The Economy

Governments Must Act to Ease Middle-Class Squeeze

A new OECD report says younger generations have a harder time making it into the middle class.
Lauren MuskettApril 11, 2019
Governments Must Act to Ease Middle-Class Squeeze

Governments need to do more to support their middle-classes as they struggle to maintain their quality of life amid stagnating incomes and rising costs, said The Organisation for Economic Co-operation and Development (OECD).

OECD’s report, “Under Pressure: The Squeezed Middle Class,” says the middle class has shrunk in most countries and it is more difficult for younger generations to make it into the cohort, which they define as earning between 75% and 200% of the median national income.

“While almost 70% of baby boomers were part of middle-income households in their twenties, only 60% of millennials are today,” the group said in a statement.

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“Today the middle class looks increasingly like a boat in rocky waters,” OECD secretary-general Angel Gurría said. “Governments must listen to people’s concerns and protect and promote middle class living standards. This will help drive inclusive and sustainable growth and create a more cohesive and stable social fabric.”

The OECD suggested countries should look to mitigate the effects of the squeeze by lowering taxes on the middle class, increasing taxes on the wealthy, developing more affordable housing, helping young adults build wealth, improving workers’ skills and training, and containing the cost of education, child care, and health.

More than 20% of middle-class households have costs that exceed their earnings.

Housing costs have increased three times faster than household median income over the last two decades, according to the report. Housing costs are about one-third of disposable incomes and are the single largest expense for middle-class households. In the 1990s, housing costs were about 25% of household median incomes.

Workers also face increasing job insecurity. The OECD said one out of six middle-income workers is at risk of automation. By comparison, one in ten high-income workers is in a job that is at risk due to automation.

“Our analysis delivers a bleak picture and a call for action,” OECD chief of staff Gabriela Ramos said.