In recent years, the term “middle class” has appeared frequently in business news\u2014so much so that it\u2019s almost overused.But the definition of the \u201cmiddle class\u201d is highly ambiguous, with over a hundred different criteria used to define it. These include considerations of income, assets, occupation, education level, and social status.Even if we focus on just one relatively concrete metric\u2014income\u2014the standards vary widely. For example, many research institutions in Europe and the United States define the middle class as households earning between two-thirds to twice the national median income.<\/p>\n\n\n\n
Under such vague definitions, many people are unsure whether they truly belong to the middle class. But one general pattern holds: during economic upswings, more people consider themselves middle class than objective standards would suggest, while the opposite is true during downturns.For example, in the late 1970s, when Japan\u2019s economy was booming and per capita GDP reached $5,000, 60% of Japanese people identified as middle class.Similarly, in South Korea during the late 1980s economic boom, 70% of people considered themselves middle class\u2014higher than what objective metrics showed. But after the 2008 global financial crisis, only 40% of South Koreans self-identified as middle class, even though official statistics suggested around 60% still were.No matter how you define it, globally, the middle class generally consists of people who:<\/p>\n\n\n\n
In fact, these anxieties are not unfounded. Over the years, reports and studies from around the world frequently describe the middle class as being \u201csqueezed\u201d or \u201cshrinking.\u201dA recent article in The Wall Street Journal<\/em>titled \u201cThe American Middle Class Has Gone From Safe to Squeezed\u201d<\/em>argues that many middle-class Americans (those with household incomes between 53,000an<\/em>d<\/em>161,000) share a similarly pessimistic view of the economy as lower-income groups.CEOs from industries like dining, retail, fashion, and aviation noted that while high-income consumers continue spending, their middle-class clientele are growing increasingly strapped for cash.The article also highlights a growing confidence gap: the disparity in economic optimism between the wealthy and the middle-\/lower-income groups is now at its widest point in seven years of tracking\u2014meaning the rich are getting more optimistic, while the middle and poor classes are becoming more pessimistic.In France, according to the latest report from the French National Institute of Statistics and Economic Studies (INSEE), the share of national income held by middle-class families has dropped from 65% in the 1980s to just 54% in 2024.Moreover, inequality within the middle class itself is worsening: the top 10% of middle-income households now earn 3.2 times more than the bottom 10%, compared to just 2.4 times two decades ago.These are relatively recent findings, but the \u201cdecline of the middle class\u201d is not a new phenomenon of the past couple of years\u2014it\u2019s a long-term trend closely tied to each country\u2019s stage of economic development.Take the U.S., for example. In 1971, 61% of Americans were part of middle-class households. By 2023, that figure had fallen to 51%.Japan, after its economic bubble burst in the 1990s and entered a prolonged period of stagnation, gradually transformed from a middle-class society into what economist Kenichi Ohmae described as an \u201cM-shaped society\u201d\u2014where both high-income and low-income groups grew in number, while the middle-income bracket steadily shrank.A 2019 OECD report titled \u201cUnder Pressure: The Squeezed Middle Class\u201d<\/em>concluded that the middle class in most OECD countries has been shrinking, largely because younger generations find it harder to enter this stratum.The report attributed this to three main factors:<\/p>\n\n\n\n Again, the above mostly refers to developed countries. While the overall size of the middle-income group in developing countries\u2014including China\u2014may be expanding, when you factor in expenses like housing, education, healthcare, pensions, and the unpredictable nature of the job market, many in these countries also find themselves in a precarious middle-class position.