Animation: The Collapse of the Middle Class in 20 Major U.S. Cities
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Animation: The Collapse of the Middle Class in 20 Major U.S. Cities

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When future historians look back at the beginning of the 21st century, they’ll note that we grappled with many big issues.

They’ll write about the battle between nationalism and globalism, soaring global debt, a dysfunctional healthcare system, societal concerns around automation and AI, and pushback on immigration. They will also note the growing number of populist leaders in Western democracies, ranging from Marine Le Pen to Donald Trump.

However, these historians will not view these ideas and events in isolation. Instead, they will link them all, at least partially, to an overarching trend that is intimately connected to today’s biggest problems: the “hollowing out” of the middle class.

Visualizing the Collapse of the Middle Class

The fact is many people have less money in their pockets – and understandably, this has motivated people to take action against the status quo.

And while the collapse of the middle class and income inequality are issues that receive a fair share of discussion, we thought that this particular animation from Metrocosm helped to put things in perspective.

The following animation shows the change in income distribution in 20 major U.S. cities between 1970 and 2015:

Animation: The Collapse of the Middle Class in 20 Major U.S. Cities

The differences between 1970 and 2015 are intense. At first, each distribution is more bell-shaped, with the majority of people in a middle income bracket – and by 2015, those people are “pushed” out towards the extremes as they either get richer or poorer.

A Broader Look at Income Inequality

This phenomenon is not limited to major cities, either.

Here’s another look at the change in income distribution using smaller brackets and the whole U.S. adult population:

Income distribution

Courtesy of: FT (h/t Metrocosm)

It’s a multi-faceted challenge, because while a significant portion of middle class households are being shifted into lower income territory, there are also many households that are doing the opposite. According to Pew Research, the percentage of households in the upper income bracket has grown from 14% to 21% between 1971 and 2015.

The end result? With people being pushed to both ends of the spectrum, the middle class has decreased considerably in size. In 1971, the middle class made up 61% of the adult population, and by 2014 it accounted for less than 50%.

As this “core” of society shrinks, it aggravates the aforementioned problems. People and governments borrow more money to make up for a lack of middle class wealth, while backlashes against globalism, free trade, and open borders are fueled. The populists who can “fix” the broken system are elected, and so on.

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Interest Rate Hikes vs. Inflation Rate, by Country

Inflation rates are reaching multi-decade highs in some countries. How aggressive have central banks been with interest rate hikes?

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Interest Rate Hikes vs. Inflation Rate, by Country

Imagine today’s high inflation like a car speeding down a hill. In order to slow it down, you need to hit the brakes. In this case, the “brakes” are interest rate hikes intended to slow spending. However, some central banks are hitting the brakes faster than others.

This graphic uses data from central banks and government websites to show how policy interest rates and inflation rates have changed since the start of the year. It was inspired by a chart created by Macrobond.

How Do Interest Rate Hikes Combat Inflation?

To understand how interest rates influence inflation, we need to understand how inflation works. Inflation is the result of too much money chasing too few goods. Over the last several months, this has occurred amid a surge in demand and supply chain disruptions worsened by Russia’s invasion of Ukraine.

In an effort to combat inflation, central banks will raise their policy rate. This is the rate they charge commercial banks for loans or pay commercial banks for deposits. Commercial banks pass on a portion of these higher rates to their customers, which reduces the purchasing power of businesses and consumers. For example, it becomes more expensive to borrow money for a house or car.

Ultimately, interest rate hikes act to slow spending and encourage saving. This motivates companies to increase prices at a slower rate, or lower prices, to stimulate demand.

Rising Interest Rates and Inflation

With inflation rates hitting multi-decade highs in some countries, many central banks have announced interest rate hikes. Below, we show how the inflation rate and policy interest rate have changed for select countries and regions since January 2022. The jurisdictions are ordered from highest to lowest current inflation rate.

JurisdictionJan 2022 InflationMay 2022 InflationJan 2022 Policy RateJun 2022 Policy Rate
UK5.50%9.10%0.25%1.25%
U.S.7.50%8.60%0.00%-0.25%1.50%-1.75%
Euro Area5.10%8.10%0.00%0.00%
Canada5.10%7.70%0.25%1.50%
Sweden3.90%7.20%0.00%0.25%
New Zealand5.90%6.90%0.75%2.00%
Norway3.20%5.70%0.50%1.25%
Australia3.50%5.10%0.10%0.85%
Switzerland1.60%2.90%-0.75%-0.25%
Japan0.50%2.50%-0.10%-0.10%

The Euro area has 3 policy rates; the data above represents the main refinancing operations rate. Inflation data is as of May 2022 except for New Zealand and Australia, where the latest quarterly data is as of March 2022.

The U.S. Federal Reserve has been the most aggressive with its interest rate hikes. It has raised its policy rate by 1.5% since January, with half of that increase occurring at the June 2022 meeting. Jerome Powell, the Federal Reserve chair, said the committee would like to “do a little more front-end loading” to bring policy rates to normal levels. The action comes as the U.S. faces its highest inflation rate in 40 years.

On the other hand, the European Union is experiencing inflation of 8.1% but has not yet raised its policy rate. The European Central Bank has, however, provided clear forward guidance. It intends to raise rates by 0.25% in July, by a possibly larger increment in September, and with gradual but sustained increases thereafter. Clear forward guidance is intended to help people make spending and investment decisions, and avoid surprises that could disrupt markets.

