business news in context, analysis with attitude

CBS News reports on a new study from the Organization for Economic Cooperation and Development (OECD) concluding that “the global middle class is witnessing a historic hollowing out, with younger generations struggling to find their financial foothold in many wealthier countries around the world, including the U.S.  Only 6 of 10 millennials earn enough to be considered middle class, compared with 7 of 10 baby boomers at the same age … . Younger generations are bearing the brunt of the middle-class decline, with each subsequent generation less likely to achieve financial stability compared with the boomers.”

Among the factors shrinking the middle class are “the rising cost of housing, education and health care. As a result, half of all middle-income households in wealthier countries now struggle to make ends meet, the OECD found.”

Here’s some more context from the story:

“Earning between 75 percent to 200 percent of the median national income is considered middle class -- in the U.S. that translates to between $23,416 and $62,442 for a single worker, according to the OECD. (Other organizations have slightly different yardsticks for the middle class, such as Pew's income range of about $26,000 to $78,000 for a single U.S. worker.)

“Middle-class income hasn't kept up with the growth in income enjoyed by wealthier people, the OECD said. Since the recession, the annual rate of growth of real median incomes across the group's member countries was a meager 0.3 percent, compared with 1.6 percent between the mid-1990s and mid-2000.”
KC's View:
The reason that the decline of the middle class is being felt more in developed countries, especially the US, is that these countries traditionally had larger middle class populations. This shrinking percentage has to be considered by not just by retailers and suppliers that have largely catered to this group, but also by the marketers that have thrived when people in the middle class aspired to move into the upper middle class. It is a lot further leap when you haven’t been able to maintain a middle class existence, and a lot of companies are going to have to think hard about their strategies and tactics.