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1. The Squeezed Middle Class
In recent years, the term “middle class” has appeared frequently in business news—so much so that it’s almost overused.But the definition of the “middle class” is highly ambiguous, with over a hundred different criteria used to define it. These include considerations of income, assets, occupation, education level, and social status.Even if we focus on just one relatively concrete metric—income—the standards vary widely. For example, many research institutions in Europe and the United States define the middle class as households earning between two-thirds to twice the national median income.
- •The traditional group of cadres and intellectuals;
- •The “new middle class” in sectors like technology and finance;
- •Employees of well-performing enterprises or public institutions;
- •The “self-employed class,” i.e., a large number of individual or private business operators.
Under such vague definitions, many people are unsure whether they truly belong to the middle class. But one general pattern holds: during economic upswings, more people consider themselves middle class than objective standards would suggest, while the opposite is true during downturns.For example, in the late 1970s, when Japan’s economy was booming and per capita GDP reached $5,000, 60% of Japanese people identified as middle class.Similarly, in South Korea during the late 1980s economic boom, 70% of people considered themselves middle class—higher than what objective metrics showed. But after the 2008 global financial crisis, only 40% of South Koreans self-identified as middle class, even though official statistics suggested around 60% still were.No matter how you define it, globally, the middle class generally consists of people who:
- •Have achieved upward mobility thanks to favorable economic conditions and their own efforts, often possess higher education levels, enjoy relatively high and visible incomes, live in major urban centers, and consume trendy and cutting-edge products;
- •Yet are also “fragile”—burdened with high mortgages and car loans, facing risks of layoffs and wage cuts, and anxious about losing their middle-class status or worried their children won’t achieve the same.
In fact, these anxieties are not unfounded. Over the years, reports and studies from around the world frequently describe the middle class as being “squeezed” or “shrinking.”A recent article in The Wall Street Journaltitled “The American Middle Class Has Gone From Safe to Squeezed”argues that many middle-class Americans (those with household incomes between 53,000and161,000) share a similarly pessimistic view of the economy as lower-income groups.CEOs from industries like dining, retail, fashion, and aviation noted that while high-income consumers continue spending, their middle-class clientele are growing increasingly strapped for cash.The article also highlights a growing confidence gap: the disparity in economic optimism between the wealthy and the middle-/lower-income groups is now at its widest point in seven years of tracking—meaning the rich are getting more optimistic, while the middle and poor classes are becoming more pessimistic.In France, according to the latest report from the French National Institute of Statistics and Economic Studies (INSEE), the share of national income held by middle-class families has dropped from 65% in the 1980s to just 54% in 2024.Moreover, inequality within the middle class itself is worsening: the top 10% of middle-income households now earn 3.2 times more than the bottom 10%, compared to just 2.4 times two decades ago.These are relatively recent findings, but the “decline of the middle class” is not a new phenomenon of the past couple of years—it’s a long-term trend closely tied to each country’s stage of economic development.Take the U.S., for example. In 1971, 61% of Americans were part of middle-class households. By 2023, that figure had fallen to 51%.Japan, after its economic bubble burst in the 1990s and entered a prolonged period of stagnation, gradually transformed from a middle-class society into what economist Kenichi Ohmae described as an “M-shaped society”—where both high-income and low-income groups grew in number, while the middle-income bracket steadily shrank.A 2019 OECD report titled “Under Pressure: The Squeezed Middle Class”concluded that the middle class in most OECD countries has been shrinking, largely because younger generations find it harder to enter this stratum.The report attributed this to three main factors:
- 1.Sluggish economic growth affecting incomes;
- 2.The rising cost of a middle-class lifestyle—especially housing prices, which have soared in nearly every country;
- 3.Younger workers losing the job protections enjoyed by previous generations, with increasing demands for specialized skills in the labor market.
Again, the above mostly refers to developed countries. While the overall size of the middle-income group in developing countries—including China—may be expanding, when you factor in expenses like housing, education, healthcare, pensions, and the unpredictable nature of the job market, many in these countries also find themselves in a precarious middle-class position.
