M shaped society

Theory

In a well-developed modern society, the distribution of classes is in a 'normal distribution' pattern, and the middle class forms the bulk of the society.

However, in the emergence of the 'M-shape society', the middle class in a society gradually disappears. With the advance and consequence of globalization (for good or bad), the middle class is gradually assimilated into either side. The bulk of society is no longer the middle classes. The name is derived when you chart the class distribution a distinct M-shape is formed to denote the two extremes, with the middle class gradually shrinking and disappearing. Very few people in this middle class may be able to climb up the ladder and be able to be part of the upper class, while most from the middle class will gradually sink to the lower-income group.

What is worse, the upward social ladder seems to have disappeared – opportunities and fair competition become fewer and fewer. People in the lower class can no longer climb up the ladder: they cannot earn a high-paid job or have stable employment, even if they have a high level of education.

Possible premise in the context of our current world view

You can imagine how this can take place once a series of circumstances come together over time to make one an Outlier. Once the immediate ancestors, parents or grandparents have done the groundwork needed to create the circumstances and design the opportunities, the person who was born into the right place and the right time with the right circumstances will leverage their circumstances to be part of Revolutionary Wealth, a theory put forward by Alvin Toffler, author of Future Shock. For those born roughly between 1980 and the early years of 2000, their parents raised them with beliefs and a schooling experience suited for the Second Wave, the Industrial Era.

It is possible that the schooling of this last generation of the 20th century made them unsuited for the economy of the 21st Century. The trade-off was of self-directedness for obedience, play for rote work, lateral thinking for conformity, they will be incapable of producing the assets required of the 21st Century economy as outlined in Daniel H.Pink's A Whole New Mind and Stephen R.Covey's The Leader in Me [1] and Howard Gardner's Five Minds for the Future.[2] Those who measured their intelligence purely on scholastic aptitudes would focus on developing an aptitude of memorizing and scoring for exams, neglecting other innate abilities they may have.

Because it takes years to acquire a profession or a mastery of any skill, those born between 1980 and the early 21st century may have lost the window of opportunity to develop talents best suited for their lives.

At the same time, technology use is very unequal thus giving people from certain parts of the world the advantage of leapfrogging in front of others in their own mastery of their talents by leveraging on the tools and information of the Internet. For instance, a middle-class 12-year-old in Taiwan, Korea, Japan or even Singapore would have the advantage of growing up being able to take high-speed Internet for granted and being able to afford a laptop of their own apart from electronic toys. These children would work on their competency in technology use, being able to keep abreast while acquiring the skills of knowledge gathering on the Internet and learning through trial and error how to validate, leverage and problem solve with that knowledge.

Also, by familiarizing themselves early in life with the tools of collaboration (wikis, bookmarking, forums), communication (Skype, Google Wave, Twitter) and social media, they will gain the maturity by the time they are in their late teens to know the difference between risky and beneficial behavior when interacting in a transparent world.

There are so many things in place that is creating the conditions of M-society. Reading What Google Would Do [3] by Jeff Jarvis and Alvin Toffler's Revolutionary Wealth would give you an idea how dramatic the disruption to our economy in the 21st Century is going to be. The people who can make sense out of this chaos possess particular aptitudes, qualities and knowledge honed over their childhood and youth.

It is not difficult to imagine as we move towards customization and become a prosumer society those who do not have the skills or knowledge to produce something of value to society will fall into great economic desperation. A child without an education from 20th century schooling but who spent their childhood being self-directed, thinking, exploring and creating may end up with a huge advantage over a child who sees work not as creation but as hardship and who has been conditioned to see learning as memorization to score for a piece of degree.

As the 21st century societies move towards a world where transparency, trust, credibility, ethics, peace, equality and design are highly valued, there is an expectation of other members to contribute same. For the majority of people born in the last decades of the 20th century, learning is not about self-directedness or about making the world a better place. Learning was about scoring for exams and defeating others often unfairly in order to get ahead in life. As the pace of learning and change increases for those who have the skills they may not be able to make time for or associate with people who do not possess the same abilities. The divide between the haves and have-nots will be about the distribution of knowledge and skills. These knowledge and skills propel further wealth-creation for the 5 Minds of the Future.

This income inequality a different idea than one where people "reserve entitlements" and places for their children and the children of people in their networks. While crony-ism and "the old boy's network" still exists, a new, more powerful form of networking is quickly forming, the Wisdom of Crowds made up of individuals, not unlike the individuals making up Wikipedia, who will form the face of 21st Century Revolution. These networks place a high premium on meritocracy, integrity, self-directedness, creativity and transparency. They will share and teach those like themselves, within their networks and virtual and face to face communities with or without money as their motivation.

