A Global Middle Class? Not Yet

Courtesy of Fast Company, an interesting report on the claim that a global middle class is emerging:

People around the world are pulling themselves out of extreme poverty. But outside of China, it’s a big stretch to claim the middle class is thriving

In recent years, we’ve heard a lot about the emergence of a “global middle class.” It’s said that developing countries are catching up with advanced western nations and that billions of people will soon be driving Chevrolets and drinking Starbucks macchiatos. Well, not quite yet. The truth is that, while incomes around the world are rising, they haven’t yet increased to a point where the masses are living to western standards.

Today, the majority of people on the planet are still poor and most of the rich still live in the same countries they always have. At the turn of the century, 91% of the world’s “high-income” citizens (earning at least $50 a day) lived in North America and Europe. By 2011, that share was down only to 87%, a big new analysis finds.

“The gap in living standards between the world’s economically advanced countries and emerging and developing nations barely narrowed in the first decade of this century,” says the report from the Pew Research Center.

The point isn’t to downplay the advances of the last decade or so. Between 2001 and 2011, almost 700 million people rose above the poverty line of $2 a day. But most of those people haven’t yet joined the ranks of the middle class. Over that period, the share of people earning $10-$20 a day, which is Pew’s definition of middle income, rose only from 7% worldwide to 13%. The percentage of “poor” people fell 29% to 15% in that time, while the share of “low-income” individuals ($2.01-$10) grew from 50% to 56% of the global population. In other words, the majority is getting richer, but it isn’t yet what you would call a comfortable life.

“Though there was growth in the middle-income population from 2001 to 2011, the rise in prosperity was concentrated in certain regions of the globe, namely China, South America, and Eastern Europe. The middle class barely expanded in India and Southeast Asia, Africa, and Central America,” the report says.

In the U.S., the middle class share fell half a percentage point between 2001 to 2011, while those classified as low-income and poor rose by 3.4% and 0.9% respectively. Pew’s $10 threshold is near the median daily per person income of poor U.S. households ($11.45 in 2011). “A large share of poor people in the U.S. would also fail to meet the global middle-income standard,” Pew says.

China stands out as the big success story in the figures. Its middle class grew 15% during the decade, while India’s middle class grew only 1.2% over that time. “The median daily per capita income in India increased relatively slowly, rising from $2.39 in 2001 to $2.96 in 2011, a gain of only 24%, compared with 126% in China,” the report says. The middle class is coming, but it’s coming quicker in some places than others.

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