Is the German Middle Class Crumbling? Risks and Opportunities

Thriving middle classes are the backbone of democratic societies and strong economies, but in many countries, they face mounting pressure as their economic strength is eroding relative to higher-income households. Real wages and incomes for most middle-class households have grown only very slowly, and rising expenditures have been putting further pressure on living standards. Meanwhile, globalisation, digitalisation, and demographic change are eroding job opportunities for middle-skilled workers, who risk sliding into lower-paid employment. The COVID-19 crisis has accentuated socio-economic divides and may end up accelerating some of the above trends. This publication builds upon the OECD's publications on the middle class (Under Pressure: The Squeezed Middle Class) and social mobility (A Broken Social Elevator? How to Promote Social Mobility). It demonstrates that the German middle class is similar in size as in peer countries, but substantially smaller than it was in the mid-1990s. Lower middle class households face an increased risk of slipping out of the middle; meanwhile, upward mobility into the middle has declined, particularly for workers in "e;typical"e; middle-class occupations. Employment growth forecasts point to further occupational polarisation. The review proposes policy options for strengthening the employability of middle-class workers, creating good-quality, future-oriented jobs, and boosting middle class disposable incomes.