Last week the ILO – the International Labour Organization – presented a report in which it warned for the erosion of the European middle classes. This is an outcry that I fullheartedly endorse.
Here are the pertinent snippets of the ILO’s press release:
The financial crisis and changing employment relationships have caused the middle class in most EU countries to contract over the past decade.
The financial and economic crisis has severely affected middle-income groups – mainly defined in the report as those groups in the income range between 60 to 200 per cent of the median income. Almost all of the EU countries studied have experienced a decrease in the size of their middle class, and the share of total income going to the middle class. “A weaker middle class leads to lower aggregate demand, puts a break on long-term growth and may cause social and political instability,” said Daniel Vaughan-Whitehead, co-author and editor of the report.
The middle class in most European countries grew rapidly in the 1980s and 1990s, driven mainly by the increase in labour market participation of both women and men, and the emergence of the dual-earnings household model. On the other hand, long-terms trends like the changing structure of jobs, and the growth of non-standard forms of employments were aggravated by additional factors brought by the crisis, such as rising unemployment, further real wage decline, and reforms of social dialogue institutions, that further contributed to the erosion of the middle class in Europe during the past decade.
“This trend is worrying, especially because it seems to hurt young people the most,” explained Vaughan-Whitehead. “The very high youth unemployment rates could result in a lower probability of being part of the middle class, and create an intergenerational gap.”
Some occupations that traditionally represented the middle class, such as teachers and public administration employees, do not systematically belong to middle-income groups anymore. Employment security is no longer the norm in the public sector, evidenced by a rapid increase in the number of temporary contracts in the public sector throughout Europe. The report finds that women have been particularly affected by this process: the public sector is not only a major source of employment for them, the reduced quality and supply of public services, such as childcare, also negatively impact their participation in the labour market.
Employment rates for older workers (55-64 years) rose from 38.4% in 2002 to 51.8% in 2014. In most European countries, the postponement of retirement provides a means of sustaining middle class status.
Despite the crisis, some countries have been able to maintain a stable middle class. This was the case for Belgium, France, the Netherlands and Sweden, all countries with resilient industrial relations. Conversely, the weakening of the social dialogue in countries such as Greece, Spain and Ireland, has certainly contributed to greater inequalities. In countries with limited collective bargaining like Hungary and the Baltic states, the growth of the middle class depends directly on the economic context.
Mechanisms of wage fixing and wage bargaining also play a role. The survival of the indexation system in Belgium for instance, seems to have contributed to limit inequalities.
The middle class is traditionally a barometer: not only for the financial and economical health, but also for the political and legal health of a country. In developing countries or countries with a poor political or legal situation, the middle class is often virtually non-existent.
Of course, in such countries there are always a (quite limited) number of rich and influential people, who move in circles close to the goverment, large ground-owners or the industrial leaders– hence, the elite. And in such poorly led or troubled countries there are a lot of poor (and often suppressed) people, who do the hard labour without getting paid or rewarded properly for it: the masses.
Yet, for a healthy middle-class to emerge there must be stable sources of labour and income for large groups of people, as well as a stable and safe economic and legal framework. This is a framework with reliable banks, a reliable legal system and a reliable, non-suppressive government, that knows where to start and where to stop its affairs and interventions. Such a society is based upon trust and fair treatment for the people, by the people and with the people.
So, when in a country the political and legal situation stabilizes, the economy improves and the cowboys and spongers are taken out of the equasion, a middle class is one of the first things to emerge. People take their chances to escape poverty; either by starting their own business or by finding a steady job in which they can prosper and create some wealth for themselves and their loved ones. And this middle class than becomes the driver for even more jobs, a vivid retail industry and general prosperity in a country.
Therefore it is alarming news that the middle class seems to be on the retreat, in contrary to both the lower classes and the (extremely) wealthy upper classes: not only in traditionally more suspect countries like Russia and Brazil (and probably in China too), but also in the European Union and the United States.
To start with the last two ones: both in Europe and the United States, the traditional middle class citizens are under attack from a few different angles.