Pacing Interest Rate Hikes

Raising interest rates is a fine balancing act. If central banks raise rates too quickly, it’s like slamming the brakes on that car speeding downhill: the economy could come to a standstill. This occurred in the U.S. in the 1980’s when the Federal Reserve, led by Chair Paul Volcker, raised the policy rate to 20%. The economy went into a recession, though the aggressive monetary policy did eventually tame double digit inflation.

However, if rates are raised too slowly, inflation could gather enough momentum that it becomes difficult to stop. The longer high price increases linger, the more future inflation expectations build. This can result in people buying more in anticipation of prices rising further, perpetuating high demand.

“There’s always a risk of going too far or not going far enough, and it’s going to be a very difficult judgment to make.” — Jerome Powell, U.S. Federal Reserve Chair

It’s worth noting that while central banks can influence demand through policy rates, this is only one side of the equation. Inflation is also being caused by supply chain issues, a problem that is more or less outside of the control of central banks.

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Mapping the Migration of the World’s Millionaires

This graphic maps out the migration of millionaires across the globe, showing the top 10 countries the ultra-rich are moving to and from.

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Mapping the Migration of the World’s Millionaires

Throughout 2022, a projected 88,000 millionaires will move to a new country, according to the latest Henley Global Citizens Report.

Which countries are these millionaires moving to, and where in the world are they coming from?

This graphic maps the migration of high net worth individuals (HNWIs)—people with a net worth of over US$1 million—showing where rich people are flocking, and where they’re fleeing.

Migration of Millionaires is Back

Before diving into the country-specific data, it’s worth taking a step back to look at overall millionaire migration trends, and how things are changing this year.

2020 saw a drastic drop in the number of millionaire migrants, as pandemic-induced lockdowns kept people from leaving their home countries—and at times, their homes in general.

But as restrictions ease and countries begin to open up their borders again, the migration of millionaires is beginning to gather steam once again:

Year# of HNWIs that migratedY-o-y change
2018108,00014%
2019110,0002%
202012,000-89%
202125,000108%
2022P88,000252%
2023P125,00042%

Below, we’ll dive into which countries are seeing the highest number of HNWI migrants, and which ones are losing the most HNWIs.

Which Countries Are Millionaires Leaving?

There are a plethora of reasons why the ultra-rich move countries. Escaping conflict is one of them, which is why it’s no surprise to see Russia and Ukraine are projected to see some of the biggest emigration numbers by the end of 2022.

Here are the top 10 countries by millionaire outflows:

CountryProjected net outflows of HNWIs (2022)% of HNWIs lost
🇷🇺​ Russia15,00015%
🇨🇳​ China10,0001%
🇮🇳​ India8,0002%
🇭🇰 Hong Kong3,0002%
​🇺🇦 Ukraine2,80042%
​🇧🇷​ Brazil2,5002%
🇬🇧​ UK1,5000%
🇲🇽​ Mexico8000%
🇸🇦 Saudi Arabia6001%
🇮🇩 Indonesia6001%

Figures rounded to the nearest 100.

While Russia is expected to see 15,000 millionaires leaving the country, Ukraine is projected to experience the highest loss in percentage terms—a whopping 42% of its HNWIs could leave the country by the end of 2022.

China could also see a big loss in its millionaire population, with a projected loss of 10,000.
According to Andrew Amoils, Head of Research at New World Wealth, this could be more damaging to the country than in previous years, since general wealth growth in China has declined recently.

Where Are The Ultra-Rich Moving?

The United Arab Emirates (UAE) has become a millionaire magnet, with a projected 4,000 HNWIs flowing into the country by the end of 2022. This influx of ultra-wealthy people is partly because of the country’s accommodating immigration policies that are specially tailored to attract private wealth and international talent.

Here are the top 10 countries that saw millionaire inflows:

CountryProjected net inflows of HNWIs (2022)% of HNWI Gained
​​🇦🇪​ UAE4,0004%
🇦🇺​ Australia3,5001%
🇸🇬 Singapore2,8001%
​🇮🇱 Israel2,5002%
​​🇺🇸 USA1,5000%
​🇵🇹​ Portugal1,3002%
🇬🇷​ Greece1,2003%
🇨🇦​ Canada1,0000%
🇳🇿​ New Zealand8001%

Australia continues to attract HNWIs, coming in second behind the UAE. According to New World Wealth, approximately 80,000 millionaires have moved to the Land Down Under in the last two decades.

A few things that attract migrants to Australia are the country’s low costs of healthcare, its lack of inheritance tax, and its generally prosperous economy.

Where does this data come from?

Source: Henley Global Citizens Report 2022

Data notes: As countries reopen, and the invasion of Ukraine wears on, this will have ripple effects on where people choose to live. There are two main things to keep in mind when view the information above. 1) Individuals need to remain in a country for six months in order to be updated in the database. In many cases, it’s not yet clear where people leaving certain countries choosing to relocate. 2) In the graphic above, we’ve visualized the top 10 countries for inflows and outflows.

 

Update: This article and graphic have been updated to more clearly explain what’s being shown, and list the data source in a more prominent way. We appreciate your feedback.

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