How 'aspirational 
middle class' went 
from tag to trap

A cross the globe, the middle classes come in different shapes and sizes. Their definitions vary as much, as their dynamics and complex socio-political circumstances drive them more often. The American middle class, for instance, is categorised as the middle 60 per cent of the income distribution, described as a way of life and even the “backbone of America”. A recent Brookings Institution study highlights that “When the middle class is thriving, America is thriving; when the middle class is struggling, we fear national decline.”

The study — ‘What If Something Happens’ — describes stories emerging from the United States as a picture of struggle and triumph, difficulty and resilience, and anxiety and hope. It encapsulates the hopes and fears of the American middle class before and during the Covid-19 pandemic, described as “the constant threat of an unexpected emergency”.

The curious case of the middle class becomes more curious when it transcends the United States and the developed world in general. Since the global financial crisis, reinforced by the pandemic, the middle class has been bearing the brunt of a crumbling economic order. An estimated 150 million slipped down the economic ladder in 2020, the first pullback in almost three decades. Pew Research says the global middle class shrank in the face of the pandemic for the first time since the 1990s.

Defining the middle class

Defining the contours of the middle class has long been contentious. Pew Research, analysing the subject for over a decade, labels middle income as those making “from $10.01 to $20 a day”. However, they use data that smooth out the differences in purchasing power across countries. Pew’s analysis suggests a separate upper-middle-income band that earns $20.01 to $50 a day. Others, such as the Brookings Institution, choose a more expansive $10 to $100 a day definition.

The middle class’s different definitions and parameters globally wreck consensus on its number and characteristics. The Credit Suisse Global Wealth Report 2021 expects the global middle class — adults with a net worth between $ 10,000 and $ 100,000 — to expand by 237 million, pushing total numbers close to two billion by 2025. “This represents growth of about 14 per cent, some from upper-middle-income countries, but most (183 million new members) from lower-income countries,” it says.

The report reflects the growing prosperity of emerging economies, especially China, and the middle-class expansion in the developing world. It also delineates the developed countries’ middle class from the developing world: the upper-middle segment, with wealth ranging from $100,000 to $1 million, expanding from 208 million to 583 million this century. “They currently own net assets totalling $163.9 trillion or 39.1 percent of global wealth, nearly four times their share of the adult population. The middle class in developed nations typically belong to this group,” says the Credit Suisse report.

However, their findings differed from the Pew Research report, which estimates that the global middle-class ranks fell by 90 million people to almost 2.5 billion last year. “That helped swell the ranks of the poor, or those living on less than $2 ($2.70) a day, by 131 million people,” the report said. The March 2021 Pew estimate noted that the pandemic pushed about 32 million people out of the middle class in India alone, shrinking it to 66 million, down a third from a pre-pandemic estimate of 99 million.

Interestingly, the report also claimed that an estimated 62 million high-income people, or those earning $50 or more a day, dropped into the middle tier due to the pandemic. “That suggests that the number of people who went into the crisis as members of the global middle class and fell out topped 150 million last year — more than the combined population of France and Germany,” says the report. A decade ago, Pew put the number of the world’s middle-income earners at 13 per cent of the global population.

The pandemic aftermath

Policy sociologist, Muchamad Zaenal Arifin, director at the Sanglah Institute in Indonesia, chooses to look at the middle-class plight through the prism of its economic hardship. Arifin maintains that Covid-19 has highlighted inequality. The lower class is the most vulnerable and at-risk population in developing countries, which has significantly impacted the lower class, particularly those working daily in the informal sector.

“Wide disparities in income, health, and job have progressed from [being] chronic to acute concerns, and the lower classes are the most exposed due to insufficient social protections,” says Arifin. In his country, Indonesia, the 
middle class has its own dynamics and, according to Arifin, “about 16 per cent of the aspiring middle class have been downgraded to vulnerable classes”. As a result, the government has had to develop various household expenditure and social protection programmes and ensure their prompt delivery to support the poor 
and vulnerable.

The entire process, Arifin says, is geared toward prioritising breaking Indonesia out of the so-called “middle-income trap”, primarily through infrastructure development and obtaining foreign direct investment. Going by his country’s experience, instead of being the hallmark of upward mobility, the middle class seems to have become a tag best avoided.

