The Global Middle Class

Wash Post: The world is on the brink of a historic milestone: By 2020, more than half of the world’s population will be “middle class,” according to Brookings Institution scholar Homi Kharas.

Kharas defines the middle class as people who have enough money to cover basics needs, such as food, clothing and shelter, and still have enough left over for a few luxuries, such as fancy food, a television, a motorbike, home improvements or higher education.

It’s a critical juncture: After thousands of years of most people on the planet living as serfs, as slaves or in other destitute scenarios, half the population now has the financial means to be able to do more than just try to survive.

“There was almost no middle class before the Industrial Revolution began in the 1830s,” Kharas said. “It was just royalty and peasants. Now we are about to have a majority middle-class world.”

(Kharas’s definition of middle class takes into account differences in prices across countries.)

It’s interesting that middle class values are also expanding, especially in Asia, even as they may be declining in the United States:

According to the World Values Survey (2015), people in countries with burgeoning middle classes do not feel that governments are responsible for their
success, but rather that it is thrift, hard work, determination, and perseverance that count.


Higher education a luxury and not a right?

Correct. There was a middle class in the U.S. in 1970 when only 10% had college degrees. (That rose to 25% in 2000 and 33% today.)

There were unions

The overwhelming majority of workers during the 70's weren't in a union. In 1975, Union membership was about 22%, today it is about 12%. So, that's not really the reason.

You are certainly capable of understanding that the benefits of union membership rippled beyond the fact that they employed nearlt a quarter of all workers

Yes, however, that doesn't make it true.

Geez the willful ignorance this morning is palpable. If you are unable to understand how 25% of a market exerted pricing power over the entire market, then there's little hope of fixing that here.

Thanks, Teamsters!

Doctors are unionized too, essentially. What do you think the AMA is for?

'zactly. When its a trade association, regulation-setting, or lobbying group for the elite, then it's much differenter than unions.

Only 25% of practicing physicians belong to the AMA.

Only 25%. Then it obviously has no impact. lol

Unions still affected wage and benefit levels even for non-unionized workers, since those workers could quit and go work in a unionized place.

Yes... since workplaces with unions were known for increasing the demand for labor... oh... wait.

You obviously never lived anywhere here there were unions. I grew up in Michigan. Back then GM was known as "the 13th grade" since any guy coming out of high school and not going to college and not going into the military could get a job there.

There were unions, yes.

More importantly there was essentially no global competition in high value add manufacturing. Which allowed for all the inefficiencies.

Those days are gone.

And that is to be celebrated. Hundreds and hundreds of millions of people are being lifted out of grinding poverty.

That the son of a UAW member has to become a nurse or an orderly, there isn’t a violin small enough to express how little we should give a shit.

Not clear why you felt compelled to express such hostility towards your neighbors whose incomes and opportinities took such a tremendous hit in a single generation. Maybe youre just a bitter person by nature.

Of course the competition gains you cite have more to do with the preferences given to mobile capital over terrestial labor

Apathy is not hostility.

Citation needed for incomes ‘taking a tremendous hit.” It’s certainly not in the data that median wages have gone down. Median wages have gone up, as well as living standards.

Labor mobility - great, I agree we should increase immigration.

Hundreds of millions of people are no longer living in crushing poverty. This is one of the greatest, if not the greatest human miracle to have ever occurred.

If the cost is unions disappearing and US auto manufacturing employment declining, then yeah that’s a no brainer.

Wages will equalize over time, unskilled labor is unskilled labor. Medium skill labor is medium skill labor. There’s no reason someone in the US should make 5x the hourly wage as the global wage. We slowly march towards equilibrium, and the best thing is wages aren’t going down in the US, it’s other countries seeing rapidly rising wages!

What’s not to love?

You have a remarkably rose-tinted take on this march to global middle class-ness. Suicide of factory drones and farmers, and destroyed rural cultures and separated families probably don't rate in your assessment; just a little more spilt milk.

As far as the economic stagnation for large segments of the US workforce, I assume you are being deliberately ignorant in claiming this needs citation.

I'm with McMike on this one. What really happened is the elite took their money and invested it across borders to find the cheapest labor - to hell with their neighbors. It is a race to the bottom. However, unfortunately for the elite, they are, by definition, a minority and the losers in this game can vote.

