Who is helping the forgotten middle class during the lockdowns?

It used to be said in jest: if you are lucky enough to have enough money to pay your bills and taxes, but not enough for anything else, welcome to the middle class.

Now, 11 months after the pandemic came to our shores, this saying has lost some of its punch. The middle class, and therefore the tax base, is getting smaller and smaller as this income group is pushed back into poverty by salary cuts and job losses.

The worst is that there has not really any measures to protect the middle class during the economic downturn exacerbated by the lockdown.

Many citizens have applauded the R350 grant for Special Covid-19 Social Relief of Distress Grant which was introduced and  extended by another three months and that vulnerable people are helped by various food parcel and feeding schemes.

But where is the support for the middle tax-paying class?

Statistics South Africa says while about half of South African families are considered poor, about 30% are considered working to middle class.

A recent University of Cape Town Liberty Institute of Strategic Marketing study, which used the National Income Dynamics Survey, indicated that the number of people who are considered middle class and above declined from 6.1 million to 2.7 million individuals, a reduction of 55.73%, between 2017 and June 2020.

It is likely that the majority of this increase happened from March 2020.

The study also showed that the number of ultra-poor individuals who earn less than the minimum wage, increased by 54% to 6.6 million individuals. According to the 2020 Budget Review, the middle class pays about 90% of individual income tax.

According to the UN Development Programme study on the socio-economic impact of Covid-19, up to 34% of households could exit the middle class and become “vulnerable” and about 44% of middle class individuals who are permanently employed will become contract workers and possibly become part of the poor.

The study estimated that a third of South Africa’s middle class will be wiped out.

Yes, the South African Reserve Bank cut interest rates, which helped consumers with home loans and car financing. The banks tried to help by offering payment holidays for three months, but that money still has to be paid back. Some people could keep their heads above water with Ters payments or borrowing money from micro lenders or even friends and family. However, this is also money that must be paid back at some stage.

Improved service delivery can also help the middle class, as well as lower municipal bills and scrapping bureaucratic burdens, such as annual vehicle registration costs. In the Medium Term Budget Policy Statement in October, government conceded that further tax increases could have large negative effects on GDP growth.

The biggest support measure that can help the middle class, that pays 90% of individual taxes, is tax relief.

If the tax individual tax payers have to pay is reduced, more people will be able to remain in the middle class and not slip into poverty. Tito are you listening?

Ina Opperman is The Citizen’s business writer and consumer affairs expert.

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