As the pace of information change picks up more speed through those interactions, it gets harder and harder to learn anything new without possessing the Learning how to Learn skills. For those with beliefs from the Industrial Age, doing things for free or learning for the sake of learning does not make sense. This belief will perpetrate the barriers to learning they have erected for themselves. In a future world where Free is a new business model [4] – the value of affluence may shift from physical money to perceived exchanges of contribution or value from a community/individual.

This and other knowledge of forces transforming the way we understood the idea of money and society in the 20th century may determine how the will and directedness of the demographics shaping the M-society of today will lay the launchpad buy the advantages to catapult the next generation further higher on the ascending curve.

The world in 2009

The income-inequality is measured by the so-called Gini coefficient (between value of 0 and 1), with 0.2 and below generally considered being most equal and 0.6 or above being most unequal, with 0.4 being the “red warning line”.

The people on the bottom half of this income-inequality will experience a deterioration in living standard. They may face unemployment or lower salaries. Gradually, they can only live a way the lower classes live: e.g. take buses instead of driving their own car, cut their budget for meals instead of dining at better restaurants, spend less in consumer goods, etc.

In a development in the China Post on Sept 4, 2008 [5] reported that in TAIPEI, Taiwan—their society has moved further toward becoming an M-shaped society in 2007, with both the highest and lowest income-earning segments in the country growing to new highs, according to a government statistical report released Tuesday.

The report authored by the Cabinet-level Directorate General of Budget, Accounting and Statistics (DGBAS) said that the number of people with an annual income of at least NT$2 million (US$63,091) broke the 100,000-mark for the first time last year to hit a record high of 101,554.

On the other hand, the number of people who earned less than NT$200,000 in 2007 reached 1.23 million, a five-year high, the DGBAS report said. While only 0.8 out of every 100 local residents earned NT$2 million or more last year, the number of those in this “rich men’s club” increased by 11,308, or 12.5 percent, from the year-earlier level. Meanwhile, 7,072 more people had annual incomes of less than NT$200,000 than in 2007, a 0.5 percent year-on-year rise. It marked the second consecutive year that the number of people in the lowest income-earning group increased.

Noting that the growing gap between rich and poor is a general world trend, a DGBAS official said Taiwan was no exception. When Taiwan’s 7.41 million households were divided into 10 tiers based on annual income in 2007, the richest 740,000 households had disposable income of about NT$1.67 million, roughly 5.2 times the NT$320,000 average disposable income of the bottom 740,000 households, the official said.

“The gap was the third highest, second only to 2001’s 5.33 times and 2002 and 2006’s 5.25 times,” the official added. There may be still remarkable progress in economic development, the GNP may still rise, there may still be economic growth, and the national average salary may still rise. However, the wealth increase in this growth may concentrate in the pockets of the very few rich people in the society. The masses indeed cannot benefit from the growth, and their living standard is on the decline.

(end of quote from China post)

Also the most prevalent behaviour that is contributing to the income gap is consumerism. With social media and globalisation, everyone is more connected than ever, thus enabling a certain product to reach its mass presence easier. This is especially true for big corporation with huge budget for advertising & marketing. By conditioning everyone's mind to only buy things that depreciate (lifestyle products), not many will buy assets that will grow in value. By shifting consumers mindset through advertisement, mass market will instinctly follow what is termed to be normal. For example, gold has true value but due to its high cost, jewellery producers mixed cheaper metals in it and market it (associate it) as the most expensive jewelery (i.e. white gold). In reality, what is happening is mass market will continue to buy and contribute to the wealth of a few. These few will continue to reinvest and the money will continue to stay within the rich. Even if you are a well-to-do middle income now, if you continue to buy non-value items, by the time you lose your income source (old, retrenched, disabled, bad luck), you will become poor as you will have no savings. Such trend is common in well-developed countries, where assets that will make you rich (e.g. property) has already become too expensive to be bought. A privilege only for the rich. So, instead of saving to buy such assets, mass market has choose to ignore them but continue to buy lifestyle consumer items.

Influence

This notion became a hotly discussed topic in Japan. And as Ohmae's book was translated into Chinese version, it also became a hotly discussed topic in Taiwan, and later in Hong Kong.

In Hong Kong, there are scholars, intellectuals and social-scientists arguing whether the conditions of Hong Kong fits the notion Ohmae put forward: e.g. diminishing social mobility and upward social ladder, the general income-decline and threat of unemployment of the middle-classes, the change of competition rules for social advancement (such as pursuit for better schools) in which status advancement is no longer based on merits or achievements, but on other certain criteria such as family wealth or background. The lives of the lower classes seem more miserable than the past even when there is still economic progress and rise in the GDP. It has become a concern for the government as the income gap between the lower classes and the upper classes has been widening in recent years.