By Kristofer Hamel, Chief Operating Officer, and Baldwin Tong, Research Analyst, World Data Lab
Poverty is declining worldwide. Yet, reducing poverty is not equivalent to a rising middle class. A large share of the world’s population earns between USD 2 and USD 11 a day (in 2011 purchasing power parity). Only once people start earning more than USD 11 do they tend to have enough extra spending power to make purchases that go beyond basic needs and therefore enter the global middle class. First-time middle-class purchases include personal transportation (motorcycles), housing (first-time renting or low-end purchases), finance (first savings account or loan) and education (tertiary).
Over the next decade, middle-class spending power will shift from west to east due to the huge growth in the middle-class segments (USD 11-USD 110 per day) of India and China. The middle classes of these two countries will represent over 83% of their respective country’s spending power, meaning that businesses should consider their tastes and preferences. Combined, the world’s two most populous countries are expected to represent over 43.3% of the global middle class by 2030.