Interesting Times: That shrinking feeling

The middle class is the object of neither envy nor pity. It’s just there. Or, as it turns out, it's a little less there each year.

Bank of Israel 370 (photo credit: Wikimedia Commons)
Bank of Israel 370
(photo credit: Wikimedia Commons)
The middle class never enjoyed much respect. Marxists disparaged the petite bourgeoisie as sad characters who lived off the crumbs of the capitalist class while the workers would remake society. The right distrusts it as too self-interested and distant from the soul of the nation. Intellectuals have scorned it as a bastion of conventionality, light on culture, smug and self-satisfied. “What is middle class morality?” Eliza Doolittle (really George Bernard Shaw) asks. “Just an excuse for never giving me anything.”
In the politics of our time and place – in the rare instances that economic issues arise at all – the classes of interest are the lower ones (who suffer unless the state steps in to help them) and the upper ones (who are routinely subject to rhetorical attacks even though the state is always stepping in to help them). The tent protests in the summer of 2011 were remarkable not only because they put economic concerns on the agenda, but because the wish list that emerged from it was unashamedly middle class. Yair Lapid’s campaign slogan “Where is the money?” is an appeal to the middle class rarely articulated in politics.
But of course, the tents were folded up a long time ago and Lapid is looking at six or seven Knesset mandates. The political class has moved on to Iran and Palestinian terror, when it can find some.
Under the circumstances, it is not at all surprising that a Bank of Israel report released last week on the middle class got far less attention than the National Insurance Institute’s annual poverty report or the Business- Concentration Committee report suggesting how to take down the tycoons a notch or two. The middle class provides the recruits for the army, volunteers for parents’ committees, goes to work and pays its taxes. It is the object of neither envy nor pity. It’s just there.
OR, AS it turns out, it is a little less there every year. The Bank of Israel estimated that the combined middle and upper-middle class shrank to just over half the total population in 2010-11 from nearly 56 percent in 1997. The wealthy kept their share throughout that period, at about 19%, while the poorest part of the country grew nearly five percentage points to 30.2%.
The Bank of Israel chose to measure the middle class by income, defining it as people with incomes between 75% and 125% of the median for the economy, which in 2010 amounted to NIS 14,385 per household. Many would argue that being middle class is mostly a state of mind, that its denizens have in common certain broad values and lifestyles more than similar take-home pay. But of course, those values are not going to be easy to actualize in a household whose pretax income is NIS 10,800. How can you pay for private tutoring or theater performances?
Israel is not alone in seeing its middle class decline. In the US, for example, the percentage of households whose income falls within 50% of the median dropped to 42.4% of the total last year from 44% in 2000 and just over 50% in 1970. But the years the Bank of Israel charted were ones when the economy was mostly booming, with hi-tech coming to the fore, foreign trade opening up to create new opportunities, taxes falling and GDP per capita increasing by 23%. There was one major recession in this period, but otherwise it was an era of near-constant growth. In other words, if the middle class was shrinking at a time like this, when will it ever grow?
APOLOGISTS FOR Bibi-nomics will say that it’s because Israel remains a state-dominated economy of excess regulation and taxes. But the argument is pretty limp: Israel has made giant strides in the direction of free markets and less government, yet the benefits have not only failed to trickle down to the poor, they seem to be circumventing the middle class, too.
A better argument is that the educational system is failing to create the skilled workforce needed to create and sustain a wealthy economy. On the one hand, we have the Start-Up Nation, which employs the tiny minority of talented engineers and entrepreneurs, but does little for the rest of us; on the other, we have a large and growing segment of the population – the haredim – who simply refuse to either work at all or acquire the skills needed for jobs in an advanced economy. The kind of jobs that keep the middle class employed – middle-management jobs at big companies, a skilled and efficient government officialdom – do not exist in large numbers. There are few big, multinational companies to employ them, and the civil service is an army of too many underpaid, undertrained clerks.
Economists, like those of the Bank of Israel, naturally express their concern about the decline of the middle class in economic terms. However, it is not just the backbone of the economy that is fragile, but the backbone of democratic society. And in times like these – when democratic values are under assault – a middle class that is well-educated, economically secure and self-confident (dare we say smug?) is the best line of defense.