71% of global population poor or low-income
At 71%, the vast majority of the world’s population remained either poor or low income in 2011 and while the global middle class almost doubled from 7% in 2001 to 13% in the decade to 2011, when compared with the Western standard both the number and level of income are not as high as previously thought.
The Washington DC-based Pew Research Center in a recent report said that nearly 700m people emerged from poverty between 2001 and 2011— however, most only barely, with many continuing to live a "low-income existence."
On middle income people, the report says that "the rise in prosperity was concentrated in certain regions of the globe, namely China, South America and Eastern Europe. The middle class barely expanded in India and Southeast Asia, Africa, and Central America. Even those newly minted as middle class enjoy a standard of living that is modest by Western norms. As defined in this study, people who are middle income live on $10-20 a day, which translates to an annual income of $14,600 to $29,200 for a family of four. That range merely straddles the official poverty line in the United States — $23,021 for a family of four in 2011."
The Financial Times said that the study will give pause to companies that "have bet heavily on a rapidly growing middle class in
regions such as sub-Saharan Africa. Multinational corporations such as Nestlé; have already begun to re-examine strategies in what they had hoped would be strong growth markets."
Pew says that the share of the world’s population living a low-income existence and the share living a middle-income existence increased similarly (6 percentage points and 5 points, respectively) from 2001 to 2011. "When we consider the number of people who entered each category due to improved living standards, the expansion of the low-income tier slightly outpaces the growth of the middle income tier (358m vs. 336m). But when all sources of change are accounted for, the increase in the low-income population exceeds the increase in the middle-income population by nearly two-to-one (694m vs. 385m)."
The analysis encompasses 111 countries, which accounted for 88% of the global population and 85% of world output in 2011. The study is among the first to make use of 2011 purchasing power parities (PPPs) that are based on the latest available benchmark estimates of price levels around the world — the PPPs, produced by the World Bank last year, are exchange rates adjusted for differences in the prices of goods and services across countries.
Pew says the five income groups are people who are poor and living on $2 or less daily, low income ($2.01- 10), middle income ($10.01-20), upper-middle income ($20.01-50), and high income (more than $50). For ease of exposition, the report refers to income ranges in whole numbers, such as $10-20 in reference to who is middle income.
In 2011, only 16% of the world’s population was living on $20 or more daily, a little above the US poverty line. By global standards, that constitutes an upper-middle or high-income existence. And most of these people still lived in the economically advanced countries in North America, Europe and the Asia-Pacific region.
In 2001, 76% of the global population that was upper-middle income, those living on $20 to $50 daily, lived in Europe and North America. By 2011, the share living in Europe and North America fell to 63%. The regions gaining shares were Asia & South Pacific — up from 14% in 2001 to 23% in 2011 — and South America, which was up from 8% to 10%.China alone raised its share of the global upper-middle income population from 1% in 2001 to 10% in 2011. But Europe and North America continue to dominate the top rung of the income ladder. Some 87% of the global high-income population, with $50 or more at their disposal daily, lived there in 2011, compared with 91% in 2001. Within this group, Western Europe gained on the US with respect to the shares of their populations that are high income. Among the countries included in this study, several had higher shares of their populations living on more than $50 per day in 2011 than the U.S.20 In order, they are Norway, Denmark, Luxembourg, the Netherlands, Germany, Iceland, Finland and Canada. Of this group, all but Denmark and Germany lagged behind the US on this front in 2001.
Pew’s figures measure gross incomes, excluding the effects of Europe’s higher taxes and social contributions.
The report says that by some key measures, the typical American household has slipped behind economically since the beginning of the 21st century.
In 2013, the median income of US households was $51,939, down substantially from $55,562 in 2001 (figures in 2013 dollars). In addition to two recessions — in 2001 and from 2007 to 2009 — longer-run trends such as globalization, the decline of unions, technological change and the rising cost of benefits such as health care are factors that limit prospects for many Americans.
But how does the well-being of the American family compare with the well-being of people in other countries?
The US still fares very well on that score. On a global scale, the vast majority of Americans are either upper-middle income or high income. And many Americans who are classified as “poor” by the US government would be middle income globally, according to a new Pew Research Center analysis.