Risk for international brands as middle-class growth is deemed ‘fragile’

There has been an overwhelming increase in the size of what’s being termed the ‘fragile’ middle class, particularly in developing countries, while the size of the solidly middle class remains small. This fragile middle is in constant danger of falling into poverty, an examination of World Bank data has found.

A Financial Times analysis of World Bank income distribution data revealed that while new markets have lifted millions out of poverty since the 1970s, there has also been an exponential increase of those in the lower middle class.

Nearly half of the world’s population earns more than $2 a day, making up the world’s biggest income group. By the Asian Development Bank’s definition, these people are considered middle class, but other groups argue for the definition to start at $10 per day. That would place those earning between $2 and $10 in the lower middle class, which would account for the world’s largest income group at 40% of the population.

A third of these people ­- those earning only $2 to $3 a day – are the most vulnerable to falling below the poverty line in unexpected circumstances, such as the death of an income earner.

The World Bank’s chief economist Kaushik Basu, said that this is “a very important moment in global economic history.”

“But it is a very strange moment, because the biggest underlying challenges are not the most visible challenges.”

 

BY Emma Do ON 16 April 2014