The OECD has been at the forefront of documenting the rising levels of income inequality, the lack of opportunities that many OECD countries have experienced over the past 30 years. Through its analyses and publications, the OECD has shown the extent to which middle-income households – the focus of this report Under Pressure: The Squeezed Middle Class – in many OECD countries have seen their standard of living stagnate or decline, while higher income groups have continued to accumulate income and wealth.

Over the past decade, the OECD has documented the evolution of inequalities in income and opportunities in details in a series of flagship publications, from Growing Unequal? (2008), to Divided we Stand (2011), to In it Together (2015) and the latest release on The Broken Social Elevator that focused on social mobility and showed that opportunities for low‑ and middle‑income families to move up the ladder became limited over the past decades. The present report zooms in on the middle class and sheds light on the multiple pressures this group faces.

This introductory chapter gives an overview of the entire report drawing on the analyses carried out in the four subsequent chapters. The report looks at the multiple pressures on the middle class, in terms of their economic situation, their living expenses, and labour market insecurity. It documents that in many OECD countries, middle incomes have grown less than upper incomes and in some, they have not grown at all. The costs of some goods and services, such as housing, which are core for a middle class lifestyle, have risen faster than real median incomes. The report sheds light on the rising job insecurity for middle-income households in rapidly transforming labour markets, where middle-income jobs face high risk of automation. Finally, it discusses policy measures and initiatives to address the challenges with which middle-income households contend - boosting incomes, coping with increased costs of living, improving the fairness of taxation and building skills of middle-class households.

This chapter gathers international evidence on whether, where, how, to what extent and why middle-income households have been squeezed in recent decades. It begins by drawing up a definition of the middle-income class applicable to all OECD countries, which it uses to measure the size of the middle-income class over time and make comparisons between countries. It examines the changes in the income, population size and economic influence of the middle-income class. It also focuses is on how the socio-economic and demographic make-up of middle-income households has evolved and for which groups it has become more difficult to make it to middle incomes. Finally, it assesses the effect of taxes and benefits on middle-income households.

This chapter discusses past, recent and prospective labour market trends for middle-class workers and their families. The chapter begins by analysing the job occupations of middle-class workers and its evolution in recent decades. It then examines how labour market polarisation and non-standard forms of work have affected the middle-income class in terms of jobs and wages. It also analyses the impact of labour market and demographic changes on the chances of households being middle-income. Finally, it assesses the risks of automation and employment prospects for the current occupations of middle-income workers.

This chapter examines how the living standards of the middle class have evolved over recent decades. It also assesses the contribution of middle-income households to aggregate consumption in the economy, in comparison to its shares of total population and income and those of the lower- and upper- income classes. The chapter then examines to which items middle-income households allocate their budgets. It goes on to consider how middle-income household spending has increased relative to income, what consumption categories have driven that increase, and to what extent prices have been an influencing factor. Finally, it considers the ability of middle-income households to afford their standard of living, their exposure to financial vulnerability and their over-indebtedness.

This chapter presents policies that could address the main challenges with which middle-income households contend. Because middle-income households are so diverse, the proposed policy solutions often focus on certain subgroups, such as families who struggle to make ends meet, parents who are concerned about how to pay for their children’s education, and middle-aged workers exposed to globalisation and technological change. Section  looks at policies for boosting middle-class disposable incomes and supporting wealth accumulation. Section  discusses policies that could help middle-income households cope with the rising costs of housing, education and health and long-term care. Section  proposes ways to help equip middle-class workers with the skills they need to succeed in a changing workplace, with special emphasis on vocational education and training and adult learning.