Japan’s Middle Class
Although the Japanese economy is the third largest in the world according to its nominal GDP, its middle class has begun to contract. Unemployment and poverty resulting from COVID-19 revealed new patterns of decreasing consumerism and stagnant wages. While Japan’s middle class is slowly disappearing, there are a few solutions from both corporate policy and grassroots organizations that are attempting to alleviate poverty and reinvigorate citizens with low income.

Poverty in Japan

In the 1980s, the once booming Japanese economy met economic stagnation during the 10 years known as the “Lost Decade,” spanning from 1990 to the early 2000s.

Before the crisis, which the real estate market caused, Japan’s annual GDP growth rate was 0.82% higher than that of the United States. However, the bursting of the real estate bubble lowered Japan’s growth rate to a feeble 1.14% during the Lost Decade. Many view the Lost Decade as one of the events that began the fading of Japan’s middle class.

From 2020 to 2021, estimates stated that one in six people living in Japan lived in relative poverty. According to some workers, open work is scarce in the aftermath of the pandemic, and Japanese media seldom covers these stories of hardship. Notably, women, who often take retail jobs with temporary contracts to balance work with childcare, experienced economic hardship after most retail shut down during the pandemic. In early 2020, around 40% of the labor force took on “non-regular” jobs, which pay lower wages and often end in swift termination.

Japan’s Middle Class

According to Oxford Economist Shigeto Nagai, a drop in consumer spending could follow the shrinking middle class. In 2020, after a steep increase in sales tax the year before, COVID-19 caused consumer spending to plummet further. Japan’s Ministry of Economy, Trade and Industry reported a 12.3% decline in retail consumption from 2019. More than 10 million Japanese citizens earn less than $19,000 per year, and having less disposable income exacerbates the issue of falling consumer spending.

A “life-time employment system” also contributes to the shrinking of Japan’s middle class. Companies value taking care of employees after retirement as well as seniority-based wages. This results in an emphasis on long-term company loyalty, and raises in wages are difficult to achieve. However, as previously mentioned, nearly half of the labor force participants work in non-regular jobs. This poses a significant problem to middle-class households in which stability is a necessity.

Alleviating Poverty

Established in 2000, the World Bank and the government of Japan conceived The Japan Social Development Fund (JSDF) to alleviate the effects of the Lost Decade. Since its founding, the government has provided approximately $855 million to support its projects. These projects aim to reach the population that often cannot access aid from charitable organizations, and intends to empower and protect impoverished communities. Similarly, small, grassroots organizations in Japan help alleviate poverty by providing support for their prefectures. For example, groups such as Food Bank Kochi and NPO Gift provide food and activities for communities that have become impoverished. The Kagoshima Volunteer Bank, which aims to teach and care for single-family households, provides educational services to communities.

In regards to the corporate world, economist Shigeto Nagai has suggested that start-ups in Japan will offer higher wages to new workers and recent graduates as compared to established corporations and that this type of shift in the labor sector could ultimately increase the economic flexibility of the middle class.

– Caroline Zientek
Photo: Flickr

Middle-class jobs in Indonesia
Less than 16% of workers hold middle-class jobs in Indonesia, with the majority of the population earning even less. With the COVID-19 pandemic making it significantly harder for people to maintain jobs, Indonesia is working to increase the number of jobs accessible to those suffering from poverty. However, while Indonesia successfully created 2.4 million jobs every year from 2009 to 2019, few offered middle-class benefits. Providing more middle-class jobs can be beneficial to people living in poverty. There are a few things to prioritize in expanding middle-class jobs to Indonesians in underserved communities. In order to increase the availability of middle-class jobs, it is important to focus on methods that will help people have more job opportunities.

The Benefits of Middle-Class Jobs

Increased availability of middle-class jobs benefits every citizen in Indonesia. Focusing on ways to create middle-class jobs can help alleviate poverty in the nation. Families with middle-class jobs live a better life and have access to essential resources. Middle-class workers enjoy the guarantee of more money and increased outcomes within the workforce. Workers feel more comfortable in a middle-class job with different resources available to guide them.

The Need for Middle-Class Jobs in Indonesia

When it comes to alleviating poverty in Indonesia, middle-class jobs help both those living in poverty as well as those no longer suffering from it. The lack of structural transformation, laborers’ transition across economic sectors over time, plays a huge role in the low number of middle-class jobs. Over the 17-year period from 2000 to 2017, Indonesia’s structural change only contributed 1% value per capita annual growth.

