Growing Vulnerability: Why Europe’s Middle Class Faces Greater Economic Risks

A World Bank study reveals that while the size of Europe’s middle class has remained stable, economic security within it has weakened, requiring higher incomes to avoid poverty. Rising financial vulnerability, driven by automation, globalization, and worsening income shocks, is making middle-class stability harder to maintain.

A recent study by the World Bank’s Poverty and Equity Global Department and the Office of the Chief Economist for the Europe and Central Asia Region has revealed a growing crisis in Europe’s middle class. The report examines how the middle class evolved between 2005–08 and 2015–18 across 22 European countries. While the size of the middle class has remained stable at around 28% of the population, financial security within this group has weakened. The income needed to sustain middle-class status has increased significantly, making it harder for families to maintain economic stability. The study adopts a vulnerability-based approach, defining middle-class households not just by income but by their ability to avoid falling into poverty. It finds that economic shocks have intensified, pushing many households closer to financial instability, despite appearing to remain in the middle class.

The Rising Cost of Staying Middle Class

Rather than defining the middle class by static income brackets, the study introduces a more dynamic measure: economic security. A household is considered middle class if its income is high enough to ensure a low probability of less than 4% over four years of falling into poverty. This vulnerability income threshold has increased across Europe, meaning that it takes a higher income to remain financially secure. In 2008, the average European household needed a daily income of $50.5 (adjusted for 2017 purchasing power parity) to be securely middle class. By 2018, that figure had risen to $55.5 per day, reflecting an 11% real-term increase. This rise highlights the growing financial pressures faced by households, making it more expensive to sustain a middle-class lifestyle.

Economic shocks are also becoming more severe. The income shock that pushed families into poverty in 2015–18 was 21% larger than the shocks experienced in 2005–08. This suggests that middle-class households are facing greater financial risks, requiring a higher income to maintain economic stability. This trend is particularly concerning as it means that those who fail to keep pace with rising income thresholds are more likely to slip into financial vulnerability.

A Divided Middle Class: Education and Jobs Matter More Than Ever

The study highlights a significant shift in the composition of the middle class. Households that once enjoyed stable financial security now find themselves struggling, while those with higher education and professional occupations are increasingly dominant within the middle class. In 2008, 24% of middle-class household heads had only a primary education, but by 2018, this share had dropped to 13%. Meanwhile, the share of middle-class households headed by someone with tertiary education rose from 22% to 31%.

Similarly, changes in employment patterns reflect a growing divide in economic security. Middle-class households are now more likely to be headed by professionals or managers, while those in sales, service, and elementary occupations are more at risk of economic instability. The disappearance of middle-skill jobs due to automation and globalization is driving this shift. In the past, having a mid-level skill set often guaranteed middle-class status, but today, those without higher education or specialized skills face increasing vulnerability.

A Growing Gap Between Vulnerability and Stability

For those just above the poverty line but not yet securely middle class, the pathway to financial security has become steeper. The study measures this through the vulnerability gap, which calculates the income shortfall between vulnerable households and the middle-class threshold. This gap widened by an average of 13% across Europe. In Norway, the gap surged from $14.4 per day in 2008 to $24 per day in 2018, while in Greece, it increased from $12.5 to $19.6 per day. Similar trends were observed in Austria, Denmark, Estonia, Latvia, and the Netherlands, where the gap expanded by over 30%.

A widening vulnerability gap means that households just above the poverty line have a harder time reaching middle-class stability. Economic mobility is slowing, making it more difficult for lower-income households to improve their financial situation. This poses a significant risk for economic inequality, as those struggling to enter the middle class face greater obstacles than ever before.

The Future of Europe’s Middle Class: A Call for Action

Although the overall size of the middle class has remained stable, the underlying dynamics suggest growing economic insecurity. Many households that were once financially secure are now at greater risk of falling into poverty, and the barriers to middle-class entry are increasing. This shift threatens to erode the traditional stability of Europe’s middle class, raising concerns about social and economic inequality.

The findings of the study suggest that targeted policy interventions are needed to protect middle-class households from rising financial vulnerability. Strengthening social safety nets, investing in education, and ensuring that labor market policies keep pace with technological changes will be crucial in maintaining middle-class security. Without these measures, economic insecurity may continue to grow, potentially reshaping the economic landscape of Europe in the coming decade.

The study’s conclusions raise an important question: will policymakers take action to reinforce middle-class stability, or will increasing vulnerability become the defining feature of the European middle class? The future of economic security in Europe will depend on the choices made today.