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The Search for Middle Class Stability in a Changing World
7 June 2019
17:00—18:15
KEY CONCLUSIONS
In emerging economies the middle class is growing

In 1991, 30 to 40 million people belonged to the middle class. Now that number is 500 million. All thanks to what we've done. This is not a just a figure, it is the result of the concrete actions that we took — Siddharth Bhatia, Vice President, National Investment Promotion and Facilitation Agency of India.

The educated middle class is the driving force of economic development

The economy is oriented towards attracting and making investments, towards creating an environment that facilitates business development, not just on a national level, but when entering global markets. <...> Also, young people, the youth, the development of professional competencies, and accordingly the preparation of new professionals in competitive sectors. <...> We are doing a lot in this sense, especially when it comes to investing in R&D — Joao Jorge Arede Correia Neves, Secretary of State of Economy of the Portuguese Republic.

The middle class has high social stability. It is the part of the population that creates demand for modernization and transformation — Ekaterina Trofimova, Partner, Deloitte CIS .

In developed countries, the middle class has a significant impact on politics

Around 2023 to 2033, we will be able to discern the political result of the 2008 crisis. <...> Large stock market crashes cause concern among the middle class. We have seen this happen twice already in the last century. Right now, it is not yet clear if we are seeing a drift towards right-wing populism, towards anti-immigration, protectionist rhetoric, or a shift to the left – increasing taxes for the rich, increasing taxes on capital, breaking apart Google, Facebook, and any other large corporate monopolies — Charles Robertson, Global Chief Economist, Renaissance Capital .

We, in fact, as a bank think that inequality will be one of the key driving forces of macroeconomic policy and therefore also ultimately shape financial markets over the next couple of decades. Simply because, we are definitely seeing that populations are not happy with the status quo. <…> Which basically means that going forward you're going to have to look at financial markets more from the perspective of more expansionary fiscal policy, higher taxes, more tariffs, less so through the lens of monetary policy – QE – that has really dominated over the course of the last 10 years — David Hauner, Head of Emerging Markets Economics & Strategy, EMEA, Bank of America Merrill Lynch International Ltd..

ISSUES
Russia's middle class is insignificant and its composition varies by region

If we apply the widest methodology, self-identification based on income and spending, the lower boundary for middle-class salaries in Russia is located somewhere in the range of 60 to 120 thousand roubles a month per capita on average. This is at the same time as Russia's average monthly salary falls below 40,000 roubles. <...> The trend [of an increasing middle class, – Ed.] that we have been observing over the past few years is sluggish. We can talk about the fact, that over the last five years, the size of Russia's middle class grew maybe just 1 to 2%. <...> The difference in income by region, among different strata of the population, is very significant, even according to official statistics. The average difference in incomes in Russia falls somewhere around a factor of 15 — Ekaterina Trofimova, Partner, Deloitte CIS .

Robotization and digitalization bring uncertainty to the labour market

We do not understand very well the risks directly tied to working with big data. <...> This is an absolutely new reality which requires new professional skills — Ekaterina Trofimova, Partner, Deloitte CIS .

Of course, what is important here is education. Jobs are not disappearing because of robots, but because people are insufficiently educated — David Hauner, Head of Emerging Markets Economics & Strategy, EMEA, Bank of America Merrill Lynch International Ltd..

SOLUTIONS
Increasing the quality of life and social support for the population

The steps that the government takes when it comes to social reforms are very cautious, and as you know, a number of the national projects that are currently guiding the work of state agencies are socially oriented. Clearly, this is meant to balance out the painful measures being taken in other areas, such as taxes and pension reform. This includes healthcare and the goals of increasing Russia’s life expectancy and average income — Ekaterina Trofimova, Partner, Deloitte CIS .

Increasing the quality of professional training

We can transform our opportunities and become more competitive on the global market and create new types of goods and services that will improve our lives. Our workers will be different, they will have more technological skills and receive better pay. Maybe they will become this new middle class — Joao Jorge Arede Correia Neves, Secretary of State of Economy of the Portuguese Republic.

This will have the greatest effect on mid-level professionals, however, even there, it might create new jobs. We have a lot of low skilled workers, and they will only be helped by this — Siddharth Bhatia, Vice President, National Investment Promotion and Facilitation Agency of India.

The material was prepared by the Russian news agency TASS