Why We Should Pay Attention to the Middle Class

The middle class plays a critical role in the development of a country. It is not only expected to create employment as business start-ups but also to boost investment and production as consumers. This Policy Note describes the middle class and provides its contributions to economic growth. It adopts an alternative definition by dividing the income distribution based on official poverty lines. To maximize the role of the middle class in growth and development, it is important to make the middle class a stable force to sustain the growth of the Philippine economy. To do so, the government should find more avenues to attract investments that will create more and better-quality jobs. The corporate social responsibilities of major companies could be tapped to generate more and better-quality jobs for the middle class. The income tax reform being proposed in the legislative branch will likely bolster the income share of the middle class. This income boost will provide an opportunity to capitalize on domestic demand-led growth spurred by domestic consumption.