The fortunes of middle-income households in some of Western Europe’s wealthiest countries are moving in opposite directions recent findings published by the Pew Research Center in the USA has revealed. In a study covering 11 economies from 1991 to 2010 the share of adults living in middle-income households increased in only four countries – the Netherlands, France, Ireland and the UK.
On the other hand in three of the largest economies including Germany, Italy and Spain and smaller ones such as Finland and Luxembourg middle-income shares fell over the same period. Others experiencing slight or no change included Norway and Denmark.
Overall, the middle-class share of the adult population fell in seven of the 11 Western European countries examined, mirroring the long-term shrinking of the middle class in the United States. In part, the shift out of the middle class is a sign of economic progress, irrespective of changes in household incomes overall. This is because the outward shift is accompanied by a move up the income ladder, into the upper-income tier, in all countries with a shrinking middle class.
At the same time, there is movement down the income ladder in most countries with a shrinking middle class. Overall, there is a greater movement up the income ladder than downward in most countries from 1991 to 2010, resulting in a general improvement in economic status.
The report shows the percentages of adults in middle-income households in 2010: Denmark and Norway (80%), the Netherlands (79%) while the smallest share was found in Italy (67%), the UK (67%) and Spain (64%). However every one of the 11 Western European countries in the report had a larger share of adults in middle-income households than the U.S. (59%).
There were broadly three groupings in the study: In the first the UK, Ireland, Spain and Italy where median incomes were between $30,000 to $39,000 and the middle-income households ranged around a 64% to 69% figure.
In the second grouping Germany, France and Finland median incomes were $40,000 to $41,000 for 72% to 75% of households.
While in the third grouping Luxemburg, the Netherlands, Denmark and Norway median incomes ranged from $43,000 to $65,000 for a middle class share from 75% to 80% of national households.Interestingly household incomes in most western European countries rose faster than in the USA in the years 1991-2010. But while the US bucks the European trend by having a higher $53,000 median income (only Luxemburg in the European category was higher) at 59% the share of people in the middle class was lower than all European countries in the study.
Compared with the 11 Western European countries the American middle class was smaller in percentage terms yet wealthier in dollars in greater numbers of Americans. At the same time there were also greater numbers of low-income (26%) and upper income levels (15%) of the US population.
The American experience reflects a marked difference in how income is distributed in the U.S. compared with many countries in Western Europe. More specifically, the U.S. has a relatively large upper-income tier, placed well apart from an also relatively large lower-income tier. This manifests not only as a smaller middle-income share but also as a higher level of income inequality. The gap between the earnings of households near the top of the income distribution and the earnings of those near the bottom is the widest in the U.S.
Ireland was the one country that experienced the most rapid growth during the study’s timeframe with the biggest increase in the middle class from 60% in 1991 to 69% in 2010.
On the other end of the spectrum the greatest falls in middle-income households during this period were in Finland from 81% in 1991 to 75% in 2010 and Germany from 79% to 72% in the same period.
The report states that there is also “a sharpening of economic divisions across households in many Western European countries”. In the US there are relatively more adults ascending to the upper income bracket as well as sliding into the lower income tier while there are ever fewer in the middle. Whether for better or worse the middle class is shrinking in developed western economies.
Author: Mary O’Carroll