She looks down on him, he looks up to her, and the underclass will always know its place

Who has what job remains the key to social class, say government statisticians. David Walker explains that who gives the orders at work will become the basis for dividing us up for official purposes.

A working party of sociologists and statisticians today publishes a classification scheme which, for the first time, officially recognises the existence of an "underclass".

The new scheme will reshape the way the Government collects data from the public, and the amounts of money paid out in grants to schools, hospitals and councils. Government definitions also affect the way market research companies operate, along with the decisions of insurance companies and building societies about policies and loans.

The report, from the Economic and Social Research Council to the Office for National Statistics, says firmly that class still matters in modern Britain, and that work remains the most important source of differentiation.

It dismisses the idea that people are nowadays less socially distinguishable, for example in terms of what they eat, what they wear and where they shop. It says people's place in the pecking order is vitally affected by whether they give orders or take them.

But in place of the old Registrar-General's social classes, which has been largely unchanged since the 1920s, the new ladder has more rungs. Instead of the old social classes IV and V, partly-skilled and unskilled occupations, the statisticians are creating separate classes for those employed in "routine jobs" (which include truck drivers and traffic wardens) and those in "elementary occupations" (waiters and cleaners, for example).

A new separate class is proposed for the long-term unemployed and those who have never worked. It is recent growth in this latter group which made the old classification redundant.

"Many were excluded, including large numbers of those who are retired, long-term sick, disabled and not in employment, unemployed or never employed," says the report. Although Labour inherits this work from the previous administration, it fits well with the new government's social policy priorities, especially welfare to work. The new class definitions should allow easier targeting of communities where the "socially excluded" live, and easier measurement of its own success in getting unemployed and disabled people off the dole and into employment. It also chimes with Labour's emphasis on the central position of work in people's lives.

"Social class," says Professor David Rose of the University of Essex, who co-ordinated the study, "needs to be defined in terms of production, of where and how people are employed. It may sound old-fashioned but work is what matters. It also matters whether you are an employer or an employee."

He cited a recent study of civil servants, which showed that stress-related illness, disability and early retirement on grounds of health affected lower grade workers far more than top mandarins. The sociologists say occupation is closely linked with health, and class correlations still exist between parents' job and children's educational attainment and success in life.

the new class divisions

The new classes Class 1: Professionals and senior managers. doctors, lawyers, teachers, fund managers, executive directors, professors, editors, managers (with more than 25 staff under them), top civil servants

Class 2: Associate professionals and junior managers. Nurses, social workers, estate agents, lab technicians, supervisors, managers with fewer than 25 staff under them, journalists, entertainers, actors.

Class 3: Intermediate occupations. Sales managers, secretaries, nursery nurses, computer operators, stage hands.

Class 4: Self employed non professionals. Driving instructors, builders.

Class 5: Other supervisors, craft jobs. Charge hands, plumbers, telephone fitters.

Class 6: Routine jobs. Lorry drivers, assembly line workers.

Class 7: Elementary jobs. Labourers, waiters, cleaners.

Class 8: Unemployed.

The old class divisions. I Professionals II Managerial and technical III Skilled jobs a) non manual b) manual IV Partly-skilled occupations V Unskilled occupations