The food security-climate change link

Asia, which will be home to over 65 per cent of the world’s middle class by 2030, is expected to witness a massive food demand rise. The Canada-ASEAN Business Council estimates that this mammoth task will require approximately $1.55 trillion of investment in food production. This data suggests that rapid population growth, urbanisation, and an expanding global middle class will profoundly impact food and nutrition security.

Naturally, it will put intense pressure on an already embattled environment. According to the World Economic Forum, the wealthy seek luxury experiences and spend heavily on long-term investments like education and retirement. On the other hand, “many members of the global middle class (who are now as likely to come from Mumbai as Minnesota) seek out goods that reflect their values — even as much of their spending has been limited by wage stagnation.”

So, the struggle between need and greed is getting intense. But, if food security is under the spotlight, can climate change be far behind? A 2016 World Economic Forum report sampled 215 cities in 15 countries at different stages of economic development. It tried to examine the link between temperature-related mortality, flood risk in these cities, and the economic behaviour of middle-class households.

The report was all about middle-class spending patterns in cities more exposed to the climate change risk, which are noticeably different. The cities include major global centres from Los Angeles to Tokyo, Mumbai to Shanghai, and Taipei, where the middle classes spend more household budgets on housing and less on leisure and recreation. The situation can significantly reduce middle-class wealth “as they have to spend more on protecting themselves and recovering from climate change impacts”.

The middle-class consumer behaviour

An Hodgson, a senior manager at Euromonitor International, asserts that global middle-class consumers are increasingly shifting away from conspicuous and wasteful consumption towards more selective and conscious spending. It is a megatrend that Euromonitor calls the “Middle-Class Reset”. “This shift in the middle-class mindset and their consumption choices will be long term and will contribute to shaping the global consumer market of the future,” she says.

According to her, due to squeezed incomes for middle-class households — especially in developed countries — to maintain their standard of living, the majority of middle-class households need two income earners and adjust their consumption habits to make the most of their limited resources. She also argues that demographic shifts and population trends such as urbanisation, migration, ageing, and rising health awareness reshape consumers’ lifestyles and purchasing decisions.

Interestingly, Hodgson posits that environmental concerns are particularly acute among middle-class consumers, even though their conspicuous consumption in the past has put pressure on the environment. According to her, the “Reset” started in developed markets, where the squeezed middle class after the 2008-2009 financial crisis changed their consumption habits to optimise their limited resources. This trend is visible in developing countries too.

Tan Ern Ser, an academic adviser at the Institute of Policy Studies, the National University of Singapore, links middle-class woes to the rapid advancement in digital technology, which could have hollowed out some middle-level jobs, resulting in a shrinking middle class. “Only those in the middle class who can ride the digital revolution and harness the benefits of digital technology could land on the side of the high-earning upper middle class, technopreneurs, and the rich,” he says.

Ern Ser argues that the middle classes in developed countries are better positioned to upskill or retrain, re-invent themselves to stay employable, and transit more smoothly into the jobs created by the new digital, knowledge-based economy. According to him, things have moved on from the days when “white-collar” jobs or being in jobs that require a college degree would put one in the middle class.

Going by his analysis, things can definitely be salvaged for the middle class. However, being middle class would no longer be characterised by security and comfort. “They would need to reinvent themselves to stay middle class constantly,” he says. Ern Ser is the author of Does Class Matter? Class and Social Orientations, Public Housing and Social Mixing, and co-author of Social Capital in Singapore.

Sociologist Cornelis ‘Kees’ Hulsman has witnessed how the Covid-19 pandemic severely impacted the middle class in Egypt, where he works and, in the Netherlands, where he is from. Hulsman is in a vantage position and has the discernible eye to distinguish the varying impact of the pandemic. For instance, he observes that, since Egypt depends much more on tourism than the Netherlands, the middle class in Egypt feels the effects of reduced tourism much more.

Hulsman throws his weight behind the need to look at how the middle class is categorised. He cites the example of the two countries he knows best — the middle class in Egypt, which receives much less protection than the middle class in the Netherlands. “There will always be a middle class,” Hulsman asserts. “The middle class provides national economies with a lot of employment. Reducing the middle class results in larger differences between rich and poor, which is not good for the stability of any country,” Hulsman hastens to add.