Global middle class growth will be 88% in Asia for next five years

The World Bank defines the global middle class within a large income range anywhere between $11 and $110 a day.

Homi Kharas, an expert on the global middle class at the Brookings Institute, estimated in a recent study that 3.2 billion people, or 42 percent of the total world population, are now in the global middle class. The group’s size increases by 160 million people a year.

The 3.2 billio is 500 million more than Kharas had previously estimated 7 years ago. This implies that in two to three years there might be a tipping point where a majority of the world’s population, for the first time ever, will live in middle-class or rich households.

The rate of increase of the middle class, in absolute numbers, is approaching its all-time peak. Already, about 140 million are joining the middle class annually and this number could rise to 170 million in five years’ time.

An overwhelming majority of new entrants into the middle class—by my calculations 88 percent of the next billion—will live in Asia.

The absolute market size of middle-class spending is larger than previously estimated. In 2015, middle-class spending was about $35 trillion (in 2011
PPP terms), roughly 12 percent higher than my previous estimate. It now accounts for one-third of the global economy.

The global middle-class market is now clearly bifurcated: a slow-growing developed country middle class, and a fast-growing emerging economy middle class—with growth in both instances measured in terms of either numbers of people or total spending.

Big geographic distributional shifts in markets are happening, with China and India accounting for an ever-greater market share, while the European and
North American middle class basically stagnates.

At a growth of about 4 percent in real terms, the middle-class market is growing faster than global GDP growth, but not as fast as it did in the 1960s and 1970s, the boom years for the middle class.

The middle class has been defined as comprising those households with per capita incomes between $10 and $100 per person per day (pppd) in 2005
PPP terms (Kharas, 2010; World Bank, 2007; Ernst and Young, 2013; Bank of America Merrill Lynch, 2016). This implies an annual income for a four-person middle-class household of $14,600 to $146,000. This is PPPD of $11-110 per day in 2011 PPP dollars.

The US dominates the global rich (richer than global middle class). In 2016, rich households in the U.S. made up 61 percent of the global number, and they spend almost two-thirds of total consumption by rich households. This dominance is likely to persist. Even with a growing number of rich households in other countries, the U.S. should still account for over 50 percent of rich household spending by 2030.


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