OECD Forum 2012: Squeezed and Emerging Middle Classes

 

 

Squeezed and Emerging Middle Classes

 

The financial crisis has struck at the very heart of the middle classes. House ownership, educational opportunities, secure retirement, stable jobs and social mobility are no longer a given.

 

 

The middle classes are apprehensive about what the future holds for them and their children. Their fears may have a significant impact on the economic recovery, as well as their political choices.

 

The middle class has been the backbone of western societies in terms of growth and stability. It represents the vast majority of consumers and entrepreneurs, and a sound and irreplaceable tax base. In many OECD economies, the middle class is squeezed due to stagnating wages, high taxation, high unemployment, and global competition for skills. People feel let down, and their confidence, whether in financial markets, government or the future, has been eroded. How to reverse this trend?

 

Meanwhile, in many developing and emerging economies, the middle class has been growing and, in some cases making a first real appearance. This has been the case in much of Latin America, where economic growth has brought many people into middle, and even upper, incomes, offering new opportunities and changing the dynamic of these economies. In Asia, and most notably in China, the middle-class population is now bigger than in many OECD countries.

 

What opportunities and challenges does this present to governments in terms of fiscal policy, and social service provision? Does this new middle class provide greater stability and sustainability to developing and emerging economies, or is it still fragile? On a global level, how does this “new” middle class compare with traditional middle-classes in OECD countries? Is the middle class in developing and emerging economies rising at the expense of the middle class in developed economies? Are we seeing a permanent shift in wealth?