Thursday, January 22, 2015

A taxi driver’s tale, Part 2: The poverty of social status in Georgia

Looking at the association between an individual’s social status and his/her standing in the labor market, the first part of this blog post concluded that higher labor market mobility is characteristic for people with high social status, and that those with high social status have better chances of finding an attractive job. Yet, the question remains whether people with higher social status actually live better lives i.e., enjoy economic well-being and have better perceptions about their and their children’s future. To answer this question, this blog post examines how social status is associated with individual and household well-being. Data again comes from CRRC’s 2013 Caucasus Barometer (CB) survey.

According to Geostat, the subsistence minimum in Georgia was GEL 137 in 2013 (approximately USD 80). CB 2013 asks a question about personal income last month, but the answer options are given in categories (income ranges). The subsistence minimum of $80 falls into the category between $51 and $100. It is used in the blog post as a reference category to compare, on the one hand, individuals with higher incomes and, on the other hand, individuals with lower incomes. The group of respondents reporting not having personal income are considered a separate group.

As expected, social status is positively associated with personal income. Almost half of the representatives of the high social status group made more than $100 last month, whereas only 30% of the low status group and 36% of the middle status group managed to exceed the same threshold. Interestingly, the no income category prevails in the high and middle social status groups. One in every three people in these groups reports having no personal income compared to one in every four in the low status group.

Unsurprisingly, the higher its social status, the more money a household spends. Geostat reported GEL 900 (approximately USD 500) as average monthly household expenditures in 2013. In CB’s corresponding question, this falls into the category between $401 and $800. Again, this is used as a reference category to differentiate households spending more than the average from households spending less than the average. A higher social status is still positively associated with higher spending. However, the overall economic condition of Georgian households looks quite poor. As the chart below shows, even in the high social status group, the majority of households spent under $401 last month, and only 19% spent more than the reference category. In the low social status group, almost everyone (91%) spent less than the reference category, meaning that the low status group households spend significantly less than Georgian households on average.

The poor economic condition of the majority of the Georgian population is confirmed by CB questions about personal savings and debt. The vast majority of Georgians do not have savings, regardless of their social status. However, the high social status group (17%) is almost twice as likely to have some savings compared with members of the low (8%) and middle (9%) status groups. Likewise, money is more often owed to the representatives of the high status group (25%) compared to the middle and low status group members (18% and 12% respectively). The data does not show significant differences in terms of personal debts. Approximately 40% of each group reports owing money.

So far, it has been demonstrated that high social status is helpful to overcome economic hardship, but does not guarantee it. The reported gap between a household’s income and the amount of money it needs to cover its basic needs reinforces this statement. Half of the high status group representatives affirm that during the past 12 months there were occasions when their household did not have enough money to buy food. In the middle and low status groups, more than 70% reported the same. Moreover, the majority of the middle and low status groups and 40% of the high status group had to borrow money to cover utilities in the past six months.

The chart below shows that even representatives of the high social status group can largely satisfy only basic needs. Half reported that money is enough for food and clothes, but not for expensive durable goods (a new refrigerator or washing machine, for example). In the low status group, 35% stated that money is not enough even for food. Interestingly, a quarter of the middle and one in every ten of the high status group report facing the same problem.

It is not surprising that the poor economic realities of households are reflected in perceived place on an imaginary economic “ladder”. The chart below shows that only 19% in the high social status group perceive their household’s economic rung as high (45% place their households on the middle rungs and about one third towards the lower end). In the middle and low social status groups, the majority believes their households stand on the low rungs (46% and 54% respectively).

Note: Original answers were on a 10-point scale. For this graph, answers were re-coded as follows: rungs 1 through 4 – Low, rungs 5-6 – Middle, rungs 7 through 10 – High. 

At the same time, belonging to a higher social status group helps people to be more optimistic – 71% of the high status group believes that they will be better off in five years. Despite pressing current economic conditions, the other two groups are also quite optimistic – 57% of the middle and 43% of the low status group believe in a better future. Optimism absolutely flourishes, and the relevance of current social status fades when individuals contemplate their children’s future. Over 90% of all social status groups believe in a brighter financial situation for their descendants. Notably, all three status groups agree that the most important factor that will contribute to the well-being of the next generation is education.

This blog post described how social status is associated with economic well-being and perceptions about the future. The most important message to the taxi driver is that a higher social status in contemporary Georgia leads to more mobility on the labor market, as well as relatively higher income and spending. However, social status alone is hardly enough to overcome poverty and substantially improve well-being. Perhaps this explains why a man with more than one university diploma chooses to continue driving a taxi.

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