Fed: Claims of Middle-Class Stagnation Are False
Almost all the benefits of economic growth since the 1970s have gone to a small number of people at the very top. ~Robert Reich, Financial Times (1/29/2008)
Since the mid-1970s income growth has been confined almost entirely to top earners. ~Robert Frank, NY Times (3/9/2008)
The modern American economy distributes the fruits of its growth to a relatively narrow slice of the population. ~David Leonhardt, NY Times (4/9/2008)
Minneapolis Federal Reserve: The claim that the standard of living of middle Americans has stagnated over the past generation is common. An accompanying assertion is that virtually all income growth over the past three decades bypassed middle America and accrued almost entirely to the rich. The findings reported here refute those claims. Careful analysis shows that the incomes of most types of middle American households have increased substantially over the past three decades. These results are consistent with recent research showing that the largest income increases occurred at the top end of the income distribution. But the outsized gains of the rich do not mean that middle America stagnated.
Claims of long-term middle America stagnation—such as those quoted above—are often part of a broader argument about the adverse impact of globalization, outsourcing and free trade. And middle class stagnation is used as motivation for a specific set of policies. But if middle America has not stagnated—as this analysis has shown—then this motivation for those policies is without merit.
From the conclusion of "Where Has All the Income Gone?" by Terry Fitzgerald, Senior Economist
HT: Don Boudreaux