The Pew Research Center released a report earlier this year and found that at the beginning of the decade, the middle class included 51% of all adults, down from 61%., as reported by The Los Angeles Times (latimes.com).
Dubbed as the worst decade in modern history, the shrinking middle class corresponds to declining tax rates for the wealthy and a growth in corporate profits. Incomes for the wealthiest 400 Americans quadrupled even as their tax rates were halved in the last 12 years, , and executive compensation has grown over 125 times faster over the last three decades than worker pay.
The result of a decade of middle class frustration in the US with no end in sight, is that many, especially the baby boomers are exiting the country for greener pastures.
In Latin America and the Caribbean saw a 50% increase in the number of people who joined the middle class in the last decade. The report, “Economic mobility and the growth of the middle class in Latin America,” reveals that the middle class in the region grew to comprise 152 million people in 2009, compared with 103 million in 2003.
For decades, the poverty reduction and growth of the middle class in Latin America and the Caribbean (LAC) moving at a very slow pace, as the low growth and persistent inequality slowed progress. In the last ten years, however, the fate of the region improved significantly thanks to certain public policy changes that emphasize the provision of social programs with economic stability and free trade.
The report reveals that some of the most important factors when it comes to ease upward mobility in Latin America are better educated among workers; higher level of formal employment, more people living in urban areas, more women in the workforce and smaller families.
The report identifies three strategies that governments can use to gain the support of the middle class to a social contract more fair and legitimate. The first is to explicitly incorporate the goal of equal opportunity in public policy to break the perception that the system is rigged in favor of the privileged.
Second, establish a second generation of reforms to the system of social protection – including both social assistance and social security – to overcome fragmentation and thus make it more fair and efficient.
Finally, to break the vicious circle of low taxes and low quality of public services by investing a portion of the windfall of raw materials to improve the quality of public services.
According to the World Bank, the debate on social policy on how to achieve greater commitment from wealthier segments of the population is likely to remain a key issue for Latin America in the near future.
The Costa Rica News (TCRN)
San Jose Costa Rica