MICHAEL SCHMIDT: Social mobility can also be downward

A friend told me that during the pandemic a horrific total of nine people she personally knew committed suicide. The common factor among them was that each had a great house, loving marriage, the corner office, the whole nine yards.

But they were totally unprepared for their loss of social and economic status — their privileged place in the class pyramid — when the economy imploded due to government’s ill-advised lockdown strategy, which killed 42,7% of SA’s small, medium & micro enterprises.

My friend and I fared better; though we also went through lean times, we had already been freelancing for some years before lockdown hit and had developed the flexibility, resilience and sheer sang-froid necessary to survive financial — and status — loss.

The Southern Africa Labour Development & Research Unit (Saldru) at the University of Cape Town (UCT) provides a model for SA — one of the world’s most unequal societies — of six classes: the poor, working poor, working class, middle class, upper middle class, and what it coyly terms the “top end”.

In a 2019 paper, “The South African Consumer Landscape”, Saldru’s Paul Egan describes the “poor” as the class, then 18-million people, whose households earned below the R3,500 per month threshold to qualify for an RDP house or state housing subsidy; it largely lives off child-support grants and old-age pensions, with those who do work eking out a living in the informal sector.

The “working poor” also numbered 18-million in 2019 — when the total population was 54-million, not today’s 62-million — and in Egan’s definition constitute those households earning R3,500-R8,000 per month, the cut-off point to qualify for a child support grant. Some 80% of its households are headed by an employed adult, but they largely work in low-skilled jobs.

The “working class” consisted of 14-million people in 2019, with households earning R8,000-R22,000 per month, the cut-off point to qualify for a housing subsidy as they “fall into the gap between qualifying for a traditional government housing scheme and having sufficient income to secure loans from the private sector to buy property”. Some 86% are formally employed, with 40% of those working in high-skilled jobs.

Egan’s “middle class” numbered 4-million people, with households earning R22,000-R40,000 per month. Over half of these contain adults with tertiary qualifications, and 42% of households have two income-earners. While poorer segments are “overwhelmingly black African” — the much-studied emerging black middle class — “nearly 50% of this segment is made up of other races”.

His “upper middle class” totalled only 2,4-million people, their households earning R40,000-R75,000 per month. He says this segment “exposes the huge disparities in income inequality. With an average household income of  more than R60,000, the upper-middle class account for nearly a quarter of all consumer spending power.

“Over half of this segment is white and nearly 70% of households include at least one adult who has a tertiary qualification. The racial breakdown of this segment has shifted over the last decade and the proportion of black African households has increased significantly.”

Finally, his “top end” consisted of a mere 600,000 individuals, just under 1% of the population: “In addition to income inequality, this group highlights the correlation between educational attainment and income. Nearly 80% of all top-end households include an adult who has at least an undergraduate degree. With an average household income of over R140,000, this segment accounts for around 14% of consumer spend. Over 60% of this segment is white.”

Of course, perceptions of what constitutes a class, especially one’s own class, can be subjective, depending on personal experience or circumstances, or at least inflected by many other considerations than merely one’s level of income. Certainly, stability and security play a considerable role in these perceptions. In many ways the growth and stabilisation of the black middle class has been the benchmark of the success of government policy.

But the SA middle class as a whole has been steadily shrinking, from 6.1-million people in 2017 as GDP per capita spirals downwards. With post-Covid middle-class households having on average R10,000 per month less to spend, debt repayments now account for 70% of their expenditure and the default rate is soaring.

Last September’s study by the University of Cape Town’s Liberty Institute of Strategic Marketing showed the now 3,4-million individuals of the black middle and upper middle classes (compared to 2,4-million whites) had mostly emerged from the pandemic financially unscathed, with a combined annual spending power of R400bn. But it warned that a third of these people were in fact extremely vulnerable to further shocks, with less than R5,000 in their bank accounts after paying their debts. Class mobility can be downward as well.

Using my own experience as an example, a decade ago I was the executive director of an institute with 10 employees, and was in charge of multimillion-rand projects. I lived in a mortgaged house, owned two cars and had a private pension and medical aid. In short, without then knowing it I sat comfortably in the lower band of Egan’s “upper middle class”.

Then I boldly went freelance, later starting my own small company plus a nonprofit with two young black women. Initially it was tough getting established, and I dropped immediately into the “working class”. But I sold my house and both cars, and rented rooms from friends to trim my overheads.

Business picked up, and by 2017 I had climbed back into the “middle class”. Then the multi-crisis of the pandemic, lockdown, war, terrorism, state capture, insurrection and load-shedding pushed me off the cliff again. This time I hadn’t jumped and there was no parachute.

I now bemusedly have to consider myself “white working class”. Given that I am not a spanner-wielding motor mechanic but a degreed professional, it’s a weird experience, socially speaking, to be so obviously poorer than many of my friends and colleagues.

I have treated it as a sort of Zen-like less-is-more life lesson. But I would be lying if I claimed I was not deeply concerned about the possibility of falling further down the ladder, being two years from retirement age without savings, a pension or medical aid. For millions like me, the future is indeed uncertain.

• Schmidt is a veteran journalist and author.