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Under Pressure: The Squeezed Middle Class

image of Under Pressure: The Squeezed Middle Class

Middle-class households feel left behind and have questioned the benefits of economic globalisation. In many OECD countries, middle incomes have grown less than the average and in some they have not grown at all. Technology has automated several middle-skilled jobs that used to be carried out by middle-class workers a few decades ago. The costs of some goods and services such as housing, which are essential for a middle-class lifestyle, have risen faster than earnings and overall inflation. Faced with this, middle classes have reduced their ability to save and in some cases have fallen into debt. This report sheds light on the multiple pressures on the middle class. It analyses the trends of middle-income households through dimensions such as labour occupation, consumption, wealth and debt, as well as perceptions and social attitudes. It also discusses policy initiatives to address the concerns raised by the middle class, by protecting middle-class living standards and financial security in the face of economic challenges.

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The rising cost of the middle-class lifestyle

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.

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