Middle income trap facts for kids

The middle income trap is a challenge that some countries face when their economy grows to a certain point but then gets stuck. It means a country can't become a rich, developed nation because it loses its ability to compete globally.

The World Bank, which is an international organization that helps countries develop, has said that nations like South Africa and Brazil have experienced this trap.

What is the Middle Income Trap?

Imagine a country that starts making things like toys or clothes for other countries. At first, it can make these items very cheaply because wages (the money paid to workers) are low. This helps the country's economy grow, and it becomes a "middle-income" country.

However, as the country gets richer, workers start earning more money. This is good for the people, but it also means the cost of making goods goes up. Suddenly, the country's products are not as cheap as they used to be. Other countries with even lower wages might start making the same products for less money.

Why Countries Get Stuck

When costs go up, the country loses its competitive advantage. This means it's no longer the best or cheapest place to make certain things. It can't sell as much as before, and its economy stops growing quickly. It gets "stuck" in the middle-income range, unable to become a high-income country.

The World Bank defines a country as being in the 'middle-income range' if its gross national product (GNP) per person is between $1,000 and $12,000 (based on prices from 2011). GNP per person is a way to measure the average income of people in a country.

How to Avoid the Trap

Countries that want to avoid the middle income trap need to find new ways to keep their economies growing. It's like upgrading from making simple toys to designing and building advanced robots!

Smart Ways to Grow

• Innovate and Improve: Instead of just making things cheaply, countries can focus on making better, more advanced products. This means investing in new technologies and finding smarter ways to produce goods, which can lower costs or create unique items.
• Educate and Train: A well-educated and skilled workforce is key. When people have better education and training, they can do more complex jobs, invent new things, and work with advanced technology. This includes studying science and technology to create new ideas and products.
• Invest in Infrastructure: Building better roads, ports, internet networks, and power systems (called infrastructure) makes it easier and cheaper for businesses to operate and transport goods.
• Find New Markets: Countries can look for new places or people to sell their goods and services to, expanding their customer base.
• Support the Middle Class: As more people earn good incomes, they can afford to buy more things, including better education and technology. This spending can help the economy grow even more.

By focusing on these strategies, countries can move beyond just making cheap goods and instead become leaders in new and exciting industries, helping them become truly rich nations.

See also

In Spanish: Trampa de la renta media para niños