The rise of the middle class has arguably been the key social trend of the last 100 years, with the growth underpinning a host of social and economic trends.  The trend is not guaranteed to continue however, with a new report from the OECD highlighting the pressure currently being placed on the middle class in a host of high-income countries.

The middle class is defined as having a disposable income of between 75% and 200% of the median, which in the UK would translate as an after-tax income of between £13,500 and £36,100 for an individual or £27,000 and £72,200 for a couple with two children (based upon 2016 prices).

Despite this relatively low bar, the data revealed that across the 37 member countries of the OECD, membership of the middle class fell from 64% of households to 61% between the mid 1980s and the mid 2010s.  This also reflected a lower influence of this group as the engine of economic activity.  The period was marked by rapid growth in the wealth of the richest 10% and above-inflation rises in most essential items, especially housing.

Squeezed middle

In the UK, the middle class represents 59% of the population, which is slightly below the 61% average across the OECD.  This is largely because of the larger share of the population earning twice the median household income (11% versus just 4% in Denmark).  What’s more, the data also highlights the volatility of income across the UK, with around 2/3 of those with incomes below 75% of the median seeing their income rise or fall by at least 20% between 2007 and 2015.  This compares with around 1/3 for OECD nations on average.  What’s more, the middle class in the UK were also more likely to descend into poverty than their peers in other OECD countries.

Interestingly, despite the OECD data, which is obviously based upon one’s income, classes a large majority of Brits as middle class, just 42% actually self-regard themselves in such a way.  Indeed, more Brits were likely to regard themselves as working-class than in any other European country.

Income is, of course, only one way of assessing people’s real or perceived class.  Another way might be their status in terms of pay and their position in the labor market.  For instance, the employment rate of the UK is high, but many of these are in part-time work.  Indeed, the proportion of people who are in full-time and well paid work was just 44.2%, which is significantly below the OECD average.  Perhaps unsurprisingly, those countries with the highest number of people in full-time and well-paid jobs also had the highest share of people in the middle class.

A policy concern

This should be seen as a source of political concern, as there is considerable evidence that falling economic power is associated with falling political engagement.  If we accept the decline in the middle class, we’re accepting the increasing polarisation between rich and poor, with the bridge between the two indelibly burnt.

So how can the middle class be better supported?  The OECD report outlines a number of policy options that could help, including improving access to high-quality public services, an expansion of social protection coverage, an expansion in the availability of affordable housing, and greater investment in education, especially of vocational education.

Governments can also implement various labor-market reforms to boost productivity, and to ensure that these gains materialize in wage increases and better work conditions, especially for those in low-income roles.