Income Around the World

Last summer the Pew Research Center published data on income and population growth in 111 countries around the world. What broad trends can we identify? Is the notion of a burgeoning middle class really true?

From 2001 through 2011, the world saw hundreds of millions of people climbing into, upwards, then out of middle income. Not surprisingly we find the greatest percentage growths in Asia in Indonesia followed by China with nearly 900% growth and 600%, respectively. However, we must keep in mind that the dataset extends only to 2011. Consequently, countries like Brazil that have slid into recession might have seen incomes fall over the last five years.

Of course, not all incomes in all countries mean the same. So the dataset from Pew Research Center used $2/day as the cut off for poverty with middle income defined as $2–10/day. Middle income, however, is not necessarily synonymous with middle class, as it does not include things like university-level education that some people equate with middle income. And when we examine median daily income we find some clear geographic patterns. Though not all the patterns are highly surprising.

North America and Western Europe comprise most of the high and upper-middle income earners. From Australasia we have Taiwan and Australia, but if the study had included, Japan, Singapore, Hong Kong, and New Zealand, presumably they would have also fallen outside the low income range for the region. Eastern Europe and South America have a number of middle income countries. The latter, however, consists mostly of low income countries, a fact it shares with Africa. In fact of all the countries studied, only Sub-Saharan Africa contains those falling under the classification of Poor, where people earn less than $2/day.

Eastern Europe provides an example of countries shifting towards a structure with greater percentages of upper-middle income demographics. The map at the beginning of the piece highlighted places like the Czech Republic, Hungary, and Croatia as places where the middle income group fell. However, the graphic below shows that in the Czech Republic, for example, that is because the middle income group earned more and move up into the upper-middle income bracket.

Other Eastern European countries like Romania offer a look at earlier phases of transition. Romania has no high-income group, but did witness its low income group, nearly 90% of the population fall to near 70% as the middle income grew from nearly 5% to 25%. Poland, Slovakia, and Bulgaria represent somewhere in-between the Czech Republic and Romania. Their respective middle income groups all displaced low income in their share of population.

When we contrast Eastern Europe to the large Asian countries China, India, and Indonesia, we see the importance of share vs. absolute growth. Middle income population as a share of the total population lags far behind that of low income and those in poverty.

In sheer volume, however, the real growth was not in Eastern Europe which has few countries larger than 10 million people. The near 20 percentage point gains in Romania, Slovakia, and the lesser gains in Poland equate to only a few million people. So when compared to the small percentage point gains in Asia, we barely register the Eastern European growth. So while the relative gains were small, the majority of the growth occurred in Asia.

In fact the data shows that despite talk of the aforementioned burgeoning middle class, what the world actually witnessed from 2001 to 2011 was the lifting of nearly half a billion people out of poverty in just China, India, and Indonesia alone. Meanwhile in parts of Eastern Europe and Latin America the movement has been to a more upper-middle income existence.

The world does indeed continue to move towards a middle income normalcy. But in many parts of the world for billions of people that existence remains a hope for the future. Check back in another ten years and perhaps those who have moved from poor to low income will make the next jump to middle income. Because thus far for Asia and Africa, the foundations for a middle income society are only just beginning to be laid.