'Caught in the Middle': Why the Middle Class is Feeling the Squeeze

But first, let's answer the most basic question: Who's the middle class that we keep talking about?

India's middle class is in a bit of trouble. Job opportunities are shrinking, salary hikes are vanishing, and inflation is eating into their incomes. Unfortunately, there are no immediate signs of things getting better anytime soon.

(Photo: Aroop Mishra/The Quint)

We all know India's middle class is in a bit of trouble. Job opportunities are shrinking. Salary hikes are vanishing. And inflation is eating into their incomes. Unfortunately, there are no immediate signs of things getting better anytime soon. On my new show, Caught in the Middle, I am going to be tracking the fortunes of this middle class, speaking to experts and the people affected, and hopefully come up with some solutions.

But first, let's answer the most basic question: Who are the middle class that we keep talking about?

In the Sociological Middle

As per the income-based definition of the middle class, it comprises everyone who earns between 75 percent of the country's per capita income and twice as much.

India's per capita income is Rs 2 lakh per year. Using the same formula would tell us that anyone who earns between Rs 1.5 lakh and up to Rs 4 lakh would make up the middle class. This definition might work in advanced countries, but it is completely meaningless in India.

I like to look at the middle class as a 'sociological category' which has an economic aspect and does translate into a certain income level, but I'm not starting from that income level alone.

For me, the middle class in any capitalist society is in the middle of the capitalist class and the working class.

Whos' the Capitalist Class?

The capitalist class consists of everyone who makes a living by investing funds to produce goods and services and then sells them. They employ people to work for them, and they earn profits. That's the important thing. Their source of income is profit. This would mean business houses and families, small and medium entrepreneurs, big traders, big retailers, and relatively smaller shopkeepers.

Again, the range of income from profit can be very wide for a year—from a few lakhs to thousands of crores.

What defines them is their source of income is from capital, but also their aspirations, attitude to work, attitude towards workers, and the wealth they accumulate over a lifetime which is more than what a salaried can.

Who's the Working Class?

On the other end of this are the working classes. They include a whole range of people we come across everyday:

• Blue-collar employees working in factories and offices

• Daily wagers

• Construction workers

• Electricians

• Plumbers

• Carpenters

• Household helps

• Drivers

• Watchmen

• Garbage collectors

The source of income of the working class is manual, semi-skilled work.

In India, a massive part of the working class are farmers and agricultural labourers. They make up about one-fourth of India's working population right now, according to data collected by the Centre for Monitoring Indian Economy (CMIE).

The middle class stands between these two groups, the entrepreneurial class at the top and the working class at the bottom.

Who's the Middle Class?

The social role of the middle class is to enable the smooth functioning of a capitalist society. Now, they do that either by running the state and the government as bureaucrats and government officials, or else by managing corporate entities, companies, to ensure workers do their job correctly, turn up on time, they supervise them, they manage offices, they sell and market products and services that companies produce, they strategise on how to increase market share of companies. In short, the middle class acts on behalf of entrepreneurs to maximise their profits without directly owning capital or earning from profits.

They do not carry any risk that an entrepreneur has to take. In return, they get a fixed salary, some variable pay, and bonus at the end of the year.

The closest a white-collar, middle-class professional comes to experiencing what it means to be an entrepreneur is when they are given ESOPs, employee stock options, as part of their pay. In such cases, a middle-class professional gets a direct share of the company's valuation and a share of the risk, by the way. If the valuation goes up, then the ESOPs are worth a lot. If it doesn't, then they lose out. But a very small section of our middle class gets ESOPs right now. So, the overwhelming majority of them are salary earners, which is their main source of income.

There are about 16-17 million or 4 percent of the entire population of the employed people who are white-collar professionals in India.

Of course, another section of the middle class is white-collar professionals who don't get regular salaries. They earn their income as fixed fees. These are doctors, architects, chartered accountants, and lawyers.

And even though their monthly earnings tend to fluctuate, they're still sociologically part of the middle class because they act like the middle class.

And at best, they will be another half a percent of the employed population of India. So, you add the two salaried people and those who earn from fees, professionals, and you would get about 4.5 percent of the population.

They are not technically in the middle. They are India's top 5 percent of income earners, just below the richest 0.5 percent.

Based on the estimates made by the World Inequality Database, my calculations show that 99 percent of India's middle class earn between Rs 70,000 and Rs 2 lakh per month.

That's the broad range.

Historically, the middle class has also been defined as an aspiring class, which does some amount of discretionary spending.

What does that mean? They go beyond their basic needs and spend on eating at restaurants, going on holidays, buying high-end cars, purchasing gadgets, sending their kids to top schools, buying branded stuff, and buying their dream homes.

It is India's consuming class which wants to live a comfortable life, retire with savings, and pass down a handsome inheritance to their kids.

Why the Middle Class is Feeling the Squeeze

This middle class has been feeling the squeeze for the past couple of years, some a little more, some a little less. For instance, fresh graduates from middle class backgrounds are now finding it difficult to get good jobs. Those who already have jobs and have about 5 to 10 years of experience earn salaries that are more or less stagnant. What I mean by that is, even if they get pay hikes or increments, these increments barely keep pace with inflation and are often lower than the inflation that the middle class faces.

In real terms, their purchasing power is either flat or has gone down in the past few years.

Then there are the high earners in any corporate office, the top rung of managers, including what is called the CXO suite, the bosses, and the people just below that level. At this level too, job security has gone for a complete toss. I know senior managers with salary packages of more than Rs 1.5-2 crore a year being suddenly asked to leave. Big corporations are cutting costs and replacing human jobs with AI.

In many companies, senior people are being asked to do two people's jobs, the second person is being sacked, and they're often very senior people being asked to leave.

At every level, roles are being collapsed and merged, work hours are increasing, and work intensity is increasing too. What does this mean?

The increasing work intensity means fewer coffee breaks, much quicker deadlines, and work spilling into the home. And all of this is happening at stagnant pay. And there is no way out of it right now because the job market is so tight.

When jobs are relatively easy to get, people jump ship if they feel they're being worked too hard or paid less than they deserve. Employers, too, are aware of this. So when there's a good job market, what happens is that they pay more and make work conditions much more comfortable to hold on to talent.

Right now, given that white-collar job opportunities have shrunk, there's no option but just to suck it up and do whatever you're asked to do.

Watch the full video for more.

(The author was Senior Managing Editor, NDTV India & NDTV Profit. He tweets @Aunindyo2023.)