Middle Income countries face a real risk of “growing old before they become rich”


Middle Income countries are the largest population group in the world. And this week we look at their key demographics:

  • They are defined as countries with an annual income between $1k – $13.2k
  • Collectively, they contain 75% of the global population
  • But their relative poverty means they have just 37% of global GDP

Importantly, their demographics are very similar to those of the High Income countries discussed last week.

As the chart shows, their population growth today is focused on the lower-income, lower-spending Perennials 55+ cohort. This was just 10% of the population in 1950, but has already reached 17% today.

And the Perennials will be nearly a quarter of the population by 2030.

The map shows the range of Middle Income countries. As the World Bank notes:

“They have unfinished development agendas and risk being “trapped” in middle income status if they do not further their own economic, social, and structural transformation.   As countries reach middle income status, they encounter ‘second generation’ or ‘frontier’ reform challenges that reflect the more advanced stage of their development.

Challenges such as lifestyle diseases, aging populations, pension reform, tertiary education, social inequality, competitiveness, trade and tax policy, financial literacy, green growth, and urbanization are typical.”

They are such a large group, the Bank divides them into 2 sectors:

  • Lower Middle Income countries include India, Egypt, Ghana, Iran, Nigeria and Ukraine with incomes of $1k – $4k/year
  • Upper Middle Income countries include China, Argentina, Brazil, Iraq, Malaysia and S Africa with incomes of $4k – $13k/year

CHINA HIGHLIGHTS THE PROBLEM OF GROWING OLD BEFORE BECOMING RICH


One of the key challenges in Middle Income countries is the great range of incomes within each of them.

In China, for example, urbanisation has been a key driver for economic growth since Deng Xiaoping launched the ‘Opening Up’ policy in 1978. City dwellers are now 64% of the population versus 18% then.

But as the chart shows, per capita disposable income is still below Western poverty definitions in both areas:

  • Official data shows it has risen from $707 in 1978 to $6962 in 2022 in urban areas
  • It has risen from $79 in 1978 to $2844 in 2022 in rural areas

By comparison, the US poverty line for an individual in $14891. And for a family it is $29960.


China has made great strides in recent decades in improving the lives of hundreds of millions of people. The chart highlights progress made in durable goods ownership, again from official data:

  • Back in 1990, only 30% owned a water heater, 78% a washing machine, 42% a fridge and 60% a colour TV
  • Today, 90% now own a water heater, 100% a washing machine, fridge and colour TV

But major differences still remain between urban and rural areas. In urban areas, for example, 50% own a car. But in the poorer rural areas, only 30% can afford one.

As the Pew Foundation chart shows, China has just 23m people who earn >$50/day in $2011.

This highlights the risk that China, like many of the other Middle Income countries, is destined to grow old before it become rich.

India might become the “exception that proves the rule”, given its uniquely young population. But it has a long way to go, with 1.2bn people living on just $2 – $10/day. Only 2m earn >$50/day.