As for the rise of the middle class around the world, that is a good thing, but the elite don't really care, it is a side effect that they can cite to bolster their arguments. They have no feelings, only love for their own money, power, and status. The noise about the rising global middle class is just virtue signalling.

But don't you worry, that grating sound you hear is the file sharpening the blade of the guillotine.

Narratives and feelings. With a heavy dose of projection and threats for good measure. And a stubborn rejection of reality.

Populism in all its glory.

By the ‘elite’ I assume you mean CALSTERs. Because the people you are railing against are basically institutional investors managing large pension and retirement funds.

Oh, you didn’t realize your retirement funds are predicated on capital earning a certain rate of return?

What I realize is how much of that return is siphoned back to Wall Street in the form of parasitic fees, direct and indirect.

You are surely also aware that the vast majority of the market is owned by a small minority of people. If not, feel free to Google and educate yourself.

I disnt realuze so many Democrats posted here.

America hss fallen nder the the jackboit of the Soroses and Koches!!

This is not even remotely true. This is a soundbite of Vox/Ocasio-Cortez nonsense.

You’re comparing individuals holding stocks, but that is willfully distorting the truth.

The truth, of course, is that it’s institutional investors, aka retirement funds, pension funds, and individuals investing for retirement.

That’s why over 2/3 of the S&P is owned by ....everyone with a retirement account or pension fund. 66% institutional.

For the largest companies it’s closer to 80%.

Where does this nonsense come from?

Speaking of nonsense, you are combining mutual funds with pension funds and then pretending its all retirement accounts owned by little people.

47% of mutual fund assets are in retirement funds.

That only includes literal retirement funds: 401k 403b ira, etc.

Utter nonsense. The top 10% own 80+ of all stocks, including both direct and indirect, mutual funds and 401ks etc

Just saying the word 401k like a magic spell does not change the fact that the majority of those savings are held by the upper classes.

Us equity market : $30 trillion

Us retirement assets, total: $19.1 trillion

Us public retirement assets, literally only public sector : $10 trillion

Your best bet here is to take JWatts approach now, and blame people for not saving enough.

Feel free to add citations to your own work, since that is so important to you.

Your finance knowledge is lacking.


Total pension assets: 19.9 trillion as of latest fed report

State and local public: $6.53 trillion

Federal: $4.1 trillion.

Over half of the 20 trillion is Public employees alone.

This data gets reported every quarter. Not really an excuse to not understand how this works.

Can’t link to tables directly apparently.

Under balance sheet.


You are being deliberately evasive now. With a little ad hominem to underscore it.

I sent you an article based on a study of the question at hand - the concentration of ownership of stocks. The study is widely published.

You ignored it and insulted me instead. Tiresome troll.

I gave you the Fed Reserve data for the latest quarter.

You linked an article from “Don’”, which by the way includes none of the figures you have been tossing around.

Which, in a microcosm, is the essence of this conversation.

I hope this is willful ignorance on your part rather than an idiotic blind spot. You insist on waiving around institutional ownership of stocks, seemingly clueless as to ascertaining who actually owns the institutional balances.

I see you've been getting your talking points from a White House spokesperson, which explains a lot

So the conspiracy theory is that Cohn got in a time machine and has been secretly manipulating federal reserve data for 30 years?

Yikes. The trumpistas have lost their minds.

I gave you the numbers for public pension assets, which stand at over $10 trillion. Alone.


I gotta hand it to ya, you show a dogged refusal to deal with this finding. Probably to prevent your brain from exploding.

"Research from economist Edward Wolff of New York University, using data from the Federal Reserve, found that 94 percent of the top 1 percent own stock either directly or indirectly, compared with 41 percent of the middle class.

In 2013, the richest 10 percent accounted for about 85 percent to 90 percent of stock shares, bonds, trusts and business equity.

Pensions themselves are also top heavy. The bottom 90 percent of households accounted for only 35 percent of the value of all pension accounts, according to Wolff's research. The top 10 percent own the rest."

"The top 10% own 80+ of all stocks"

That's kind of a tautology. If you buy and invest in stocks in a regular manner, your household wealth inflates and you become rich. Most American's don't save, but those who do tend to prosper.

Any American making close to the median household income can retire in the top 20% of wealth by saving 10-20% of their income starting in their 20's. This isn't a secret. It's well advertised. Most people would rather buy a new car though.

hmm, kind of a strawman there, plucked from the gauzy platitudes of someone's grandpa there , without much connection to economic reality for the vast majority of Americans.

