More than half the world’s population is now middle class

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Most of the rapid growth of the middle class is taking place in Asia © Dreamstime Share on Twitter (opens new window) Share on Facebook (opens new window) Share on LinkedIn (opens new window) Save Save to myFT John Aglionby in London SEPTEMBER 30, 2018 Print this page28 More than half the world’s population is for the first time living in households earning enough to be considered middle or upper class, with five people joining their ranks every second. The rapid growth of the middle class, most of which is taking place in Asia, will have significant economic and political effects, as people become more demanding of businesses and governments, said Kristofer Hamel, chief operating officer of World Data Lab, the non-profit organisation that compiled the figures. “The milestone is important because the middle class is the engine of modern economies,” Mr Hamel said, adding that about half of global economic demand is generated by household consumption, with half of this coming from the middle class. The World Data Lab defines middle class as someone earning between $11 and $110 per day, on a 2011 purchasing power parity basis, a benchmark used by many organisations and governments, including India and Mexico. It concluded earlier this month that 3.59bn people make up the global middle class, and forecast that the group would grow to 5.3bn by 2030. “These are the people who spend the most on the things that are produced in the economy,” Mr Hamel said. “Transportation services, the wide variety of consumer products, food products and financial products are broadly catered to serve people who can afford to spend a certain amount and have a wide variety of needs.” Almost 90 per cent of the new middle class is expected to be found in Asia, while Africa is likely to experience little growth, on a relative scale, because in several big countries — notably Nigeria and the Democratic Republic of Congo — populations will grow faster than their economies’ ability to lift them out of poverty. By 2030, the spending power of the American middle class will remain the greatest in the world — at about $16tn on a 2011 PPP basis — with China ($14tn) and India ($12tn) not far behind. The figures were calculated by analysing household income and expenditure surveys compiled by 188 governments and aggregated by the World Bank. World Data Lab is based in Vienna and its funders include the German government, the European Space Agency and Unicef, the UN’s children body. Recommended Undercover Economist Tim Harford Why all things are not equal in the measure of inequality Homi Kharas, a senior fellow at the Brookings Institution think-tank in Washington DC, who led the research, said the growing middle class would probably make life harder for multinational businesses to succeed.  “With the more opportunities, comes more competition,” he said. “Most multinationals tend to offer a similar product everywhere, and one of the things about the middle class is they love product differentiation.” He added: “One pair of blue jeans is not the same as another pair of blue jeans.” Mr Kharas pointed to the recent box office success of the film Crazy Rich Asians as an example of how businesses must appeal to diverse audiences, especially the growing Asian market. “If you want to be successful in today’s world you’ve got to make sure you appeal to Asians,” he said. Governments, too, will need to pay more attention to the middle class as its influence grows — or suffer the consequences, said Mr Kharas said, citing Brazil, which will hold a presidential election on Sunday, as an example of where this has become manifest. “The middle class was fed up with corruption, fed up with poor public services and has consistently opted for changes in government,” he said. “They haven’t yet found something they like.”

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