Other areas requiring emphasis include health and education. Only 43% of the labor force completed more than a lower-secondary education. Policies that focus on benefits received from middle-class jobs can encourage more people to want a middle-class job. It is also important to be attentive to different skills that are necessary for certain jobs. This includes informing Indonesians of what they need to know so that the people can be eligible for more opportunities. From emphasizing the importance of school to helping those in need, prioritizing these things can help increase the number of middle-class jobs.

Possible Solutions

There are other barriers preventing the creation of middle-class jobs in Indonesia and contributing to the nation’s poverty. Making adjustments to businesses within the country will make it easier to increase the availability of middle-class jobs. For example, households are responsible for two-thirds of Indonesian jobs, while larger employers and companies are scarce. There needs to be more focus on creating policies such as tax incentives and providing resources for workers. Another thing to consider is increasing middle-class jobs by improving the country’s workforce. Teaching younger citizens the skills essential to current jobs is one way to accomplish this.

On Track to Success

The COVID-19 pandemic brought more challenges to Indonesia, which resulted in many citizens not having employment. Some areas that need more attention to increase the availability of middle-class jobs are the education system and manufacturing industries. It is also important for the government to create policies to help workers. Indonesians will greatly benefit from working middle-class jobs with increased pay and greater access to much-needed resources. With these measures, one can be optimistic about alleviating Indonesia’s poverty levels.

– Chloe Moody
Photo: Flickr

Middle Class Poverty in Russia
For most of Russia’s history as a developing nation, foreign direct investments have taken the form of oil and land. The consumer market within Russia has remained a small part of its economy because of a consistently weak Russian currency- ruble, market volatility and consumer hesitation in purchasing durable goods such as cars and other less-liquid assets.

Russian Economy

A weakened economy and increased embargoes from the United States and other Western nations have led to the worsening of middle-class poverty in Russia. Russia’s gross domestic product (GDP) fell on average 1.5 percent yearly between 2014 and 2016. GDP is a measure of the country’s finished goods and services produced within its borders and sold to trade partners.

If a country’s GDP is decreasing, the nation’s consumers have fewer goods and services to purchase. As a result, this adversely affects the country’s economy and consumer market. As of 2016, the population living below the poverty line in Russia rose to 23 percent and amounts to around 20 million people. A rebound in oil prices coupled with a growing agricultural sector has improved Russia’s chance for a massive economy turnaround. Increased trade with China has also given room for economic improvements to the developing nation.

Middle-Class Poverty in Russia and Retail Market

In turn, middle-class poverty in Russia is being addressed through a revitalization of consumerism in malls and small shops across large Russian citizens such as Moscow, St. Petersburg and Saransk. A renewed interest in mass consumerism across this Eastern nation has inspired thousands of businesses to open and offer a variety of goods to consumers.

Mass production of commodity items mimics the consumerism attitude in the United States. Historically, Russian consumers have taken rubles out of the country and purchased goods and services abroad because of lower prices and an increased purchasing power. However, because Russia is producing and selling its own goods and services, consumers are remaining in the country and spending their money with Russian businesses.

As a result of increased consumerism and small to medium-sized enterprise business growth, additional Russian business owners have flooded the market with new enterprises. As of January 2019, Russia’s employment rate is 59.90 percent. The developing nation has seen unemployment continuously fall as a result of improved geopolitics and business within its borders.

The Future Opportunities

Within the next 10 years, Russia’s consumer market is expected to grow internally and the economy is expected to improve. Currently, Russia’s economic freedom score is 58.2 on an index of 100, ranking the country globally as the 107th freest in the 2018 index. Compared to the United States, ranked at the 18th place with a score of 78.8, Russian consumers exercise a significantly lesser degree of economic freedom in their daily purchases and investments.

The Russian government intends to reverse this downward trend with increased investment in malls and shopping centers across the country. The burgeoning consumer market is one solution to alleviating middle-class poverty in Russia as it creates more jobs and opportunities for less-skilled laborers.

Additionally, Russian can begin to encourage more multinational businesses and franchises to do business within its borders. The presence of well-known global brands works cooperatively with Russia’s present goals of increasing consumerism and mall traffic. Russia has a long way to go yet before it improves its global ranking as an economically free country of consumers. The present geopolitical landscape lends itself to a much-needed overhaul of economic policy within Russia.

