Rakesh Kochhar Pew Research Centre

Economic downturn pushes millions out of global middle class

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The global middle class- those “middle income” and “upper-middle income” people earning $10-$20 and $20-$50 per day respectively- shrunk for the first time since the 1990s last year, as the world’s economy contracted, a new study by Pew Research Center has found.

The analysis found that the global middle class encompassed 54 million fewer people in 2020 than the number projected prior to the emergence of the Covid-19. Meanwhile, the number of global poor-or living on less than $2-a-day-is estimated to have risen to 803 million last year, much greater than the 672 million initially expected.

The global poverty rate, which had been in steady decline this century, is likely to have increased to 10.4%, nearly reverting to the rate in 2017, instead of sinking to a new low of 8.7%, as previously expected, according to Rakesh Kochhar, the study’s author.

At the other end of the economic spectrum,  the global high-income population likely fell to 531 million in 2020 from the 593 million originally expected ,  erasing about half of the gain since 2011, with most of the change emanating from advanced economies which also see a decrease in living standards.

Meanwhile, the upper-middle income population ($20.01-$50 daily) fell by 36 million, while the low-income population ($2.01-$10 daily) is estimated to have increased by 21 million.

Pew Research Chart middle class Rise in poverty in Asia and Africa

The drop-off in the global middle class was centered in South Asia and in East Asia and the Pacific. South Asia, specifically India, as well as Sub-Saharan Africa, accounted for most of the increase in poverty, reversing years of progress on this front.

The number of Indians in the middle class shrunk by about 32 million, compared with the number that could have been reached in the absence of the virus.

“India is estimated to have seen a greater decrease in the middle class and a much sharper rise in poverty than China in the COVID-19 downturn,” the research centre said, citing the World Bank’s forecasts of economic growth.

The report added that the erosion of the middle class may have been even deeper were it not for China – home to over a third of the world’s middle class – managed to avoid the same economic downturn witnessed in other countries.

In a separate paper, World Bank researchers surveyed 47,000 households in 34 developing countries. It was found that 36 percent of households saw job losses, and almost two-thirds saw a drop in income. The result was the first increase in global poverty since the Asian financial crisis of 1997-98, with the number of people living in extreme poverty projected to have increased by 119 million to 124 million in 2020.

One year on from the start of the coronavirus, many of the fears about the increase in hunger and poverty have been confirmed. Analyses by international institutions show just how devastating the Covid-19  has been. Experts are warning of a growing crisis in multiple areas from education to employment, likely to be felt for years to come.