2. Sources of Middle-Class Anxiety
So, what’s causing the instability and anxiety among the global middle class at a deeper level?The most obvious factor is economic growth and industrial development, which directly affect middle-class incomes and career prospects. The number of jobs offering “middle-class” compensation largely determines the size of the middle class.For example, in the U.S. during the 1950s–70s, the rise of manufacturing enabled many blue-collar workers to enjoy a comfortable middle-class life, leading to a steady expansion of the middle class.This is the era depicted in movies like Forrest Gump, where the protagonist, despite average intelligence, succeeds through diligence, optimism, and integrity—a time when the idea of the “American Dream” suggested that anyone could achieve a decent, middle-class life.But starting in the mid-1970s, as Europe, Japan, and South Korea recovered from the devastation of WWII and began producing goods for the global market, reducing imports from the U.S., America’s economic growth slowed.Driven by profit-seeking motives, American companies began globalizing production—shifting manufacturing to lower-cost emerging economies—resulting in widespread layoffs of blue-collar workers. At the same time, they cut employee benefits and weakened unions to further reduce costs.Over the past half-century, tens of millions of high-paying manufacturing jobs in industries like automotive, steel, and durable goods have disappeared. The share of manufacturing jobs in total employment plummeted from a peak of 35% to just around 9% today.By the 1990s, with the advent of the information age, headlines about “layoffs” and “deindustrialization” gave way to stories of white-collar job cuts—either due to automation or being replaced by lower-cost workers abroad.As a result, even though new technologies can create jobs, capital’s pursuit of profit and the overreliance on neoliberal policies (financial liberalization, deregulation, open investment, and small-government economic ideologies) meant that many of these new jobs were created overseas rather than domestically. The good jobs didn’t get replaced.This led to a widening divide between “good jobs” and “bad jobs,” forming what’s known as a “dual labor market”—with a stark and nearly insurmountable divide between the two.“Good jobs” are concentrated in fields like finance, law, medicine, economics, and technology, while “bad jobs” are typically held by “non-standard workers”—those hired for specific tasks or projects, or simply as a flexible, low-cost labor option. These jobs offer little to no skill or experience accumulation, often paid by intermediaries, with minimal insurance or benefits. This makes it harder for more people to join the middle class.The same trends of economic decline, industrial transfer, and job loss have also significantly impacted the middle class in Europe and Japan.Therefore, fostering industrial development and upgrading to create more middle-class-compensated jobs—and avoiding a stagnant “dual labor market”—is crucial for strengthening the middle class.Years ago, Chinese economist Li Yining addressed this issue in his essay “On the Growth of Blue-Collar Middle Class.”He argued that “blue-collar” work should not be synonymous with “bad jobs.” Instead, by developing vocational and technical education, blue-collar workers can advance to become technicians or senior technicians, achieving middle-class status similar to some white-collar workers—thus creating more channels for upward social mobility.In other words, becoming middle class shouldn’t rely solely on competing in a few narrow fields or pathways. A more diversified approach is needed.Beyond economic and industrial factors, another key influence on middle-class stability is the volatility of the assets that provide them a sense of security.The middle class, while earning more than ordinary workers, often aspire to achieve financial freedom through investments in real estate, stocks, and other capital assets—hoping to eventually escape the need to work.But investing in property or financial markets is a double-edged sword. Once involved, individuals are drawn into the ups and downs of financial cycles, with the value of their assets constantly fluctuating.The recent declines in real estate markets and repeated losses by retail investors in the stock market show that these so-called “safe assets” do not necessarily provide the stability middle-class families seek.What about investing in education? That too can lead to “credential inflation.” The global phenomenon of declining value of educational qualifications needs no elaboration.Such unstable investments demand significant outlays of real money but yield highly uncertain returns.Many middle-class assets have become financialized—not generating greater wealth, but instead reducing their ability to withstand crises and risks.Stanford historian Walter Scheidel, in his book “The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century,”notes that historically, wars and crises have tended to reduce wealth inequality—for example, the Great Depression of the 1930s hit the wealthy hard. But today, things are different. After the 2008 financial crisis, the U.S. implemented “quantitative easing,” which barely affected the wealthy—in fact, they got richer—while the middle class took a heavy blow.
3. Reforming Middle-Class Mindsets
Aside from external factors, there are also internal issues among the middle class: the tendency to fall into the “middle-class consumption trap.”Korean scholar Ku Haegŭn, in his book “Privilege and Anxiety: The Korean Middle Class in the Age of Globalization,”describes a phenomenon where:
Individuals living in homes larger than 30 pyeong (approximately 99 square meters), earning over 90% of the national average income, holding at least community college-level education, and working in semi-professional or higher-status occupations—people who objectively enjoy a higher standard of living than average—nevertheless often don’t consider themselves middle class.
This reflects how the standards for what counts as “middle class” have been raised to unrealistic levels.According to Ku, this is largely because ordinary middle-class individuals attempt to imitate the consumption patterns and lifestyles of the wealthy.This is also evident in the Korean middle class’s obsession with luxury goods. Many buy counterfeit versions when they can’t afford the real ones, and the consumption of luxury and knockoff goods becomes a key marker of intra-class stratification.Additionally, middle-class individuals invest heavily in time and money on organic food, fitness, yoga, beauty treatments, and other forms of “conspicuous consumption.”There’s also the pursuit of “residential segregation.” Since the 1960s, South Korea has developed the area south of the Han River as a predominantly middle-class enclave—featuring elite educational resources, major cultural facilities, luxury stores, high-end restaurants, and fashion malls. This has effectively excluded ordinary middle-class families who can’t afford housing there. Yet many still see living in such areas as a prerequisite for being middle class, further inflating their standards.Nothing, however, is more financially draining than education. Many middle-class families engage in an ongoing status competition, driven by the anxiety of not falling behind or losing their middle-class identity. Despite financial instability, they continue to invest heavily in costly private education for their children.These phenomena aren’t unique to Korea—they exist among middle classes worldwide. The so-called “six paths to middle-class poverty”—including excessive spending on children’s education (often dubbed “chicken parenting”), high mortgages, risky investments, entrepreneurship, co-signing loans, and major health issues—are mostly driven by personal choices. (Except illness, the rest are self-inflicted.)Much of this anxiety stems from people being led by “middle-class consciousness,” spending money according to idealized online content that promotes an unattainable, curated version of middle-class life—wasting resources on unnecessary pursuits.The stability of the middle class depends not only on macroeconomic improvements by governments, but also on individual mindset shifts. As economist Ohmae Hiromasa argued in “The M-Shape Society,”the middle class must undergo a “consciousness reform”—rethinking their budgets, which were previously based on the assumption that hard work alone leads to promotions and raises. They need to re-examine their expenditures and investments, and reshape their lifestyles accordingly.
