OECD: Middle Class Shrinking in Rich Countries


The Organization for Economic Co-operation and Development recently presented a report during a UN meeting where they claim that the size of the middle class is declining in the most economically developed countries while the richest and powerful are enjoying improving earnings, boosting social and economic inequality.

While 68 percent of baby boomers belonged to the middle class when they were in their twenties, 60% of millennials (those born between 1983 and 2002) aren't as lucky. The report defines the middle class as a group consisting on the people who earn between 75% and 200% of the national median income.

The report, called "Under Pressure: The Squeezed Middle Class", claims that rising costs of living are among the main factors behind this phenomenon, coupled with stagnant salaries and unstable employment. Housing, health, and education costs are among the main cause of this rise in the cost of living, as these expenses tend to be more than the increase in salaries.

This costly lifestyle makes millenials spend more than what they earn, making them get debt to sustain their life rhythm.

The median income, on the other hand, is increasing at a slower pace, 0.3% compared to 1.0% in the 80s and 1.6% in the 90s and the following decade. Only Israel and Turkey enjoyed better median incomes after the 2008 crisis, which has affected the middle class enormously and has shaped their expectations about the future.

Millennials are also suffering from employment insecurity, mostly caused by automation, which is currently threatening around 16% of middle-class jobs.

This phenomenon is related to the increase in populism and to the nascent social movements in the first world countries and the diminishing social mobility.

The OECD recommends that its members to invest in education for the middle class in order to boost their earnings, and that they implement a more progressive tax system.

Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.