Eric Youle | eyoule
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3 years ago

The Shrinking Middle Class

Jul 5th 2010 at 6:33 PM

In their book Why We Want YOU to be Rich Donald Trump and Robert Kiyosaki remarked that the relative numbers of Middle Income earners in the Developed Countries was shrinking.  See the two right most diagrams (below).  I have chosen to call them Mature Industrial and Post Industrial Age Societies.  Also I have suggested what the Pre-Industrial age distribution might have been (with a preponderance of poor agricultural laborers subsistence farmers even serfs).

These may be an exaggeration and there is some question of the shrinkage in Middle Income, but there does appear to be a trend, which should be of some concern. Certainly the increasing polarization of income in the Developed Countries is beyond doubt.

Its is also quite clear that the Developing Countries (India and China, in particular) are moving away from the pre-industrial age distribution, with a growing middle income class, at a good rate.

Income Distribution






One can postulate the reason and effect of this change.

The rich one can surmise would include:-

the losing Middle income being

and the Poor

Apart from the consequences to individuals of their reduced status, its would also seem clear that the tax base is being seriously eroded.  The middle income sector have become the major source of taxation revenue.

The people in the Rich sector can be seen as largely individual entrepreneurial people, traditionally able to minimize their tax, through corporate or trust structures and able to meet a significant part of their expenses from pre-tax income.  The shrinking middle class had no such advantage, their income taxed at source and their goods and services inevitable also taxed.  The Poor can (at least, over their life time) be seen as a net recipient of taxation income rather than as significant contributors.

This suggest the emergence of a tipping point at which the taxation income will be insufficient to maintain the services currently afforded to the poor, which would further aggravate the disparity between the two groups.

Not a promising view of the future.  Its worth seriously looking at the authors intent that their readers should be amongst the rich.  This is an individual choice one can be proactive and seek an improving future or do nothing and slide down the income tree.

How you may ask - well consider the solution that both Donald Trump and Robert Kiyosaki, suggest - start your own Network Marketing business.

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