Millennials being squeezed out of middle class, says OECD

Millennials in advanced economies around the world are being squeezed out of the ranks of the middle class, including in Britain, as pay growth stalls and house prices skyrocket, according to the OECD.

The Organisation for Economic Co-operation and Development (OECD) said that for every every generation since the baby boom of the 1940s, across 40 major countries, the middle-income group had shrunk and its economic influence weakened.

The Paris-based organisation, which represents 36 wealthy nations around the world, but also included South Africa, China, Russia and Brazil in its analysis, said there had also been a noticeable decline in the living standards of middle-income families over the past three decades.

It said there were 15 countries where the middle class was now a smaller group than before the financial crisis; the group was defined as people whose earnings are between 75% and 200% of median national income. It also found that the top 10% of earners held almost half of the total wealth, with the bottom 40% accounting for only 3%.

The snapshot of modern life for middle class households around the world suggests that younger generations are increasingly being denied similar opportunities to their parents.

As many as 70% of the baby boomers – born between 1942 and 1964 – were part of the middle class in their 20s, compared with 60% of millennials – born between 1983 and 2002 – at the same point in life, the OECD said.

While the situation in Britain has been less pronounced than the OECD average, with 63% of baby boomers, compared to 59% of millennials, the report found that families in the middle-income group had been squeezed.

House prices in the UK over the past two decades have increased by at least 60% more than median incomes, much faster than the OECD average of 50%.

The OECD recommended governments review and adapt the tax system, as well as reforms in housing and education to make it more accessible. Angel Gurría, the OECD secretary-general, said: “Today the middle class looks increasingly like a boat in rocky waters.

“Governments must listen to people’s concerns and protect and promote middle class living standards. This will help drive economic inclusive and sustainable growth and create a more cohesive and stable social fabric.”