Adjusting to demands of times, an average family across the income spectrum has been shuffling its spending priorities. The weight assigned to major expenditure heads is changing but not uniformly across all social strata.
The change in the spending pattern is most obvious in the middle class where the gap between aspirations and the means to fulfill them is believed to be widest. With an increase in family income in this group, expenses on basic food as a percentage of the total spending has come down and that on personal care items, utilities, transport, health and education has increased.
The ratio of expenditure on shoes, clothing and rent to total earning of majority of families has not changed much. However, some new heads of expenditure have emerged that were not there earlier. Spending on ‘outside the home eating’, cable, internet and mobile phone services fall in this category.
Both the rich and poor are not indifferent to the societal transformation and did make adjustments in their spending patterns even if those were marginal in comparison to those falling in between the two extremes.
Here rich refers to families with monthly disposable income of half a million rupees ($5,200) and above, and the poor represent families earning Rs30,000 ($300) or less; those collectively earning between half a million and Rs30,000 comprises the biggest chunk of the population categorised as middle income group.
Spending on food consumption has increased in poor families with rise in their incomes. This class is paying higher house rent that often includes utility charges in shanty townships and Kutchi Abadis on the periphery of bigger cities. Till 1980s this class did not use electrical appliances and paid very little or nothing for the space they occupied for a house in a Kutchi Abadi.
With improved liquidity a strong segment of the poor is using consumer durables such as TV, fans, etc. Expenses on personal care items, such as tooth paste, shampoo, soaps and detergents etc. is rising.
They spend about 40 per cent on food, 10 per cent on transport, under five per cent on shoes and clothing, 20 per cent on rent, 15 per cent on utilities that also include mobile service charges, 10 per cent on education, two per cent on toiletries and rest on other incidences. The additional expenditure could be on milk and processed food products such as tea, sugar, ghee, bread, etc.
The families at the top in terms of income distribution do not spend more than 10 per cent of their earnings on kitchen and this percentage falls as they climb up the income ladder. They spend liberally on their upkeep but their monthly spending on shoes and clothing remains within 10 per cent band. The utilities consume another 10 per cent. Transport eats up 10 per cent. They spend 10 to 15 per cent on their fleet of servants that include cook, maid, security guard, gardener and driver, and 15 per cent on gasoline for generator and transport. Education accounts for 15 per cent.
These percentages fall with increase in monthly family income with the rest spent on luxury items, holidays and entertainment. Often families falling in this category own properties so they need not spend on rent.
The noticeable feature of middle class family budget is its disproportionately high spending on education. They spend at least four times more on education of their children than their equals thirty years back.
“In transformational society, urban families might not necessarily be happier but materially they seem to be better off with possessions of comforts such as fans, refrigerators, television and telephone. The percentage monthly expenditure on personal care items, processed food, social and physical utilities has increased to suit changing lifestyle”, says an analyst.
The official fact-books such as Pakistan Economic Survey and the annual report of State Bank do not contain data on consumption that could throw light on consumer behaviour and preferences. The average propensity to consume in Pakistan is evidently higher than any other country in the region including India and China.
In Pakistan, the huge undocumented economy is understood to be big and growing. As formal economy stagnates, the informal one provides the cushion to the people by generating and distributing wealth to support emerging consumption trends. The overseas workers’ remittances also increase buying capacity of the recipients remarkably.
“The cost of living has risen dramatically over the past two decades but so has the monthly family income. From one-job, one-salary most households today depend on multiple salaries or/and untaxed earnings from some side business such as tuition, grooming, writing, marketing, property dealing, etc. Many people work two jobs. An increasing number of women and teenage children also take up regular or part-time jobs to supplement family income and cover for increasing needs”, commented another analyst.
Senior officers contacted in economic ministries could not offer insightful comments. The observations in the article at best indicate trends as they are based on random family budget study by this writer and can not be supported by structured verifiable set of statistics that are not available.