Vanishing Middle Class: Implications for Management and Business
The middle class person belongs to a social group that falls between the upper and the lower working class, speaking in terms of socio –economic factors. The degree of socio-economic factors varies from one country to another and differs significantly. However, it is seen that, in most parts of the developed world, the middle class has slowly and steadily started to vanish. The issue of vanishing middle class is primarily related to the business, the reasons for this are:
- In countries such as America and UK, several workers are struggling to survive, as rapidly changing markets and technologies have made their skills obsolete. Several manual skills which contributed to middle class jobs have now become either obsolete or have been replaced by superior technology and machines.
- Lack of Middle class jobs: Earlier, people used to get jobs, even without a college degree. These jobs made them join the middle class society. But today, after the end of the recession, there is still a big vacuum in the world economy. As per the study made by Federal Reserve of New York, it was found that more jobs have been added to the lower class and the upper class of society. This has compelled the middle class to either accept low paying jobs, or make efforts such as improving skill sets, higher education, working abroad and other making other efforts to get high paying jobs.
- This has created an income inequality all across the world.
- As the world economy is still in the recovery mode, businesses are reluctant to hire more people for new jobs. And, since the middle class are the ones who are the real job creators, they have suffered the consequences of this downturn.
- Along with the increase in wealth and income, the upper class has become so powerful, that it has started availing several business privileges related to tax exemptions and discounts. Because of this ongoing trend, the rich has become richer; the poor has become poorer, and the middle class is left nowhere to go.
- Since past few years, high-end jobs related to management, healthcare, finance and manufacturing have grown very fast, even low salaried jobs related to the food industry and other sectors have increased. However, the number of middle class occupations, especially related to constructions and education, has steadily declined.
The steady decline in the numbers of middle class people would have several implications, especially in the areas related to business, management and higher education. Let us first analyse its implications on management:
- There will soon be a time when the management would face an acute shortage of medianly skilled workers, even if there is no increase in mid-level jobs. The reason being simple; the decline of the middle class would result in a huge scarcity of several skilled workers, especially in the field of construction and operations.
- The management will have to deal with the situation of steep price hikes in certain areas where there is scarcity of labour, due to which , certain goods would become very expensive, while others, where there is no shortage of labour ,would become cheaper.
Implications to overall business would be:
- The income inequality, which is always present in any economy, would rise to such levels that it might become a destabilizing force for a particular business.
- Businesses would become even more reluctant to hire new talent, as the rising cost pressures and income inequality would reduce their profits and demand for goods and services.
- The consequences of this would be an increase in corruption, power struggles and politics.
However, these are not the only areas that will miss the once abundant middle class. Those students, who would pursue higher studies in management in their domestic countries or abroad, will also become the victims of the vanishing middle class. The reduction in the number of jobs and opportunities that has taken place due to this phenomenon has severely impacted the prospects of these management students. Many students take education loans in order to pursue higher studies, and many of them aspire to enhance their socio-economic stature by starting with mid-level jobs. But what would happen if there are no mid level jobs? This is the new reality, and management students need to realise this fact.
References
Hoffman, V. (2013) A Vanishing Middle Class- A New Normal? Retrieved from: http://www.cbsnews.com/news/a-vanishing-middle-class-the-new-normal/
Reich, R. (2012). America’s Vanishing Middle Class. Retrieved from: http://www.salon.com/2012/08/31/americas_vanishing_middle_class/
Plumer, B. (2013). Here’s where middle class jobs are vanishing the fastest. Retrieved from: http://www.washingtonpost.com/blogs/wonkblog/wp/2013/08/27/heres-where-middle-class-jobs-are-vanishing-the-fastest/
Kain, E. (2011). America’s Vanishing Middle Class. Retrieved from: http://www.forbes.com/sites/erikkain/2011/09/15/americas-vanishing-middle-class/
