How has the middle class evolved in Spain?

The middle class is the subject of recurrent scrutiny. Indeed, the pillars that sustain society depend on its strength, or on its weakness. A broad middle class is often associated with greater social cohesion, better functioning institutions (as well as greater confidence in them), and greater capacity for economic growth. To analyse its evolution and its current state is, therefore, to analyse the state of the foundations of society itself.

This is no easy task, as there is no single metric that summarises the state of the middle class in a single number. There are different definitions and, in any case, each one of them needs to be carefully analysed from different angles. Some of the definitions of what constitutes middle class that have been proposed – and perhaps the most complete ones from a conceptual perspective – are very difficult to measure. For example, one definition is the portion of the population who share certain values and enjoy relative financial stability and a good quality of life. However, there are other definitions that are less broad, but easier to quantify. In this article we will use the measure proposed by the OECD, which defines the middle class as the portion of the population with an income level between 75% and 200% of the median income of the whole population each year.1

As can be seen in the first chart, in recent years the size of the middle class in Spain does not appear to have undergone any significant changes, although we do observe a gradual upward trend. In 2007, before the financial crisis, 59.2% of the population was middle class. Between 2014 and 2019, this proportion fluctuated around 59.7% on average, and by 2022 (the latest available data) it had risen to 61.1%. Moreover, this increase has gone hand in hand with a slight reduction of both the working class and the upper class. Specifically, the proportion of people in the working class decreased by 0.6 pps between 2007 and 2022, to 30.0%. The size of the upper class, meanwhile, has reduced by 1.4 pps to 8.8% of the population.

Despite the slight growth of the middle class that has occurred in recent years, the perception is often the opposite. What can explain this? One possible explanation is the loss of purchasing power that occurred during the financial and real estate crisis across the population as a whole and which was similar for all income brackets. Starting in 2009, real income per household began to decline sharply. As can be seen in the second chart, in 2013 this measure was already more than 15% lower than in 2007, prior to the outbreak of the financial crisis. However, the fall in income was similar across the different classes of society. The subsequent recovery was also quite similar, and it was not until 2022 that all groups recovered to their pre-financial crisis levels. To the extent that income trends have been similar across the different groups, there have been no major changes in the size of the middle class in recent years.2

n order to analyse in greater detail the perception that the middle class has been weakened in the last 15 years, we analysed how the middle class would have changed if we had kept the income thresholds that demarcate the different classes fixed at their 2007 levels (instead of changing them each year according to the evolution of the annual income distribution). With the significant fall in incomes that occurred, many people saw their earnings fall below the threshold that had separated the working and middle classes back in 2007. Using these fixed thresholds, as can be seen in the second chart, there is a marked fall in the size of the middle class between 2008 and 2013, going from 59.2% of the population to 53.0%, followed by a subsequent recovery. To the extent that people adjust their social references gradually, this is likely to help explain why, even though the middle class has barely changed in recent years, the perception is sometimes different.

Significant differences also emerge when analysing the evolution of the middle class by age. As can be seen in the third chart, between 2007 and 2022 the proportion of young people belonging to the middle class has decreased slightly, while the proportion of older people belonging to this group has increased considerably. On the other hand, there is an increase in young people belonging to the working class, while there is a fall among older people in this segment.