir dos microdados da PNAD/IBGE e das Contas Nacionais
2008
2009
2010
2011
2012
Growth Rates
Quantile Regressions - Cummulative Growth Rates from 2011 to 2013
9.5%
9.5%
9.2%
9.0%
9.0%
9.0%
8.5%
9.0%
9.0%
9.2%
9.1%
9.2%
8.9%
8.6%
8.3%
8.1%
8.0%
7.8%
7.6%
8.0%
7.5%
7.2%
7.0%
6.9%
6.5%
6.2%
6.0%
0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5 0.55 0.6 0.65 0.7 0.75 0.8 0.85 0.9 0.95
Source: PME/IBGE microdata
Polarization versus Inequality
Example: Society with six people: A, B, C, D, E & F,
with respective incomes of
R$ 6, 5, 4, 3, 2 and 1.
If R$ 1 is transferred from A to C and from D to F .
Get a divided society:
R$ 5, 5, 5, 2, 2 and 2
Although less unequal, after these progressive
transfers, society has become more polarized.
Polarization and Inequality
Inequality (Gini) and Polarization (PER with alfa=1.3)
0.612
0.2700
0.26
0.604
0.61
0.596
0.26
0.27 0.26
0.60
0.60 0.60
0.588
0.580
0.2650
0.26
0.26 0.26
0.60
0.59 0.60
0.25
0.2600
0.26
0.25
0.2550
0.59
0.58
0.58
0.2500
0.25
0.572
0.25
0.57
0.57
0.564
0.56
0.556
0.2450
0.24
0.56
0.24
0.2400
0.23
0.23
0.548
0.55
0.540
0.54
1992 1993 1995 1996 1997 1998 1999 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: PNAD/IBGE microdata
0.2350
0.2300
Identification Within and Alienation Between
Groups
• Cut income distribution in groups making internal
differences within groups as small as possible &
differences between groups as large as possible.
(Theil decompositions spirit or more generally EGR)
• Initial 3 groups: 52,6 and 91 percentiles in 2002-03
• 49 and 87 percentiles in 2012
• Subdividing other groups following the same
procedure plus institutional features (official
poverty lines etc).
• Underreporting & Regional price level differences
How Much Income Inequality is
Explained by Economic Classes?
ECONOMIC CLASSES
GROUPS WITH
EQUAL SIZES
PME 2002-2003
76.71%
59.34%
PNAD 2003
79.71%
59.91%
PNAD 2009
74.29%
57.96%
POF 2008-2009
71.40%
59.29%
Source:IBGE microdata
Economic Classes Defined by Total Household Income
(calculated originally in per capita terms) (R$)
Economic
Classes
Class E
Class D
Class C
Class B
Class A
* Adjusted by POF
** in current R$ January 2014 prices
Lower
Limit
0
1254
2004
8640
11261
Upper
Limit
1254
2004
8640
11261
0
Source: PNAD/IBGE and POF/IBGE microdata
Population Pyramid and Economic
Classes 2003, 2011 and 2014
Class AB
Class C
Class DE
29.1 Mi
22.5 Mi
13.3 Mi
65.8 Mi
105.4 Mi
118 Mi
96.2 Mi
2003
63.6 Mi
2011
48.9 Mi
2014
Changes in time: Class C + 40 million people 2003-11 and + 13 million 2012-14.
Classes AB + 9.2 million people from 2003 to 2011 and + 7.7 million from 2012 to 2014.
The AB population will grow proportionally + than C : 29.3% and 11.9%, respectively.
We will talk more and more in the future about a new AB class, just as we´ve been talking, until
now, about a new C class.
Source: CPS/FGV. from microdata by PNAD/IBGE
Inequality Effect
Class Composition 1992 to 2014*
100%
AB
90%
80%
C
70%
States'
Inequality
Effect
60%
50%
D
40%
30%
20%
E
10%
0%
1992
93
94
95
Source: PNAD/IBGE microdata
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
*class growth forecasted from 2010 to 2014
11
12
13
2014
Evolution of Class ABC shares
Brazilian State Maps
Evolution of Classes
1993
1995
2014 (forecast)
% Classe ABC 1993
13.01 - 28.32
28.32 - 43.63
43.63 - 58.93
58.93 - 74.24
74.24 - 89.55
% Classe ABC 1995
13.01 - 28.32
28.32 - 43.63
43.63 - 58.93
58.93 - 74.24
74.24 - 89.55
2003
% Classe ABC 2003
13.01 - 28.32
28.32 - 43.63
43.63 - 58.93
58.93 - 74.24
74.24 - 89.55
Source: PNAD/IBGE microdata
2009
% Classe ABC 2009
13.01 - 28.32
28.32 - 43.63
43.63 - 58.93
58.93 - 74.24
74.24 - 89.55
% Classe ABC 2014
13.01 - 28.32
28.32 - 43.63
43.63 - 58.93
58.93 - 74.24
74.24 - 89.55
Consumers versus Producers:
Sustainable or Not?
The progress in the Brazilian ability to generate
income increased, according to our index, 31.2 per
cent from 2003 to 2009, and potential consumption
increased 22.59 per cent. These data reveals that
the producer’s side increased 38 per cent faster
than the consumer’s.
Probability of Transition to Below
& to Above the Median (%)
Sustainability:
Earnings Risk
Up Down
2002-03
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
PeriodTransition period
Source: Ipea. from microdata by PME/IBGE.
Public Services Quality and
Individual Perceptions
Perceptions
of the Middle Class
Economic Class
Public Services and Standard of Living Perceptions
Total Pop
by Economic Classes
Class E
Class D
Class C
Standard of Living Perceptions
Enough family income
21.70%
5.11%
10.58%
26.93%
Always consumes type of food wanted
31.39%
9.83%
19.22%
38.99%
Has special checking account
13.66%
0.97%
2.48%
13.18%
Delay in debt payments
33.15%
43.25%
39.45%
29.30%
Good overall housing conditions
49.25%
33.46%
39.86%
55.36%
Public Services Coverage and Perceived Quality
Good public transportation services
63.40%
59.81%
60.32%
64.84%
No public transportation services
25.18%
45.98%
28.55%
17.76%
Good educational services
68.96%
68.64%
66.94%
69.41%
No education services
2.70%
2.61%
2.68%
2.70%
Good health services
43.49%
39.58%
39.10%
44.70%
No health services
4.03%
5.77%
4.58%
3.14%
Good sewage services
77.48%
65.36%
71.20%
80.64%
Not covered by sewage services
36.80%
61.98%
43.77%
27.57%
Class AB
58.20%
69.24%
52.52%
16.88%
75.78%
67.86%
10.61%
72.76%
2.85%
56.39%
3.31%
86.11%
12.95%
Good quality of garbage collection services
86.09%
78.40%
82.61%
88.64%
92.79%
No garbage collection services
Violence in the Neighborhood
13.90%
31.07%
33.24%
28.87%
16.08%
33.08%
7.05%
30.76%
2.65%
31.44%
Source: POF/IBGE