Latin American Middle Classes: The Distance between Perception and Reality

Definitions of the middle class used in the economic literature are mainly based on objective measures that classify as middle class those who are neither at the top nor at the bottom of the distribution of a statistically measurable characteristic such as income or consumption. However, as these definitions often rely on arbitrary boundaries (measures of central tendency, quantiles of the distribution, or absolute thresholds), there is little agreement on what the middle class is. Furthermore, the economic literature has ignored social status as a component of social class, meaning the place in a social hierarchy determined on the basis of life opportunities, lifestyles, and attitudes. Sociologists (Hodge and Treiman 1968; Jackman and Jackman 1982; Wright and Singelmann 1982) argue that no consideration of social class is complete unless it takes into account the perceptions of individuals, as their subjective assessments may not coincide completely with their objective class position and are likely to affect their behavior and choices.

Perceived social rankings are of interest to the new and fast-growing “science of happiness” because they have a significantly stronger association with subjective well-being than objective measures of relative ranking based on reported income (Posel and Casale 2011). Identifying the variables associated with perceived social rankings may reveal the criteria used by individuals not just to judge what class they belong to but also to compare themselves with others and to form their own aspirations.

Understanding how perceived social rankings are formed and why those rankings differ from objective rankings may shed light on key political issues, such as attitudes toward redistribution. Preferences for redistribution derive in part from individuals’ beliefs on their own position in a social ranking and on what determines such position (Alesina and La Ferrara 2005; Gaviria 2007; Senik 2009). However, those preferences may change when the individuals are confronted with information about their actual standing in the social ranking (Cruces, Perez Truglia, and Tetaz 2013). In a similar way, those who perceive that their social position has declined have more positive attitudes toward redistribution (Guillaud 2011), while those individuals who perceive themselves to have experienced higher mobility are less supportive of redistributive policies (Gaviria 2007). Perceived social ranking and its mismatch with objective social ranking may also influence consumers’ aspirations and decisions as well as work attitudes and effort.

This paper aims to contribute to our understanding of perceived social rankings and their relation to objective rankings with a focus on Latin American middle classes. It has three main objectives. The first is to provide a subjective classification of the populations of sixteen Latin American countries into low, middle, and upper classes, based on a self-perceived social ranking. The second is to analyze whether such subjective classification matches a set of standard income-based measures of social class. Since the mismatches between the objective and the subjective classifications are fairly large, the third objective is to explore what factors, in addition to income, are associated with the self-perceived social ranking of Latin American households and to what extent those factors help to explain why so many people classify themselves as middle class when they are not, on the basis of their income alone, middle class.

Literature Review

Previous literature has proposed three alternative ways to explore how survey respondents perceive their own position in society. The so-called Cantril ladder question, which may elicit the subjective perception of social ranking or any other aspect of the respondent’s life, asks respondents to place themselves in one of the rungs of a ladder, which may have from three to eleven rungs. Cantril ladder measures have been used by, among others, Riffault (1991) with data from the Eurobarometer, Mangahas (1995) in his work for the Philippines using data of the Social Weather Station, Ravallion and Lokshin (1999, 2002) in their study on Russia, and Posel and Casale (2011) in a recent study on South Africa. The Social Weather Station, in the Philippines, asks a sample of adults whether they are poor, borderline, or nonpoor. The Eurobarometer asks a similar question but...