Strawman? No, it's not a strawman argument. Try harder.

McMike is correct on all counts.

Many people in the lower 80% cannot afford to save enough for retirement. If they are lucky enough to have a home mortgage they are struggling to pay the mortgage, insurance, property taxes, and maintenance costs. Add transportation costs, education for their kids - now financed via hideous loans - and medical insurance and there is not much left.

As for government pensions, that gives me no solace. Most government workers are overpaid and underworked and most of our state and local budgets, and thus taxes, goes to finance the lifestyle of this lucky group of special people. In my area, about one in six people are government employees and there are lots of young retired people enjoying government pensions that we have to pay for, both via taxes and all the services not delivered because our tax payments are used to buy stocks for government employees. I despise this system.

"Many people in the lower 80% cannot afford to save enough for retirement. "

They choose not to. That's not the same as can't. Don't get me wrong, I'm not saying it's particularly easy. But you are saying it's impossible, which is flat out wrong. It's quite obviously wrong, as indicated by the numerous amount of middle class people who do save and retire with substantial assets.

Saving 20% of your post tax income is not impossible. Never buying a "New" car is not impossible. It's just abnormal.

Could society make it easier? Sure. But there's no legitimate argument, that a middle class American can't save enough to retire with a decent amount of wealth. It literally happens every single day.

You are clearly ensconced in the bubble.

Indeed, I'm in the bubble of my wife and I never buying a brand new car. Indeed, we've saved up and paid cash for every vehicle for the last 20 years.

It kind of sucks that I drive a beater 2010 Toyota Camry with 160K miles on it, even though I could "afford" better. I'm sure you drive a much nicer car.

Suicide, destroyed ‘rural cultures’ and separated families. Citation needed, thanks.

Are you specifically speaking about China? Please throw some sources in here, I’m not sure where you are getting your information.

You said wages took “a tremendous hit”, colloquially the implication is that wages have cratered, or allowing for hyperbole, declined precipitously.

Obviously that’s not literally true at all, so I’d like to see the sources.

You have a lot of narratives, and zero facts so far.

This isn’t mother jones.

Stagnation of real wages over decades is fairly described as precipitous, given the previous multi-generational trajectory.

I'll not provide citations for widely published information that you are surely already aware of, and capable of finding for yourself.

I will clarify that I am including also India.

Okay, so we’ve gone from ‘tremendous hit’ to stagnation. We are on the right track McMike. Baby steps towards reality.

The cash part of compensation has indeed stagnated. Benefits have become a larger % of compensation, and obviously this skews the farther you go down the ladder into middle class.

But why listen to me, the BLS literally measures this every quarter.

Average compensation as of 3/18 is $36.32 an hour. $11.55 of that is in benefits.

Which has obviously risen since whatever Trumpian golden age you are thinking back to.

After several decades of stagnation , the difference between the previous trajectory and current is indeed a cliff. On the order of 150% gap

Talking about benefit increases is silly without talking about how much of that shuttles right back out the door as health insurance premiums.

Health care is $3.03 an hour.

So the rest of that is other benefits.

So on the facts again, you’re wrong.


Unless you think workers in the 1970s were earning $8.52 an hour just in nonmedical benefits.

Which, citation needed.

Nonsense argument

Yes, when the facts conflict with your worldview, abandon the facts.

Certainly a Trumpian method.

And when you are troll; spend most of your time cherry picking and asking for citations.

Yes, it must be uncomfortable to have your narrative challenged by facts.

You made a lot of claims to fit your worldview.

The problem is they’re not supported by reality.

You keep saying that as if you think it will make it true, or convince anyone.

Well McMike, he does have the facts and reality on his side, which I personally find fairly persuasive.

Got to agree with my anonymous friend McMike, Hmm is wiping the floor with you.


Not clear why you felt compelled to express such hostility towards your neighbors whose incomes and opportinities took such a tremendous hit in a single generation.

To this:

As far as the economic stagnation for large segments of the US workforce, I assume you are being deliberately ignorant in claiming this needs citation.

Is a great leap. Can we agree that stagnation is not a tremendous hit?

Higher education is a right. Diplomas are a luxury.

In countries where higher education is fully subsidized by taxes, the admission process ensures only 10-20% continues in higher education.

