The epidemic is over a year old, and the global “K-shaped” development has taken a step to the extreme, according to estimates, the middle class is greatly reduced, unfortunately, not from the “K-shaped” upstream to the affluent class, but “back to the original form “! In the “K-shaped” economic recovery, the global inequality between the rich and poor is worsening, the U.S. Pew Research Center’s latest forecast last year, a total of 54 million people lost their middle-class status, while the rich and powerful continue to “gain pounds. This tendency of the world’s rich and poor to lose their middle class status, while the rich continue to gain weight, has laid the groundwork for social unrest.
It is true that the epidemic has hindered the growth of the global middle class, but also increased poverty. Data show that 150 million people slipped down the economic ladder last year, the first time in nearly 30 years that there has been an overall downward trend, and the number of people living in poverty rose sharply by about 131 million as a result of the recession.
By definition, middle-income groups live on US$10.01 to US$20 (about HK$78 to HK$156) per day, a definition that still seems loose when viewed by the standards of developed economies. However, this is enough to make the number of global middle class last year for the first time since the 1990s, including South Asia and sub-Saharan Africa, the largest decline, India is particularly tragic, the number of middle-class people in the country last year is expected to decline by 32 million, the largest in 30 years, accounting for 60% of the global total. Since the middle class is closely related to gross domestic product (GDP), India’s GDP is forecast to decrease by 5.2% by 2021 compared to previous years, while the United States will only decrease by 1.6% at the same time. The report also shows that the number of poor people in India is expected to increase by 75 million, also accounting for 60% of the global total.
In fact, the OECD has long warned that the economic influence of the middle class is declining, and once this class disappears, it could have serious consequences for the economic growth and social structure of countries. One of the most serious problems is that it is now more difficult for young people to climb to the middle class, looking back at the baby boomers born between 1943 and 1964 (now aged 57 to 78), about 68% belonged to middle-income households in their 20s, but the relevant rate fell to only 60% for millennials born between 1983 and 2002 (now aged 19 to 38).
Ironically, according to the Institute for Policy Studies, a U.S. think tank, the world’s 2,365 billionaires have increased their wealth by a total of $4 trillion (about HK$31 trillion). In the year since mid-March last year, the total wealth held by the rich rose sharply from US$8.04 trillion to US$12.39 trillion, an increase of 54 percent. What is more noteworthy is that 13 billionaires in the world have increased their wealth more than five times in a year, the most exaggerated even up to 33 times. If this continues, the world is afraid of becoming a world of extreme luxury for the rich and extreme poverty for the poor.
In order to solve the problem of “K-shaped recovery”, it is said that President Biden will push the rich tax, forcing the rich to tide over the difficult times with the government. However, Nobel laureate Angus Deaton warned that the government’s tax on high income earners will be very difficult to implement, and through a one-time property tax to pay off the epidemic debt is not a good idea, fear will become a permanent tax, just like the United Kingdom.
[The “abnormal” inflation rich families become beneficial]
Low-income families were the first to lose their jobs during the epidemic, and as the economy recovered, they became the biggest victims of rising prices for essential goods. This inflationary divergence in different commodities will worsen the disparity between the rich and the poor, triggering large-scale social unrest at any time.
In the United States, for example, although the overall inflation is still moderate, but there are huge differences behind the data, especially in recent months, the price of certain commodities rose particularly much, such as gasoline, only one month apart, currently a week of driving may need to pay an extra $ 60 (about 468 Hong Kong dollars). Food prices have risen by more than twice the overall price of goods, many of the necessities of life have increased prices.
As gasoline and food accounted for a much higher ratio of monthly expenses of low-income families than wealthy families, so they bear the biggest blow. Moreover, these needs are often not delayed or substituted.
In fact, the United States is not a single region with rising prices, the United Nations Food Price Index in March has been rising for 10 consecutive months, the longest wave of increases since 2008, meaning that the world is facing a more disparate situation between rich and poor.
Carmen Reinhart, chief economist at the World Bank, said that food prices and inflation are equally important to the issue of equality, and that such shocks can have an uneven impact.
The media used different income groups to assess the impact of inflation reflected in the increase in the price of a basket of goods, and found that for the wealthiest U.S. households, this is the “flattest time for prices,” mainly because high-income earners are the biggest beneficiaries of the K-shaped economic recovery after the outbreak, and their holdings of stocks and real estate have increased their fortunes dramatically, not to mention Most of them had their jobs unaffected.
In short, high-income households have seen a relative decline in spending on food, health care, rent and other items due to the appreciation of their assets, and these are items that have risen faster than overall prices in recent years.
Even the Federal Reserve’s statistics also show that 70% of the increased wealth last year flowed into the top 10% of all U.S. households with the highest incomes, and only 4% of the lowest 10% of households increased their wealth.
A report published by Opportunity Insights, a policy research firm, shows that the recession is basically over for higher-paid families earning more than $60,000 a year. But for the lowest-income groups earning less than $30,000 a year, the number of unemployed is still up by a whopping 30 percent from the pre-epidemic level.
As inflation heats up, low-income households may be hit harder, especially the Federal Reserve has repeatedly indicated that it will tolerate inflation for a period of time, until the economy shows substantial progress will not raise interest rates, in order to help the job market fully recover.
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