<\/p>\n\n\n\n So, what\u2019s causing the instability and anxiety among the global middle class at a deeper level?The most obvious factor is economic growth and industrial development, which directly affect middle-class incomes and career prospects. The number of jobs offering \u201cmiddle-class\u201d compensation largely determines the size of the middle class.For example, in the U.S. during the 1950s\u201370s, the rise of manufacturing enabled many blue-collar workers to enjoy a comfortable middle-class life, leading to a steady expansion of the middle class.This is the era depicted in movies like Forrest Gump<\/em>, where the protagonist, despite average intelligence, succeeds through diligence, optimism, and integrity\u2014a time when the idea of the \u201cAmerican Dream\u201d suggested that anyone could achieve a decent, middle-class life.But starting in the mid-1970s, as Europe, Japan, and South Korea recovered from the devastation of WWII and began producing goods for the global market, reducing imports from the U.S., America\u2019s economic growth slowed.Driven by profit-seeking motives, American companies began globalizing production\u2014shifting manufacturing to lower-cost emerging economies\u2014resulting in widespread layoffs of blue-collar workers. At the same time, they cut employee benefits and weakened unions to further reduce costs.Over the past half-century, tens of millions of high-paying manufacturing jobs in industries like automotive, steel, and durable goods have disappeared. The share of manufacturing jobs in total employment plummeted from a peak of 35% to just around 9% today.By the 1990s, with the advent of the information age, headlines about \u201clayoffs\u201d and \u201cdeindustrialization\u201d gave way to stories of white-collar job cuts\u2014either due to automation or being replaced by lower-cost workers abroad.As a result, even though new technologies can create jobs, capital\u2019s pursuit of profit and the overreliance on neoliberal policies (financial liberalization, deregulation, open investment, and small-government economic ideologies) meant that many of these new jobs were created overseas rather than domestically. The good jobs didn\u2019t get replaced.This led to a widening divide between \u201cgood jobs\u201d and \u201cbad jobs,\u201d forming what\u2019s known as a \u201cdual labor market\u201d\u2014with a stark and nearly insurmountable divide between the two.\u201cGood jobs\u201d are concentrated in fields like finance, law, medicine, economics, and technology, while \u201cbad jobs\u201d are typically held by \u201cnon-standard workers\u201d\u2014those hired for specific tasks or projects, or simply as a flexible, low-cost labor option. These jobs offer little to no skill or experience accumulation, often paid by intermediaries, with minimal insurance or benefits. This makes it harder for more people to join the middle class.The same trends of economic decline, industrial transfer, and job loss have also significantly impacted the middle class in Europe and Japan.Therefore, fostering industrial development and upgrading to create more middle-class-compensated jobs\u2014and avoiding a stagnant \u201cdual labor market\u201d\u2014is crucial for strengthening the middle class.Years ago, Chinese economist Li Yining addressed this issue in his essay \u201cOn the Growth of Blue-Collar Middle Class.\u201d<\/em>He argued that \u201cblue-collar\u201d work should not be synonymous with \u201cbad jobs.\u201d Instead, by developing vocational and technical education, blue-collar workers can advance to become technicians or senior technicians, achieving middle-class status similar to some white-collar workers\u2014thus creating more channels for upward social mobility.In other words, becoming middle class shouldn\u2019t rely solely on competing in a few narrow fields or pathways. A more diversified approach is needed.Beyond economic and industrial factors, another key influence on middle-class stability is the volatility of the assets that provide them a sense of security.The middle class, while earning more than ordinary workers, often aspire to achieve financial freedom through investments in real estate, stocks, and other capital assets\u2014hoping to eventually escape the need to work.But investing in property or financial markets is a double-edged sword. Once involved, individuals are drawn into the ups and downs of financial cycles, with the value of their assets constantly fluctuating.The recent declines in real estate markets and repeated losses by retail investors in the stock market show that these so-called \u201csafe assets\u201d do not necessarily provide the stability middle-class families seek.What about investing in education? That too can lead to \u201ccredential inflation.\u201d The global phenomenon of declining value of educational qualifications needs no elaboration.Such unstable investments demand significant outlays of real money but yield highly uncertain returns.Many middle-class assets have become financialized\u2014not generating greater wealth, but instead reducing their ability to withstand crises and risks.Stanford historian Walter Scheidel, in his book \u201cThe Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century,\u201d<\/em>notes that historically, wars and crises have tended to reduce wealth inequality\u2014for example, the Great Depression of the 1930s hit the wealthy hard. But today, things are different. After the 2008 financial crisis, the U.S. implemented \u201cquantitative easing,\u201d which barely affected the wealthy\u2014in fact, they got richer\u2014while the middle class took a heavy blow.<\/p>\n\n\n\n Aside from external factors, there are also internal issues among the middle class: the tendency to fall into the \u201cmiddle-class consumption trap.