The Endangered Middle Class? A Comparative Analysis of the Role Public Redistribution Plays

This article contributes to the debate on the decline of the middle class by engaging in a cross-national comparison of the role public income redistribution play for the relative income position of the middle, and its change over time. The analysis distinguishes between the development of the market as compared to disposable incomes, since different dynamics shape each. Moreover, the broad category of “a middle class” is sub-divided into three groups. The analysis is based on a dataset, covering the period from 1985 to 2005, constructed from the micro-data of the Luxembourg Income Study. The result of the analysis indicates that government income redistribution mainly improves the position of the lowest income group, while the highest income group experiences losses. The income position of the middle classes shows little change as a result of income redistribution. The pro-poor orientation of the welfare state is especially strong in continental European countries. In the decades examined public redistribution increasingly influenced the distribution of market incomes. In most countries, market distribution was characterised by gains to the top and losses to the bottom quintile which redistribution did not fully compensate or. The middle income groups lost little over time, with respect to both market and disposable incomes. However, the distance between the middle and the top incomes grew remarkable. This might best explain the public debate about an endangered middle class.