Everyone has the right to compete for a seat at the university, not the right to have a place.

Hold my beer

^ brilliant

10-20% is about the right amount that should go. We need more streamlined educational options. 2 year tech colleges would be good as well as some specific training in high school.

That is correct. Higher education is not a right. Why would it be? You don't need to survive. You don't need to get a job (even a decent job... plenty of construction workers, mechanics, delivery persons, etc., without college degrees). You don't need it to be an active member in your community. You don't need it to contribute to society. And no one has an obligation to give you a higher education or to be your professor (which is the flipside to higher education being a right). So no... it's not a right.

And I got sufficient training in elementary school English classes to know that I should have put "it" after a few of the "need"s in the above comment... so no... higher ed is not a right.

I do not know if I am becoming paranoid, but I am very sensitive to comments like “living as serfs, slaves or in other destitute scenarios”. Look the way they bundle together situations in which basic, negative rights of people are trampled, with simple situation of poverty. It seems the author implies that individuals have the natural right not to be destitute, just as they have the natural right not to be reduced in slavery.

Governments that do not allow for economic freedom are morally no different than those that allow serfdom or slavery. A population able to participate in a free market will naturally become wealthy, it takes positive action by a government to hold them down in poverty.

Yeah, right, as if our current situation in any way resembles a "free market".

But unemployment is at the lowest evar! And the stock market going gangbusters thanks to me! #maga

Bernie Sanders is not fooled by this corporate propaganda.

Rather, he is not edified by any explanation of market forces and principles.

Neither are Trump supporters apparently.

"“There was almost no middle class before the Industrial Revolution began in the 1830s,” Kharas said. “It was just royalty and peasants. Now we are about to have a majority middle-class world.”"
That is not accurate. Not as large, but there were, throughout European history, significant groups between royalty and peasants. Merchants, bankers, etc.

In 1820, 95 percent of the world lived in abject poverty.

I'd like to read or listen to anyone stating bankers are middle class.

My guess is that the author would agree with you that there were such groups, but that while they were sometimes politically significant, they were still numerically minuscule.

Freemen were about 10% of the population at the height of serfdom in the UK - I don't know if they would be considered as middle class by today's economic criteria (of course no-one could) but they certainly were a "middle class" by the literal definition.

It is highly inaccurate. See - A "Middle Class" existed in England in 1688. Tokugawa Japan had a significant urban class of non-peasants (and the samurai class themselves were significant).

Less than 50% of English workers in agriculture by 1688 -

Incomes universally fairly low before Industrial Revolution? Sure. But social structure? Far from "royalty and peasants".

The samurai were 7% to 10% of the population and very few drove Volvos.

They drove Toyotas, Japan hadn't yet opened up to trade.

As I wrote, very few drove Volvos.

As he wrote, they drove Toyotas.

Not sure how the WP came up with that definition for middle class, but in his report Kharas defines "middle class" broadly as annual income of a four-person household between $16,060 per year and $160,600 per year. That's quite a range. Kharas: "The global middle-class market is now clearly bi-furcated: a slow-growing developed country middle class, and a fast-growing emerging economy middle class . . . . The most dynamic segment of the global middle-class market is at the lower end of the scale". It seems that firms in developed countries not only shifted production to developing countries, they shifted the middle class there too. Anyway, I am a believer in trade, so I find the report to be good news for the global economy if a bit overstated (the income range for a family of four is misleading in my view). I would point out that inequality and increasing GDP have a positive correlation (i.e., rising GDP means rising inequality), something that Kharas ignores in his report (he assumes a constant income distribution in his projections).

As for Tabarrok's "middle class values", I would point out that the U.S. trade negotiators have complained to their counter-parts in China that China needs to consume more American-made goods as part of Trump's policy of reducing what he refers to as the deficit. It's true that China has an exceptionally high savings rate (about 45%). Is that a "middle class value"? If so, why would we be encouraging the Chinese to consume more and save less? One policy change in China that would greatly increase consumption would be the adoption of some form of social security benefit - China has nothing equivalent to social security, which helps explain why China's savings rate is so high. Would a social security benefit in China be consistent or inconsistent with "middle class values"?

"Would a social security benefit in China be consistent or inconsistent with "middle class values"?" Neither, or both? If the Chinese are saving 45% of their income why would they need SS?

