Global inequality

Capítulo 4

The Middle class shrinks in the West, but China pulls up global income

Despite the advance of Asian countries, the largest share of high incomes is still concentrated in the US and Europe

Fernando Canzian

For economist Rakesh Kochhar of the Pew Research Center in Washington, China is the country that has most contributed to the rise of the middle class in the world.

Several factors have lead, however, to the shrinkage of the middle class in the West.

Rakesh Kochhar, senior researcher at the Pew Research Center in Washington, focusing on the US and global middle classes. He holds a doctorate in economics from Brown University

Asian countries, especially China, are rapidly pulling millions out of extreme poverty and, unlike the West, have expanded their middle classes. What is the future of this process?

We divide people into five groups. We start at the poverty level, and we go to the low income, middle income, high middle income, and high-income groups.

The average income includes people earning between $ 10 and $ 20 a day. Overall, the number of people with this average income bracket has doubled since 2000.

Much of this growth came only from China, accounting for more than half of this increase.

So middle-class growth in some parts of the world is due to the large number of people in China who have benefited from tremendous growth based on economic reforms begun in the 1980s.

Second, Latin America is also contributing to the growth of the middle class, particularly Argentina and Brazil. This region contributed about 50 million people who recently reached middle income in this century.

In other fast-growing countries like India, people migrated from poverty to the low-income group.

But a large number of people still need to reach the middle-income group, according to the overall standard.

So there is growth, but it is not egalitarian. Some middle-income countries are still behind the curve compared to other high-income countries, such as Western Europe or the United States and Canada, where the upper-middle class prevails.

There was some improvement. But the vast majority, between 80% and 90% of people considered globally as high-income, still live in these Western countries.

In regards to income concentration and the shrinking middle class, many say Asia is the cause because industrial production shifted to there. But there are other aspects, such as the decline of trade unions and technology. What is your opinion?

There are many factors here. Unfortunately, we do not have a good answer for how much each factor contributed to the decline of middle-class participation.

The decline of trade unions, associated with the decline of the manufacturing industry, played an important role.

Globalization and competition, with more overseas laborers capable of doing the work that was done in the United States, for example, also played a role.

The same goes for technology. Most people say that technology has more to do with it than anything else. By technology, we understand that the engineer who designs the car is very productive. He or she benefits from computerization. This person is productive and well paid.

But the same computerization, or automation, takes away the work of the person who used to put together the car. She or he is replaced, and her income and jobs are under pressure.

Most people would point to technology, globalization, and the weakening of trade unions as a combination of forces that contributed to the decline of the middle class.

But it is not possible to define whether this explains 50% or 80% of the problem.