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Growing Vulnerability: What Happened to Europe’s Middle Class in the Course of a Decade?

Excerpt:  “This paper examines the health of the middle class by using on a novel definition of the middle class. In this new definition, introduced by López-Calva and Ortiz-Juarez (2014), being in the middle class requires absence, or a low risk, of vulnerability to poverty. The risk of experiencing poverty –defined as having income levels below a given poverty line– is what makes an individual vulnerable or insecure in an economic sense. Since economic security is a hallmark of the middle class, being vulnerable means not being in the middle class. … this paper investigates changes in the risk of vulnerability to poverty. In essence, this vulnerability is assessed by estimating a level of household income associated with a low probability (defined as less than 4 percent over four years) of falling into poverty. By using European panel data covering 22 countries during the period from the 2008 global financial crisis to just before the onset of the COVID-19 pandemic, this paper assesses, for the first time, whether the crisis of the middle class manifested itself as an increase of the risk of falling into poverty or, equivalently, as an increase of the minimum income needed to be (almost) immune from this risk.”

Report (38 pages)