Russia is combatting economic strife and political pressure from the rest of the world by revitalizing its consumer market. Brand development is a key success factor in this revitalization process. If the country continues to mimic the United States of America in the rebuilding of its consumer market, the middle-class poverty in Russia can potentially be eradicated and lead Russia into the new decade of economic growth and prosperity.

– Nicholas Maldarelli

Photo: Pixabay

Middle EastIt seems like every year, another company or app comes out that changes our lives and disrupts traditional businesses. Netflix changed movies and TV shows, Uber changed individual transportation and Airbnb changed the hotel industry. These new and innovative companies have allowed more people to access services that may have been out of reach in the past.

Now, this trend has taken hold in an unlikely place: the Middle East.

Currently, the two most prominent Middle Eastern startups in the region are Souq, an online e-commerce retailer and Careem, a ride-hailing service. While these firms are not based around wholly original ideas, the mere fact of their creation shows a desire for citizens in these countries to utilize smart technology to improve their daily lives.

Amazon’s acquisition of Souq in 2017 showed the effectiveness of the firm in the region, considering that Amazon’s modus operandi when entering new regions involves launching its own platform paired with a substantial investment component. The efficiency of Souq, however, allowed Amazon to make a direct buyout instead.

Startups like those seen in other parts of the world are sprouting up in the region regardless of the challenging economic and political circumstances they face. In 2016, the top 100 startups in the region raised over $1.42 billion, with each firm raising at least $500,000. But this does not come easily.

Many Middle Eastern countries do not have a conducive climate for startups compared to western Europe and North America. Bankruptcy laws and overregulation have stifled innovation for decades. However, the increase in startup firms in a variety of sectors shows a young, tech-savvy population that seeks to innovate and reinvigorate the economies of the Arab world.

Jamalon, an online book-selling firm, was started by a Jordanian who grew up in Palestinian refugee camps. Ala’ Alsallal saw a need for greater access to Arabic-language books for people in the region, especially works that are banned by various governments in the region.

“You know what the censors told me? ‘We don’t want any books that can change the way people think,'” Alsallal told Forbes Magazine. “That doesn’t matter,” he says. “We just keep sending them.”

Entrepreneurship with a social mission is common among startups, and it is no different in the Middle East, as shown by Jamalon. Average citizens are destined to benefit immensely from these companies. If this trend continues, the advent of Middle Eastern startups will increase access to services and will improve the quality of life for the people of the region.

Daniel Cavins
Photo: Flickr

The expansion of a country’s middle class has often been regarded as a sign of development. In recent years, there has been a rise of the middle class in the developing world, resulting in economic prosperity, as well as a potential for more social security.

A report by Homi Kharas titled “The Unprecedented Expansion of the Global Middle Class” provides significant statistics on this topic. Worldwide, there are approximately 3.2 billion middle-class members, with this number expected to increase in the upcoming years.

Such is due in part to a decline in world poverty, with the rate of those living on less than $1.90 a day being about 10 percent. The largest reduction in poverty can be seen in Asia, particularly in the countries China, Indonesia, and India.

However, progress in poverty reduction and its related development of the middle class has been disproportionate. Regions of sub-Saharan Africa still see the greatest diffusion of poverty, with half of the world’s extreme poor being housed here.

Yet, despite this, there is cause for optimism. The GDP of developing countries, measured in terms of purchasing power parity, grew from approximately $35 trillion in 2005 to more than $40 trillion in 2011. Such an increase is reflective of an enlargement of the middle class.

While this clearly has economic consequences, it also has social ones. Predictions have been made regarding advancements in world democracy, as more middle-class citizens in developing nations recognize their potential to bring about governmental change. Strength comes in numbers.

As OECD director  Mario Pezzini comments: “Middle-class expectations in emerging and developing countries are rising and evolving as their countries’ economic situations improve… They are no longer satisfied with simply having access to public services; they are increasingly concerned with their quality.”

This, in turn, may have repercussions for world poverty, assuming governments are able to meet public demands. It has been universally recognized that causes of poverty include insufficient access to public resources such as education and healthcare, especially for rural inhabitants.

Assuming governments are able to meet public demands, if these public resources are not only expanded but improved, it is likely that global poverty will be further reduced. However, such is only speculative. Only time can reveal the future of poverty worldwide.

What appears to be certain, however, is that the rise of the middle class in the developing world has a number of positive consequences. Collective leaders should continue to ensure such growth in order to reduce poverty, bring about economic expansion and increase social opportunities worldwide.

