The Continued Erosion of the Middle Class

As Dr. Elizabeth Warren at Harvard has discussed well (take a look at her presentation where she illuminated the effects of the depreciating dollar on the middle class and presents statistics on how the middle class spends its money over the past several decades http://www.youtube.com/watch?v=akVL7QY0S8A), there has been the continued destruction of the U.S. middle class.

As in the U.S. the middle class is shrinking in Korea.

Several research outputs support this. For instance:

“According to the Hyundai Research Institute, the number of middle-class families has declined sharply over the past three years.The institute said middle-class households accounted for 49.9 percent of the total in 2008, down 7.6 percentage points from 57.5 percent in 2005. It was the first time for the portion to fall below the 50 percent mark.”

Along this line, the Bank of Korea points out the repaid expansion of household debt since the 1997 financial crisis, resulting in the rapid decline in the household savings rate especially among the middle class, while that of the highest income bracket hasn’t changed much.

Another research done by Dr. Kang Sung-jin at Korea University points to the dwindling middle class base.

What have been the main causes of this trend?

What have the policy actions got to do with it?

The continued erosion of the middle class has far reaching consequences.