French middle-class under pressure, according to OECD

In France, 52% of households expressed difficulty to make ends meet at the end of the month. [Shutterstock]

Soaring housing prices, budget under pressure, automation. In its latest report, the Organisation for Economic Cooperation and Development paints an alarming picture of the French middle class. EURACTIV France’s media partner La Tribune reports.

“Demotion”, “class disappearance”, “impoverishment”. There are many words to describe the situation of the middle class. According to the latest OECD report published on Wednesday 10 April, the middle class in developed countries has shrunk over the past three decades.

It has dropped from 64% to 61% of the total population. While almost 70% of baby boomers were part of middle-income households in their twenties, only 60% of millennials are part of it today.

“The middle class’ economic influence and role as “economic centre of gravity” has weakened.

“Thirty years ago, the aggregate income of all middle-class incomes was four times higher than the income of the upper-class. Today, it is only three times higher.”

For the authors of the report, “among OECD countries, except for a few countries, middle-class incomes are barely higher today than they were ten years ago, increasing by just 0.3% per year, a third less than the average income of the richest 10%.” At the same time, “the cost of a middle-class lifestyle has increased faster than inflation”.

In France, the middle class has often generated debates and controversies in the political arena and among economists and sociologists. In 1988, sociologist Henri Mendras spoke of “the growing of the middle class” between 1965 and 1985.

Thirty years later, sociologist Louis Chauvel referred in his sometimes-contested essay ‘La spirale du déclassement’ (‘Declassification Spiral’) to the erosion of this social class since the end of the post-war economic boom.

French Finance Minister Bruno Le Maire explained that “the yellow vest crisis is rooted in a deep concern by the middle class about the risk of demoting, working with insufficient pay […] Our line, with Gérald Darmanin (Minister of Public Action and Accounts, Ed.), is to pay the greatest attention to the working middle class.

As the government tries to quell the anger of the “yellow vests”, the OECD publication paints a bleak picture.

A French middle class that is still large

OECD economists estimate that the middle class earns between 75% and 200% of the median income. In France, the yearly median income is €21,415. To compare, it amounts to €16,153 in the EU according to recent data from the French National Institute of Statistics and Economic Studies (INSEE).

In France, the size of the middle class compared is well above the OECD average at 68% of the total population compared to 61% in other OECD countries.

High-income households (with more than 200% of the median income) average at 6% of the total population compared to 9% in OECD countries.

Difficulties in making ends meet

To understand frustration among the middle class, the OECD pointed out that the proportion of households reporting difficulties in making ends meet is higher than the average in OECD countries (52% versus 47%).

This gap is even starker for low-income households, with a difference of 11 points between France and other OECD countries (81% versus 70%). On the other hand, the results are similar for high incomes, regardless of the geographical area.

Soaring housing prices

Soaring housing prices over recent decades have negatively affected the budgets of households.

“Housing prices have increased much faster than median incomes,” explained the authors of the report.

In Paris alone, the average price per square metre surpassed €10,000 in the first quarter of 2019, according to recent data from the real estate group Century 21. And despite fears raised by the months of protest, prices in Paris have continued to increase, including in more tense areas.

Access to homeownership for young households has deteriorated since the 1970s. According to a Banque of France note, this phenomenon has worsened “for households aged 25 to 44 with the lowest incomes”. In 1973, 34% of them were owners compared to 16% in 2013, a 50% decrease.

However, the rate of homeownership among young and wealthy households increased from 43% to 66%, a 50% increase.

Risks of automation

Pressure on the middle class is also very present on the labour market. According to latest OECD estimates, “one in six middle-income workers are in jobs that are at a high risk of automation in France, close to the average for OECD countries”.

Although there is no consensus on the impact of automation on the labour market, many jobs are expected to change in the coming years. This is likely to increase the polarisation of the labour force that is already underway in many developed countries.

In his book ‘Inequality in the world’, the economist Branko Milanovic, recalled that:

“Rich countries’ workers are squeezed between their own countries’ top earners, who will continue to make money out of globalization, and emerging countries’ workers, whose relatively cheap labour makes them more attractive for hiring.”

Davos warns ‘squeezed’ middle class needs attention

Threatened by unemployment and stagnant wages, the middle class is increasingly feeling the pinch and falling prey to populism, as shown in recent elections and the Brexit vote, international and business leaders in Davos warned.

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