Poor Versus Middle Class

Who is really hurt by the reforms and who is most likely to complain? In absolute terms, the answer to both questions is the middle class. The middle class receives more subsidies in dollar amounts than the poor, and the urban middle class has generally more voice when it comes to protests. Political leaders are understandably aware and worried about this fact when it comes to subsidy reforms. The very generous compensation packages designed by Iran and Jordan extended well beyond the middle class, and although the rhetoric may have been around protecting the poor, the real target of quasi-universal cash transfers is the middle class. Egypt, Morocco, and Tunisia, however, did not formally compensate either the poor or the middle class. As already discussed, countries that opted to provide compensation did so with quasi-universal coverage. This is one area where a lot more can be done. If governments opt for compensation and in preparation for the reforms, it is important to simulate reforms and measure the budget cost of compensation under different coverage scenarios as we show throughout the book, and it is equally important to improve the targeting capacity of the social protection systems so as to be able to reach the intended population.

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