Friday, March 19, 2021

The Rise in Poverty

 The global "middle class" (or perhaps better described as the middle-income)  shrank last year because of the Covid-19 pandemic, with almost two-thirds of households in developing economies reporting they suffered a loss in income, according to two new estimates based on World Bank data.

Researchers at the non-partisan Pew Research Center found that the ranks of the global "middle class" – those earning $10-$50 per day – fell by 90 million people to almost 2.5 billion last year to swell the ranks of the poor, (those living on less than $2 a day), by 131 million.

The Pew data on the middle class actually understates the impact because an estimated 62 million high-income people, or those earning $50 or more per day, dropped into the middle tier as a result of the pandemic. That meant the number of people who went into the crisis as members of the global "middle class" and fell out actually topped 150 million last year. South Asia accounted for more than a third of the decrease in the ranks of the middle class seen last year

“In modern history it is hard to come up with examples where you saw such a sharp downturn in global economic growth,” Rakesh Kochhar, the study’s author said.

The World Bank expects the ranks of the world’s poor to continue to grow this year. Its estimate show as many as 124 million people fell below its $1.90 line for extreme poverty in 2020. That number of new poor is projected to continue growing this year to as many as 163 million people.

In a separate study based on surveys of 47,000 households in 34 developing countries, researchers at the World Bank found that 36% of households saw job losses last year and almost two-thirds saw incomes fall. The result was the first increase in global poverty seen since the Asian financial crisis of 1997-98, the bank’s researchers wrote.

As in many rich countries, the surveys of countries ranging from Burkina Faso to Colombia, Indonesia and Vietnam show the burden of the economic hit disproportionately fell on women, young people and the self-employed in urban centers. But they also point to the consequences that slower recoveries are expected to have. While the U.S. has unleashed unprecedented fiscal rescue efforts for its economy, many developing economies have had smaller resources to draw on.  As of September 2020, advanced economies had on average spent 7.4% of gross domestic product on rescuing businesses and people hit by the pandemic versus 3.8% of GDP in emerging markets and 2.4% in low-income developing countries.

Global middle class shrinks for first time since 1990s | Business and Economy News | Al Jazeera

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