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Does US$60,000 make you middle-class or wealthy on Planet Earth?
THE world is on the brink of a historic milestone: By 2020, more than half of the world's population will be "middle class", according to Brookings Institution scholar Homi Kharas.
Kharas defines the middle class as people who have enough money to cover basics needs, such as food, clothing and shelter, and still have enough left over for a few luxuries, such as fancy food, a television, a motorbike, home improvements or higher education.
It's a critical juncture: After thousands of years of most people on the planet living as serfs, as slaves or in other destitute scenarios, half the population now has the financial means to be able to do more than just try to survive.
"There was almost no middle class before the Industrial Revolution began in the 1830s," Kharas said. "It was just royalty and peasants. Now we are about to have a majority middle-class world."
Today, the middle class totals about 3.7 billion people, Kharas says, or 48 per cent of the world's population. An additional 190 million (2.5 per cent) comprise the mega-rich. Together, the two groups make up a majority of humanity in 2018, a shift with wide-reaching consequences for the global economy - and potential implications for the happiness of millions of people.
1. So how much money does it take to meet Kharas's definition of middle-class?
It depends on where you live and, more precisely, on how expensive things are where you live. Kharas's definition takes into account the higher cost of meeting basic needs in places such as the United States, Western Europe and Japan than in much of the developing world.
In dollar terms, Kharas defines the global middle class as those who make US$11 to US$110 a day, or about US$4,000 to US$40,000 a year. Those are per-person numbers, so families with two parents and multiple children would need a lot more. It's a wide range, but remember that he adjusts the amounts by country to take into account how much people can buy with the money they earn. For example, earning US$12,000 for a family of four in Indonesia would qualify for the global middle class, but it would not in the United States.
2. What about the US middle class?
The median household income in the United States is just over US$59,000. That's right in the middle for the United States, but it ranks in the 91st per centile globally for a family of three, according to Kharas's research, putting that US family on the high end of the global middle class.
"Americans have a hard time realising the American middle class is, in a global perspective, pretty high up," said Anna Rosling Rönnlund, who founded the Dollar Street project to photograph families and their lifestyles around the world.
3. Where are these new residents of the middle class coming from?
Kharas estimates 140 million to 170 million people a year are moving into the middle class every year. (More-exact estimates are difficult to come by; not all countries keep uniform records, and in some places the data is years out of date.) India and China have been driving much of the middle-class boom in recent years. Now, Kharas said, Southeast Asian countries such as Thailand and Vietnam are poised for a middle-class surge.
4. So what does it look and feel like, around the world, to be a part of the global middle class?
Dollar Street, the project from Sweden's nonprofit Gapminder foundation, has photographed the daily lives of more than 250 families around the world. Their subjects include a family of five in Burundi who lives on US$324 a year and a family of five in China pulling in US$121,176 a year. The photos show the people and their homes, eating utensils, toilets, toothbrushes and transportation, allowing people to compare lifestyles around the world.
Dollar Street recently photographed Angga and Yuli Yanvar, a couple in their early 30s with two young children, part of the rising middle class in Indonesia. Angga is a social worker and Yuli is a teacher. The family has a refrigerator, electricity and a motorbike to get around, and their children have several toys, including bikes and a battery-powered minicar. They are saving money to purchase a home and car, goals that appear realistic given that they earn just over US$12,000 a year in income.
What immediately jumps out flipping through the Dollar Street photos is how remarkably similar daily life is around the world, with the exception of the very rich and poor. The vast majority of the families have electricity, running water in their home, children that attend school and some sort of transportation.
"The most striking thing is so many of the people we visited so far actually have a plastic toothbrush," said Rönnlund, who started Dollar Street in 2015. "It's the same with soap. Almost everyone in the world has access to some kind of soap. The poorest buy a tiny fraction of a soap bar or make it themselves. When you come to the middle, you see people buying locally produced, big bars of soap. The higher you go up the income scale, the nicer the soap becomes - or even multiple cleaning products."
That lines up with Kharas's research. "These people in the global middle class have a lot of things in common," he said. "They like having air conditioning, a refrigerator, a car or motorcycle to get around, and they like going on vacation and not having to work every day."
5. Does more money and more stuff make us happier?
There are endless debates about what amount of money and what lifestyle would maximise happiness. The consensus among researchers who have studied this extensively is that day-to-day mood doesn't improve much after about US$75,000 a year in the United States. There's not much noticeable improvement in mood after that, even when homes and bank accounts get larger. That said, people also tend to feel better if they are moving up the income ladder, not moving down or stalled, which helps explain why the middle class in the United States and much of Europe is upset after years of stagnating income.
Ronnlund and her team have witnessed some of these trends with the Dollar Street project. They don't ask specifically about happiness, but they did ask every family they photographed about their favourite things they own and what they would like to buy if they got a bit more money.
One poor family held up a plastic bucket as their favourite possession because it was the difference between life and death for them. They dreamed of getting a phone or better bike. Middle-class families valued things that made their life better, such as air conditioning or a refrigerator, and they longed to own cars or homes. Wealthier families prized items such as specialty alcohol, exotic plants or fancy stuffed unicorns.
"I thought it would be easiest to photograph wealthy people, but it's been the opposite," Rönnlund said. "Richer people have a harder time inviting people into their home as is. They want to stage it so they look good and present the social media version of themselves." WP