A Squeeze on the Global Middle Class

An estimated 150 million people slipped down the economic ladder in 2020, the first setback in almost three decades

- By Cristina Lindblad

One of the most economically significant trends of the past few decades has been the emergence of a global middle class. The expectation that this cohort of consumers would continue to grow relentlessly, as rising incomes in developing countries lifted millions out of poverty each year, has been a central assumption in multinationals’ business plans and the portfolio strategies of professional investors.

You can now add that to the list of economic truths that have been upended by this pandemic. For the first time since the 1990s, the global middle class shrank last year, according to Pew Research Center estimates. About 150 million people tumbled down the economic ladder in 2020, with South Asia and sub-Saharan Africa seeing the biggest declines.

Defining the parameters of this global middle class has long been a contentious exercise. Pew, which has been researching the topic for more than a decade, labels as middle income those making from $10.01 to $20 a day, using data that smooth out differences in purchasing power across countries. In Pew’s analysis, there’s a separate upper-middle-income band made up of those earning $20.01 to $50 a day. (Note that $50 per day falls shy of what a minimum wage worker in the U.S. takes home pretax for an eight-hour day.) Others have opted for a more expansive $10 to $100 a day definition.