The Curious Case of the Western Lower Middle Class

The last thirty to forty years have arguably been the most successful years in human history. Hundreds of millions of people have been able to grow out of extreme poverty and global inequality has declined for the first time in the last two hundred years. This global exercise in re-distribution of incomes has obviously been a boon to the upper and middle classes of the relatively poor Asian countries (and, of course, the global 1%).

At the same time, the lower middle class of rich developed (i.e., Western) countries has curiously found itself between a rock and a hard place.

When it comes to income distribution percentiles, the Western lower middle class is indeed in a pretty unique position: It seems to be the single massive loser of Globalization, at least compared to the real income gains enjoyed by all other percentiles.

The Western lower middle class has not only been squeezed on the income side, it has also faced a massive increase in essential costs.

A well-known blogger going by the pen name Scott Alexander recently wrote an excellent exposé on "Cost Disease", detailing how much more expensive essential middle class expenses like housing, schooling and college and healthcare have become without having seen adequate corresponding increases in quality.

Not adjusted for inflation, though

Is it then really any wonder that the Western lower middle class recently seems to have embraced nativist solutions. How much of Donald Trump's or Marine Le Pen's popularity is a consequence of pure economic anxiety? 

The past forty years may not even have been the worst to come for the Western lower middle class. Ongoing automation of routine work tasks that in decades prior had been solid middle class jobs will only increase in scope and intensity. 

As Andrew McAfee, a MIT research scientist, recently stated, the US will probably never again have a large middle class doing industrial-era routine work - although the last four words are certainly the key ones (to quote Erik Brynjolfsson, a professor at MIT).

The next forty years will not only see massive rates of job displacement and automation of all kinds of tasks historically thought of as requiring human input. They will at the same time show job creation in entirely new and different fields, but with a globally competing work force.

Without mitigating effects, it will become very hard for the Western lower middle class to even preserve their relative status (as measured in global population income percentiles).

In order to preserve their political stability in the decades to come, Western countries will have to face a Herculean task: How to build a new middle class in an information society.