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The Missing Global Middle Class

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Although one billion people have risen out of extreme poverty in the past 15 years, concerns still remain. Amid the success in this impressive reduction, there are new concerns over how those who have risen up out of extreme poverty are transitioning into a working middle class.

A new study from the Pew Research Center found that, despite slight growth in the population living on between $10-20 per day (middle income), the growth was largely concentrated in specific regions of the world. These hot spots of growth include China, Eastern Europe and South America. In areas where extreme poverty is extremely concentrated, such as in India, Southeast Asia, Africa and Central America, growth was minimal. Furthermore, there are still large inequalities in wealth distribution, as demonstrated in the areas that have the majority of middle and upper income populations—North America and Europe.

The study also notes that even in these specific areas of improved prosperity, the improvements in their standards of living and qualities of life did not improve as much as may have been expected. Another reason for small middle class growth, despite larger reductions in extreme poverty, is the volatility of climate change. Of the many factors that push people back into poverty, climate change is increasingly understood as the true threat, as changing weather brings its effects to light.

The lack of growth in the middle class has huge implications on individual countries and globally. The middle class was predicted to have grown, which would have increased national economic and political participation and boosted health outcomes.

Many experts associate the development of the middle class with a certain advantageous social structure that benefits the country as a whole. The middle class is generally able to focus less on strictly surviving, which enables them to make certain choices about the kind of lives they want to live, and to demand rights to make those choices, which leads to, all around, more developed nations.

Still, over 70% of the world’s population lives in poor to low-income levels, and progress still needs to be made. The disparities seen, despite progress, are calls to action. One of the biggest public health and developmental challenges we face today is that of inequality and inequity. Seeing such discrepancies on a global level is further proof that this is a problem that needs global attention.

The report brings attention to the fact that, although poverty reduction has been successful in some cases, on a more global and long-term level, changes need to be made. There need to be more effective strategies aimed at not only helping people come out of poverty, but also helping people stay out of poverty. We now know that the effects that we had hoped to see as a result of poverty reduction have many intermittent steps and barriers that also need to be addressed in order to see the kind of results that were predicted. The benefits of a growing middle class are achievable and progress in poverty reduction is the first step, but until the other barriers that new global middle class members face are also addressed, people, their nations, and the world will not see the maximum benefits.

– Emma Dowd

Sources: BBC, Pew Global
Photo: Deccan Chronicle

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The Rising Middle Class in Latin America

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When people are asked to picture Latin America, an image of poverty usually comes to mind. Yet while it is true that Latin America has historically been a region of high rates of poverty and income inequality, income inequality has in fact declined in 13 of 17 countries as measured by the Gini coefficient. The Gini coefficient is used to determine the level of income inequality in a country wherein a score of 0 is given to countries with complete equality (countries whose citizens have the same income) while a score of 1 is given to perfectly unequal countries (those in which one person owns all the income).

Recent data by the World Bank suggests that there has been a successful push to reduce poverty in the region, with the number of people living in extreme poverty (defined as those living on less than $2.50 a day) halved to 12.3 percent between 2003 and 2012. The largest proportion of the population, at 38 percent, includes those that are most vulnerable to falling back into poverty. This last part includes those making between $4-$10 a day. The middle class in Latin America is growing extremely rapidly at 34.3 percent of the population and is set to overtake the most vulnerable to become the largest segment of Latin America. The middle class is defined as the number of people who earn between $10-$50 a day.

Yet these numbers are a bit misleading. There continues to be a large degree of inequality between Latin Americans of different ethnicities. In Brazil, 76.4 percent of primary school children who are descended from Europeans are enrolled in school, while only 65.3 percent of indigenous or African children are enrolled. Similarly, in Chile 97 percent of families of European descent are enrolled in school, while 74.4 percent of children of indigenous or African descent are enrolled.

This is significant because as the middle class expands, it’s going to be able to expend more money on disposable goods and fuel economic growth. It will also be interesting to see what happens as the middle class demands more of a stake in the political process.

– Jeff Meyer

Sources: World Bank, IARIW
Photo: Not Adam and Steve

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Africa’s Rising Middle Class

Growing Middle Class in Africa
The middle class is essential for economic and democratic growth. The continent of Africa, consisting of 54 independent countries, contains the poorest countries in the world, according to the human development index created by the United Nations. However, over the last 15 years, the middle class in Africa has grown.

As the middle class expands, so does consumerism. The growth of the African middle class not only means more stability for Africa, but also more profit for American businesses. More of the African population is buying televisions, cell phones, and leisure and entertainment items, which Western companies provide.

But, how is the African middle class defined? In the U.S., there is a struggle to define the middle class. However, it is clear that those earning about $20,000 to $120,000 a year would categorize themselves as middle class. In Africa, the range is quite different. The middle class consists of those earning $2-$20 a day, or $730-$7,300 a year.

A strong and large African middle class is beneficial. The African middle class consumed approximately $680 billion in 2008, consisting of nearly a quarter of Africa’s GDP. At this rate, Africa will comprise approximately 3 percent of worldwide consumption by 2020, with about $2.2 trillion of consumer spending. The middle class will help grow the economy as they have more income to spend and can invest more of their finances in health and education. However, 60 percent of the African population continues to earn a meager $2-$4 daily.

Those in this floating class, earning $2-$4 a day, are at risk of leaving the middle class and descending into poverty. This represents 180 million people. The floating class could slip into poverty very easily; a job loss or the death of the head of household could cause the slip. Therefore, a balancing act is required to help grow the middle class while also preventing the floating class from slipping back into poverty.

Policies that focus on both human capital development and job generation will ensure the growth of the African middle class. Continued improvements in governance, better access to technology, the rapid spread of mobile telephones, and the better use of natural resources are necessary. Additionally, social changes and policies that focus on education and health will work to support those earning $2-$4 a day.

The U.S. should continue investing in Africa through aid. History demonstrates that the U.S. benefits greatly by assisting poorer countries. For instance, from 1960 to 1974 the U.S. provided South Korea with $5.6 billion in aid. In 2010, the annual U.S. export to South Korea was $38.8 billion. But this is just one example. Find more information about the benefits of reducing global poverty here.

Now is the time to increase the investment in Africa. As the middle class is beginning to grow, investment in Africa will result in a more stable economy, growth of democracy, and an increase in consumerism. Both the U.S. and Africa will benefit from building a strong middle class throughout Africa.

– Caressa Kruth

Sources: How We Made It In Africa, UN Development Program, The Borgen Project, National Geographic
Photo: Forbes India