\u201dKorean scholar Ku Haeg\u016dn, in his book \u201cPrivilege and Anxiety: The Korean Middle Class in the Age of Globalization,\u201d<\/em>describes a phenomenon where:<\/p>\n\n\n\n Individuals living in homes larger than 30 pyeong (approximately 99 square meters), earning over 90% of the national average income, holding at least community college-level education, and working in semi-professional or higher-status occupations\u2014people who objectively enjoy a higher standard of living than average\u2014nevertheless often don\u2019t consider themselves middle class.<\/p>\n<\/blockquote>\n\n\n\n This reflects how the standards for what counts as \u201cmiddle class\u201d have been raised to unrealistic levels.According to Ku, this is largely because ordinary middle-class individuals attempt to imitate the consumption patterns and lifestyles of the wealthy.This is also evident in the Korean middle class\u2019s obsession with luxury goods. Many buy counterfeit versions when they can\u2019t afford the real ones, and the consumption of luxury and knockoff goods becomes a key marker of intra-class stratification.Additionally, middle-class individuals invest heavily in time and money on organic food, fitness, yoga, beauty treatments, and other forms of \u201cconspicuous consumption.\u201dThere\u2019s also the pursuit of \u201cresidential segregation.\u201d Since the 1960s, South Korea has developed the area south of the Han River as a predominantly middle-class enclave\u2014featuring elite educational resources, major cultural facilities, luxury stores, high-end restaurants, and fashion malls. This has effectively excluded ordinary middle-class families who can\u2019t afford housing there. Yet many still see living in such areas as a prerequisite for being middle class, further inflating their standards.Nothing, however, is more financially draining than education. Many middle-class families engage in an ongoing status competition, driven by the anxiety of not falling behind or losing their middle-class identity. Despite financial instability, they continue to invest heavily in costly private education for their children.These phenomena aren\u2019t unique to Korea\u2014they exist among middle classes worldwide. The so-called \u201csix paths to middle-class poverty\u201d\u2014including excessive spending on children\u2019s education (often dubbed \u201cchicken parenting\u201d), high mortgages, risky investments, entrepreneurship, co-signing loans, and major health issues\u2014are mostly driven by personal choices. (Except illness, the rest are self-inflicted.)Much of this anxiety stems from people being led by \u201cmiddle-class consciousness,\u201d spending money according to idealized online content that promotes an unattainable, curated version of middle-class life\u2014wasting resources on unnecessary pursuits.The stability of the middle class depends not only on macroeconomic improvements by governments, but also on individual mindset shifts. As economist Ohmae Hiromasa argued in \u201cThe M-Shape Society,\u201d<\/em>the middle class must undergo a \u201cconsciousness reform\u201d\u2014rethinking their budgets, which were previously based on the assumption that hard work alone leads to promotions and raises. They need to re-examine their expenditures and investments, and reshape their lifestyles accordingly.<\/p>\n","protected":false},"excerpt":{"rendered":" 1. The Squeezed Middle Class I…<\/p>\n","protected":false},"author":2,"featured_media":534,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,4],"tags":[94,92,93],"class_list":["post-533","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized","category-policy-impact","tag-anxiety","tag-middle-class","tag-oecd"],"_links":{"self":[{"href":"https:\/\/www.finndy.com\/index.php\/wp-json\/wp\/v2\/posts\/533","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.finndy.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.finndy.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.finndy.com\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.finndy.com\/index.php\/wp-json\/wp\/v2\/comments?post=533"}],"version-history":[{"count":1,"href":"https:\/\/www.finndy.com\/index.php\/wp-json\/wp\/v2\/posts\/533\/revisions"}],"predecessor-version":[{"id":535,"href":"https:\/\/www.finndy.com\/index.php\/wp-json\/wp\/v2\/posts\/533\/revisions\/535"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.finndy.com\/index.php\/wp-json\/wp\/v2\/media\/534"}],"wp:attachment":[{"href":"https:\/\/www.finndy.com\/index.php\/wp-json\/wp\/v2\/media?parent=533"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.finndy.com\/index.php\/wp-json\/wp\/v2\/categories?post=533"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.finndy.com\/index.php\/wp-json\/wp\/v2\/tags?post=533"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
\n\n\n\n2. Sources of Middle-Class Anxiety<\/h3>\n\n\n\n
\n\n\n\n3. Reforming Middle-Class Mindsets<\/h3>\n\n\n\n
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