Gigi DeLorenzo

Photo: Flickr

Rising Middle Class in Emerging Countries
One sign of the rising middle class in emerging countries is the optimistic projection for the global airline industry. An industry study conducted by analyst DKMA indicates that airline passenger traffic should double by 2035. More than half of the eight billion additional passengers will come from the Asia-Pacific, and 70 percent of future traffic growth will come from the new middle class in emerging countries as more people leave poverty.

The airline industry will be the latest to catch the rising wave of the global middle class. Other “connection” industries that are riding this wave include the cell phone industry, with seven billion devices in use around the world, and the internet, with 3.2 billion people connected to it and each other, according to the Wall Street Daily. In fact, internet users in developing nations outnumber those in developed nations two to one.

Middle class growth drives economic change as people leave poverty. Just 25 years ago, one-quarter of the population of emerging countries lived in extreme poverty, getting by on less than $1.25 per day. Today, that number has been more than halved. Just 10 percent live in extreme poverty. In the last two years alone, 100 million households in emerging countries moved from poverty to the middle class, according to a report by Credit Suisse.

The global middle class now numbers more than 1.8 billion. If current trends of falling poverty continue, the middle class will reach 3.2 billion by 2020 and 4.9 billion by 2030, according to the OECD Observer.

Consistent with the airline study projections, most of this growth is projected to take place in Asia. Asia is anticipated to be responsible for 66 percent of the global middle class population by the end of the next decade, up from 28 percent at the end of the last decade, and the continent will account for 59 percent of all consumption by the middle class, up from 23 percent.

The OECD reports that over the next 20 years, the Asia-Pacific market is projected to grow at a 5.3 percent rate; the Middle East, at a 5.2 percent rate, and Latin America and the Caribbean at a 4.7 percent rate. Further, there will eventually be more passengers on planes from emerging countries such as India and Indonesia than from long-time market leaders Japan, Germany and the United Kingdom, according to DKMA.

The booming air traffic economy in emerging countries could have positive economic effects on the ground. Airports will need to invest in new construction or renovations and increase staff and services to keep up with the greater demand. This economic trend has the potential to further influence global poverty rates in the future, demonstrating the way positive progress toward ending global poverty continues to impact the world.

Robert Cornet

Photo: Flickr

Is a Global Middle Class Possible?
The first 15 years of the 21st century saw 700 million people lifted out of extreme poverty. As people moved from poverty to low-income levels, many economists started coining the term “global middle class;” a class that will form the backbone of democratic governments and economic stability across the world.

A global middle class that composes the majority of the planet’s population is currently just an idea. To make it a reality, poverty rates need to fall while the number of people living in the subsequent income brackets need to continue their ascent.

Economists faced an issue when trying to characterize a global middle class. The most advanced nations have much higher living standards than developing nations, so characterizing a “global middle class” would reveal discrepancies in living standards. For example, a citizen of Brazil living on $16 per day will be classified as “middle income” but would straddle the poverty line in America.

Economists eventually concluded that living on $10 a day constitutes the beginning of the global middle class (and continues up to $20). When an individual reaches this threshold, he or she becomes more economically secure, and his or her chances of falling back into poverty drop significantly.

Currently, the global middle class encompasses 13 percent of the earth’s population. It has increased by roughly 385 million since the Millennium Development Goals were instituted in 2000.

Reuters magazine projects that this class will grow from two billion to almost five billion by 2030, making it the biggest class in the world.

But, today, almost 60 percent of the world population is still considered “low income,” living on $2 to $10 per day. This number must continue to lower so that millions can reach the global middle class.

A study by the McKinney Global Institute in 2012 found that people living on $10 a day or more become “consumers.” They study titled this bracket of people the “global consumer class.” This class can influence purchasing power and drive demand for products, creating markets in regions that traditionally have not had them.

The consumer class can also have positive impacts politically. A study by the PEW Research Center found that when citizens with more economic security strive for social change, that will further benefit the middle and poor classes. The study also linked a country’s income and education levels to the quality of government it has.

Although the global middle class is still in its infancy, it has come a long way since 2000. Millions will continue to climb the economic ladder into the middle class.

This class will make the world a better place, politically and economically. That’s why the continued implementation of the Millennial Development Goals and other methods of foreign aid are so important.

Kevin Meyers

Sources: OECD Observer, McKinsey, PEW Global, Reuters
Photo: Flickr