The fall in absolute poverty in the world accelerated the process of elevation from lower income to middle class group. In the 21st century people are striving hard to rise to middle class by hard work, education, employment. The increased population with middle income, neither rich nor poor, is helping the developing countries to upgrade themselves from Lower Income Country (LIC) to Middle Income Countries (MIC).
Number of middle income people is increasing particularly in Asia and Europe. According to Ernst & Young (EY) Global Limited, “By 2030, two-thirds of the global middle class will be residents of the Asia-Pacific region, while Europe’s share of this population will have dropped by 14 per cent”. Now the middle class consumers have higher ability and they can afford car, television and other luxury items and have a higher living standard. Institute for Emerging Markets Studies, defines the middle class as people earning between US$10 and US$100 per day. People in this income bracket can be considered as “global middle class” – middle class by the standard of any country.
In Asia, 525 million people, more than the total population of the European Union, are already considered as middle class people, who are contributing more for economic development. The world data predicts that middle class group will expand by another three billion within next two decades. The new growing middle class people of the world will be an addition to the growing consumer trends for the world market that will drive the global production and innovation. The data states that the size of the “global middle class” will increase from 1.8 billion in 2009 to 3.2 billion by 2020 and 4.9 billion by 2030. In 2030, major contribution will come from the Asian Countries, approximately 66 per cent of the global middle-class population and 59 per cent of middle-class consumption.
The importance of middle class group is undeniable for a developing country, as they are the group who have been promoted to the middle class and pushed the countries up from the LIC to MIC/UMIC, particularly among the largest developing countries such as China and India. For example, the middle class group of Korea is able to move towards the developed nations. The middle income group can promote inclusive growth of a nation by developing income level, generating employing in the productive sector, participating in the political process, expressing support for political programmes and electoral platforms. The global research evidence says that the middle class is unlike that which became the engine of development in many Organization for Economic Co-operation and Development (OECD) countries. Since middle class benefits the economy of a nation most, the governments should put policies in place to fight the vulnerabilities of the middle class and lower class families more. Policies should promote the education, employment, safety nets and supports for the poorer.
OECD predicted that by 2030 China and India will lead the middle class consumerism over the next two decades. Brazil will also contribute. As per the prediction, middle class people of European Union countries and the US will decrease massively by 2050. At present, China has almost 150 million which is expected to reach 500 million within next two decades. Meanwhile, India’s global middle class is 5 per cent of its population, but the EY estimates that this group will grow steadily over the next decade, reaching 200 million by 2020, then to the 475 million by 2030. Such middle income group will push the global demand and consequently the production will increase.
To develop the lower class to move towards middle class, the accelerating economic growth policy in many low and middle-income economies is essential. The policy should help higher education, stable economy and more jobs/employment. The government should focus on the socio-demographics, technological innovations and manufacturing sector as well as export. The foreign currency reserve should be made through remittance earnings, export and international trade. The key sectors to be developed for being added to the list of middle income countries, are education, employment, production, export, environment, etc. As most of the middle class groups of developing countries live in rural areas therefore emphasis of the policy should be on rural people, equity in society, financial inclusion, mobile banking, agricultural production and industrialization. For sustainable development the country should formulate a policy incorporating inclusive economic growth.
The writer is associated with Research & Development Division of a private commercial bank.