UK middle class households struggling to maintain economic status

Middle-class households around the world, but also in the UK, are struggling to maintain their economic status and lifestyles as stagnating incomes fail to keep up with the rising cost of housing and education, warned the Organisation for Economic Cooperation and Development in their latest report.

The report found that the middle class had shrunk in most OECD countries and that millennials were finding it increasingly difficult to enjoy the same rewards as their parents.

Defined as earning between 75% and 200% of the median national income, almost 70% of baby boomers belonged to middle-income households when they were in their twenties, whereas only 60% of millennials can claim that status today.

In particular, lifestyles were being crimped by faster-than-inflation increases in housing prices, which accounted for the single largest item in middle-income budgets. Since the 1990s, the cost of housing had gone from 25% of middle income budgets to 33.3%.

The economic influence of the middle class had also dropped sharply across the OECD region, except for in a few countries, meaning that inequalities between the richest 10% and the rest of the population were growing.

Middle incomes were growing at the same pace as ten years ago, increasing by just 0.3% per year, a third less than the average income of the richest 10%.

Most households now spent more than they earned and over-indebtedness was higher for them than for both low-income and high-income families.

"Today the middle class looks increasingly like a boat in rocky waters,2 said OECD Secretary-General Angel Gurría. "Governments must listen to people’s concerns and protect and promote middle class living standards. This will help drive inclusive and sustainable growth and create a more cohesive and stable social fabric."

To help the middle class, the OECD called on governments to improve access to high-quality public services and to ensure better social protection coverage.

The Paris-based organisation also called on policymakers to tackle the cost of living crisis by implementing policies that encourage the supply of affordable housing.

Socio-economic fairness also dictated that it was necessary to consider shifting the tax burden from labour income to that from capital and capital gains, property and inheritance, as well as making income taxes more progressive and just.