Under Pressure: The Squeezed Middle Class and the economic gravity-shift

The middle class is under pressure – household incomes have been lagging behind rising costs of living for the past three decades. A new OECD report[1] zooms in on the dwindling middle class and the consequences for the overall economy. An economic gravity-shift that calls for increased use of collective agreements and a firm stand against the increasing labour market uncertainties.

In a new report released on Wednesday 10 April 2019, the OECD looks into the state of the middle class in our economies, finding that middle-income families have been under increasing pressure over the past three decades. The report finds that the current generation of middle-class children have less chance of achieving the same standard of living as their parents, despite the fact that they are the most educated generation ever in history. The reason for this is clear. Growth in middle-class incomes have for decades lagged behind rising expenditures for housing, education and healthcare, combined with increased labour-market uncertainties.

A striking observation of the report is that across the OECD one out of two middle-income households reports difficulties in making ends meet. This ratio rises to two out of three when looking at southern and eastern European countries. General Secretary of TUAC, Pierre Habbard, is not surprised; “The report confirms what trade unions have been saying for years. The middle class is under pressure and many have been left behind. There is an urgent need to strengthen collective bargaining and address the increasing labour-market uncertainties and exploitation of precarious workers”.

The TUAC agrees with many of the observations made in the report and appreciates that the OECD in the report explicitly acknowledges labour-market flexibility in particular, in the form of reduced access to stable jobs, as a key factor in explaining why it has become more difficult for younger generations to enter the middle class.

However, it is regrettable that the OECD does not follow through and clearly signal the important role of collective bargaining, trade unions and social dialogue in strengthening the position of the middle class. In the same way, there is no clear reference to the fact that wage floors in the form of minimum wages or collectively bargained wages are indispensable to prevent employers from capturing part of in-work benefits.

The middle class has for decades been the centre of economic gravity – the engine for growth. The new OECD report could indicate an economic gravity-shift underway. “If we do not act now, by addressing issues such as labour market uncertainties, excessive use of precarious work and if we do not strengthen collective bargaining, all dreams of long-term inclusive growth and a just transition may dwindle like the middle class itself. This should be a wake-up call to all”, says Pierre Habbard.

Link to the OECD report: [1] Under Pressure: The Squeezed Middle Class

For further information, please find TUAC´s analysis of the report here.