Over the last decade, economic growth lifted almost a billion people around the world out of extreme poverty. Unfortunately, it didn’t lift them very far.
A rising economic tide has been concentrated in just a few regions of the world, and it’s failed to raise many people into the middle class.
By U.S. standards, most of the world remains terribly poor.
“If we look at the income distribution of the world population, the vast majority is living [on] $2 to $4 per day,” says Rakesh Kochhar, associate director of research and economist at the Pew Research Center. Kochhar is one of the authors of the new report “A Global Middle Class is More Promise than Reality.”
The study looks at changes in economic status around the world between 2001 and 2011. How many people in impoverished Burundi, for instance, were considered “low income” in 2001 versus a decade earlier? How many people in booming Uruguay rose to the “upper-middle income” category?*
And while there’s been a lot of improvement at the very bottom of the economic ladder recently, Kochhar and his colleagues find that only 13 percent of the world’s population is now “middle class.”
“In 2011, 71 percent of the world was either poor, living on less than $2 a day, or low income, living on $2 to $10 per day,” he says.
For this report, Kochhar defines the global standard for “middle class” as income of $10 to $20 per person per day. By comparison, the median per capita income in the U.S. is $54 per day.
Over the course of the decade that Kochhar looked at, the global middle class did expand. Roughly 400 million people reached that “middle class” threshold. But this prosperity was concentrated primarily in three places. More than half of the newly minted middle class — 235 million — were in China; most of the rest were in Eastern Europe and South America.
“In Africa, India, parts of Asia and parts of Central America,” he says, “we see very little growth in the global middle class.”
The Pew study maps out a world of extremes. In Europe and North America, most people are “upper-middle” or “high” income, earning more than $20 per day. In Africa and Asia, billions are “low income” or “poor,” and there’s not a lot in the middle.
Heather Boushey, chief economist at the Washington Center for Equitable Growth says that the goal of growing the middle class globally is critical.
“The strength of the middle class has a lot of reverberating effects throughout your economy,” she says.
There’s a positive feedback loop in which people with decent jobs spend more money, which spurs the economy, which creates more jobs, Boushey says. It’s also just good for society when people feel economically secure.
“That [expansion of the middle class] could translate to more social stability or a more vibrant democracy or less likelihood of people picking up their pitchforks and getting mad at whatever leader isn’t giving them the standard of living that they need to get by,” she says.
This new report shows that while the gap between rich and poor nations in the world remains huge, there is at least some movement towards a global middle class.
India, for instance, saw the portion of its population classified as “middle income” jump from just 1 percent in 2001 up to 3 percent a decade later, according to the Pew study. But that’s not very encouraging news for the average person in India, who’s still living on just $3 a day.
*You can find the answers in the maps, but if you’re not in the mood to click, Burundi saw its low-income population increase from 12.2 to 20 percent, while Uruguay’s upper-middle-income sector jumped from 19.7 percent to 29.9 percent.