April 11 (UPI) -- The middle class is shrinking the world over due to stagnating incomes and rising education and housing costs, a new OECD report said.
"Under Pressure: The Squeezed Middle Class," published Wednesday, said governments need to do more to help the struggling middle class that has shrunk in most of the world's rich countries while simultaneously becoming harder for younger generations to enter.
Defined as earnings between 75 percent and 200 percent of the median national income, the middle class has seen its share of households in OECD countries shrink on average from 64 percent of the population in the mid-1980s to 61 percent in the mid-2010s.
On top of the, while 70 percent of baby boomers were middle class in their 20s only 60 percent of millennials can say the same today, the report said, adding that "the middle-income group has grown smaller with each successive generation."
"Today, the middle class looks increasingly like a boat in rocky waters," said OECD Secretary-General Angel Gurria in a statement. "Governments must listen to people's concerns and protect and promote middle-class living standards. This will help drive inclusive and sustainable growth and create a more cohesive and stable social fabric."
This group's economic influence is also on a sharp decline, the report said, as middle-class incomes are stagnating in all but a few OECD countries, rising by only 0.3 percent a year, which is a third less than that of the richest 10 percent.
Meanwhile, products and services essential to a middle-class lifestyle are getting more expensive with prices increasing faster than inflation, the report said.
Housing prices, for instance, have increased three times faster than the median income over the last 20 years. While housing accounted for a quarter of disposable income in the 1990s, it now represents a third.
This is happening, the report said, as job security is weakening and more than one-in-five households spend above its means and indebtedness is higher for the middle class than for either of the other two classes.
"Our analysis delivers a bleak picture and a call for action," OECD Cheif of Staff Gabriela Ramos said. "The middle class is at the core of a cohesive, thriving society. we need to address their concerns regarding living costs, fairness and uncertainty."
OECD said it is focusing on the middle class because it has always been an aspiration and represented a rewarding lifestyle while being the backbone of healthy economies and societies.
The report said, "through their consumption, investment in education, health and housing, their support for good quality public services, their intolerance of corruption and their trust in others and in democratic institutions they are the very foundations of inclusive growth."
In other words, the middle class is the "bedrock" of society and it is less stable than a generation ago, it said.
Governments need to review and adapt their tax policies and benefit systems to protect those at the lower end of the middle-class threshold while also reforming the housing and education systems in order to address the root problems of the instability, the report said in urging countries to take action.
"To foster fairness of the socio-economic system, policies need to consider shifting the tax burden from labour income to income from capital and capital gains, property and inheritance, as well as making income taxes more progressive and fair," the report said.