It hardly seems possible, but the United States no longer is tops when it comes to having the largest middle class in the world.
According to the Credit Suisse Research Institute’s “Global Wealth Report” released Tuesday, China now has the largest middle class on earth. Since 2000, the number of middle-class adults in China rose by 43.4 million, reaching 109 million adults this year. The U.S. in comparison added 22 million adults to its middle-class ranks, reaching 92 million in 2015.
The slippage will likely give Democratic and Republican candidates for president in 2016 more ammunition to say what they plan to do economically to beef up the ranks of the middle class in the United States.
Credit Suisse CEO Tidjane Thiam notes in the report: “Wealth is (nevertheless) still predominantly concentrated in Europe and the United States. However, the growth of wealth in emerging markets has been most impressive, including a fivefold rise in China since the beginning of the century.”
China has a fifth of the world’s population with 1.4 billion people while holding nearly 10 percent of the global wealth. Global wealth is likely to continue to grow at an annual rate of 6.5 percent in the coming years to reach $345 trillion in 2020, 38 percent above the current wealth level. Thiam said “the middle class will continue to expand in emerging economies overall with the lion’s share of that growth to occur in Asia.”
“As a result, we will see changing consumption patterns as well as societal changes as, historically, the middle class has acted as an agent of stability and prosperity, Thiam said.
The Global Wealth Report uses the U.S. as a benchmark in defining the middle class as a wealth band rather than an income range to show a resilience to setbacks such as a stretch of unemployment.
“A middle-class adult in the United States is defined here as having wealth between $50,000 and $500,000 valued at mid-2015 prices,” the report says. “The lower bound could perhaps be justified by noting that $50,000 equates to roughly two years of median earnings and hence provides substantial protection against work interruptions, income shortfalls or emergency expenditures. Similarly, the upper threshold of $500,000 roughly equates to the amount of capital a person close to retirement age needs to purchase an annuity paying the median wage for the remainder of their life.”
The report also notes a growing income inequality worldwide.
“While the bottom half of adults collectively own less than 1 percent of total wealth, the richest decile holds 87.7 percent of assets, and the top percentile alone accounts for half of total household wealth,” the report says. “The shares of the top 1 percent and 10 percent in world wealth fell during 2000–2007, that of the top percentile from 48.9 percent to 44.8 percent, for example. However, the trend has reversed since 2008, and the additional rise this year takes the share of the top percentile to a level not observed since 2000 and possibly not seen for almost a century. Nevertheless, the share of the top decile remains below the 88.3 percent level achieved in 2000.”
As the middle class and the wealthiest 1 percent grow elsewhere, expect multinational corporations to shift their marketing to people in those emerging areas. Americans may look longingly to places overseas and recall with fondness the days that once were.