- The everlasting hunt for increased cost-efficiency and elevated shareholder value, which forces companies to continue their quest towards execution of jobs and services with as little people as possible;
- Out of that the automation and robotization of much of the traditional, repetitive (i.e. routine) work, which diminishes the need for well-educated and qualified, middle class workers;
- The reduced amount of available work for the middle classes, making that the highest educated people take over the jobs from the less (but still quite good) educated people, thus leading to a diploma inflation and increasing joblessness and poverty under less educated people;
- The independent freelancers from inside and outside the country, who – unintentionally – stimulate the race to the bottom, as they both put pressure on hourly rates and on the available money for insurances fees and social security payments, thus further eroding the number of available jobs for middle class people with fixed contracts;
- The retail industry and the owners of small enterprises – traditionally representing a large group within the classical middle classes – who suffer enormously from the erosion of their middle-class customers’ job base and income sources and get into financial trouble themselves: look at the deterioration of all middle-class, middle-of-the-road shopping chains in f.i. The Netherlands or abroad and figure out how many businesses have been closed and (middle-class) jobs have been lost;
- And last, but not least: the palpable disdain among many neoliberal and neoconservative people for fixed jobs as an instrument for structural prosperity and wealth;
- In their vision and words fixed jobs are for cowards and dinosaurs ‘who dream of remaining at the same company their whole working life’;
- Everybody who tries to halt the erosion of the steady jobs and thus the deterioration of the middle classes – for instance by trying to spur fixed contracts – is branded as ‘suspicious’ and must be stopped in their narrow-minded image of the world.
And please don’t be mistaken. When the middle classes in the United States and the European Union deteriorate, it is nothing short of a catastrophy. It means that the mostly young and vivid backbone of a country is weakened... probably for a long time. This is a development that will make the whole country less powerful, as it hurts the structure and strenght of the country.
Can this development be stopped? Perhaps, yes!
In case of The Netherlands, it means that the monomanic focus on exports of cheap agricultural produce, on cheap distribution of bulky and piece-goods and on cheap financial, ICT and commercial services must be abandoned .
The Netherlands should not be the data centre capital of the world, as data centres consume enormous amounts of energy and yield in comparison very few qualified jobs and very little added value to our country. Data centres should be put in sparsely populated countries where green, natural energy resources are amply available.
And The Netherlands should not be the tax haven of the world either. Tax havens rob countries from their desperately needed and well-deserved sources of income and they are the source of political and economic disputes and mutual anger and yield in comparison relatively few qualified jobs and very little added value to our country.
Countries like The Netherlands should – in my humble opinion – shift their focus away from the commercial and financial services industries, towards the development of high quality, high added value and high technology products. Preferably in green areas like energy supply or environmentally friendly public and private transport. Or in the production of durable business and consumer goods of impeccable quality, as such goods last longer and add less to the pollution of the world.
The Dutch should try to do so, not by trying to be more Chinese than the Chinese themselves, but by raising the standards of Dutch quality. In a way you could say that The Netherlands should become a little more German.
I think that every country in Europe should start to look at its own particular situation, its geographical location and the economic possibilities that this location creates. And it should look at the availability of durable, natural resources, that can be used without depleting or polluting the country. And perhaps a tough one, in these nationalist times; not only by themselves, but as part of a pan-European master plan for the benefit of the whole union. As supranational cooperation is not a dirty word, but a prerequisite for a higher standard of living in Europe: not only for a few countries, but for all European countries.
Countries like Spain, Norway and the alpine countries could take of the production of green, durable energy in their portfolio (i.e. wind, water and solar energy) , while countries with natural harbours and ports could take care of internal and external distribution of goods.
Countries with specialized knowledge and skills should be persuaded to share their knowledge and skills with other countries, in exchange for knowledge and skills that they don’t possess yet: quid pro quo. Competition and cooperation should be equally important.
Universities should be even more involved in both fundamental research and applicable research than they are today, while (large) companies should take care of the practical education of youngsters: especially in labour and technology that is still too complicated or versatile to be executed by robots.
And countries could help their citizens to look outside the cocoons of their own homes again, to make them dare to dream and spur them to pursue their wildest dreams. As I argued in my article from a few days ago, the human development of technology seems to be at a standstill at this very moment, as the vast majority of technological developments is aimed at keeping people inside their homes and making them even more lazy, instead of bringing them outside of these homes, where the real life takes place.
Of course I am a dreamer and slightly naive. Nevertheless, when the middle classes everywhere – just like the poorest population groups – are degraded to being second rate people, who cannot count on understanding and compassion from the rich and successful elites, the human race is in a worse shape than we all feared.
This in order to save the middle and lower classes everywhere from a future of being improductive and useless people.