The Middle Class Income Trap


This is a problem developing countries might face when local wages rise fast and the country is no longer able to use the wage arbitrage between developed countries and its local labour force to produce goods and services for export and at the same time the country has not developed the technology and infrastructure to produce the advances goods and services that developed countries focus on producing .

When this happens,growth stalls and wages stagnate at about $1,000 to $12,000 gross national income per person measured in 2010 money.

The way out of the impasse is to focus on innovation and improve technical and managerial skills and re-focus businesses to concentrate on selling to the local markets made up of the rising middle class.


About Keerthika Singaravel

One Response to The Middle Class Income Trap

  1. You got it with that last paragraph – when labor costs rise, the only way to retain the competitive edge is to make labor more productive. That is often through better management and oversight, additional capital facilities and equipment, and more automation and technology.

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