‘middle class’ occupations appear to be shrinking relative to those in the bottom as well as the top third,” says Mr Van Reenen. Some economists have argued that the shrinking middle is not all bad news, if more families are moving up the ladder than down. Yet polarisation of the workforce and growing inequality as the rich get much richer nonetheless raises urgent questions for policymakers, particularly as they struggle to stimulate growth. The issues are as pressing for developing countries such as China and India where, despite a rapidly growing middle class, inequality has also been on the rise. William Easterly, the US economist, writing for the World Bank in 2001 found that middle income share affects all indicators such as life expectancy, infant mortality and health outcomes. A middle class consensus is also good for democracy, he argues, with research showing that a rise in middle class share has a clear impact on development of political rights. Elite dominated societies, he adds, will also invest less in human and infrastructure capital for the majority because of “fear of empowering groups outside [its] own class”. The middle class is a constituency that policymakers ignore at their peril. The key will be to ensure that the traditional aspirations of the middle class—a job, education for their children and a secure retirement—are not rendered futile as governments seek to control public spending while boosting growth. That, of course, means pursuing job creation policies. But in a world where technology has ruthlessly culled middle income opportunities, policymakers will also have to ensure that the skill sets of the middle class match the needs of employers, which means prioritising education above almost all else. Focusing on lifelong learning and skills enhancement must be a priority, as the wage premium for education has clearly grown.
It is also notable that the Resolution Group study found that countries with the greatest disconnect between growth in the economy and median wages were those where unions and collective bargaining were weakest. Encouraging a working dialogue between labour and employers could help to stem in inequality. Finally, policymakers must do more to halt the accumulation by an extreme minority of an ever greater share of their nation’s wealth. This means doing more to rein in the culture of excessive bonuses that has flourished in recent years. Progressive fiscal policies will also ensure that the
Polarisation of the workforce and growing inequality as the rich get much richer raises urgent questions for policymakers, particularly as they struggle to stimulate growth burden of maintaining public services such as health and education—which have the greatest effect on income inequality and relative poverty—are more fairly shared. This will not only bolster the middle class but benefit the poorest as well. As Aristotle said more than two millennia ago, no government should be content with a nation “of masters and slaves, the one despising, the other envying”. Everyone’s interests are best served when the population has a healthy middle class. “This is the class of citizens which is most secure in a state … and as they neither plot against others, nor are themselves plotted against, they pass through life safely.” Recommended link www.oecd.org/els/social/inequality
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OECD Yearbook 2012 © OECD 2012
2012 OECD Yearbook