"what he refers to as...." May be new to you, but talk about the trade deficit has been around for a long time. Glad Trump could teach you something.

" If the Chinese are saving 45% of their income why would they need SS?"

Well, that's almost certainly not true. At best the figure is an average, and it probably includes 100's of millions of Chinese that earn next to nothing and save nothing. Chinese wealth disparity puts California to shame.

You dig into the numbers and your realize that this “growing middle class” live around the equivant of the “poverty line” in the first world. Global convergence of income means a lot of people living around that range, which is a big hit to quality of life for the developed worlds middle class.

"which is a big hit to quality of life for the developed worlds middle class"

That would only be if someone's income had gone down, right?

Median wages have been stagnant for decades and labor force participation has been falling. The more working class you make the measure, the worse it looks.

Moreover, when you look at the CPI it’s necessities that have gone up (housing, healthcare, education) while the stuff that got cheaper was mostly discretionary consumer gadgets.

All of this at the same time that we chewed up a huge demographic dividend that will be spent soon.

I'm confused. Real compensation has proceeded upwards apace, so where is the big hit to quality of life?

No middle class before 1830? And who exactly are those french bourgeois who overthrew the monarchy in 1789? And who are those "shopkeepers" of England for whom Napoleon had so much contempt while being powerless to defeat them?

The bourgeoisie you talk about were the rulers in the (pre?) capitalist France. In Marxist terms, these guys were the owners of the means of production: land, mills, early industries.

Yes, the bourgeois were neither aristocrats nor peasants. But, can they be considered middle-class while living from their rents/capital?

Compared to modern times - wall street businessmen, owners of some middle-high range franchises and so on. The percent would be the same. Also, do not mix France and England, that were the most industrial nations of the time, with the rest of the world. Remember, England population in 1800 was 56 mil, Qing (China) - 300 mil, Maratha - 170, Russia - 35 mil, France - 46. So, even if there was a significant portion of middle class in the top countries (let's say there was as much as 10%, which isn't true), England and France were just 10% of world population, so that brings the middle-class to a meager 1%. Let's not discuss middle class in 19th century Russia or China or India. It's basically non-existent. Nowadays, all of these developing countries have a very healthy portion of reasonably wealthy people.

Oh, wait, let me rephrase that. I made a mistake. 40 mil of British Empire was in British India. So that's brings bourgeoisie to 0,5% of world population or something like that.

It's like the rest of the world isn't really this impoverished ghetto where heartless Westerners keep everybody else locked up.


Sorry, I thought I was McMike for a second there.

Stop acting like a dumb prick.

In the early 1960's I worked for a major US multi-national company in Venezuela. Someone who worked for us could send his kids to school, own a car and a house. I would call that middle class. Of course that individual would be better off than most people in Venezuela. It seemed similar to what I saw in the rural Southeast in the 1950s where outdoor toilets were still common.

Is it my imagination, or are an increasing number of these MR cited study pieces fully reliant on dubious strawman premises to get off the ground, and require comically questionable methodologies to stay in the air?

Increasing number?

Cite please. Loyal readers (and disloyal, for that matter) would suggest there has been little to no rise over the years.

You could always start your own blog of course. And post exactly the content you desire. That would seem to be a more rational response than to continue to whine about the contents of this blog.

'than to continue to whine about the contents of this blog'

And here I was, thinking that my comment was directed to McMike, and the way he tends to not support his statements very well (though in fairness, links are provided at times). As seen in this very comment thread, actually, thus prompting my comment.

Of course, you are welcome to disagree with me and agree with McMike that there has been such a rise recently.

Nice to see you are still sticking with that passive aggressiveness.

Somebody making repeated comments about "Disloyal readers" is showing a stunted ability to make effective criticisms. Instead you are relying on passive aggressive language to attempt to distance yourself from legitimate debate. Furthermore, the phrasing "you are welcome to " is yet more such immature phrasing.

If you talk like an emotionally troubled teenager, without expressing yourself in an effective and adult manner, then your posts will continue to be ineffective.

It is not your imagination, and your bubble-dwelling detractors don't have a clue about the lived experience of most of their fellows. Perhaps ignorance helps them sleep at night.

This strange coming form the Post... the destroyer of middle class values...

The victory of reason and Christianity over greed and envy?

Wonderful thoughts. I'd like to read or listen to anyone stating bankers are middle class.

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