Lou Dobbs Is Right: America's Middle Class Really IS Disappearing, They're Moving To Upper-Income
Steve Horwitz at the Austrian Economists blog uses these Census Bureau Data and concludes that:
More than 30% of U.S. households in 2006 earned above $75K compared to under 20% in 1980. Over the same period, the percentage of U.S. households earning under $35K fell from 42.8% to 36.7%. Fewer households are poor, fewer are middle class, and a hunk more are above $75K (see chart above).
More than 30% of U.S. households in 2006 earned above $75K compared to under 20% in 1980. Over the same period, the percentage of U.S. households earning under $35K fell from 42.8% to 36.7%. Fewer households are poor, fewer are middle class, and a hunk more are above $75K (see chart above).
The middle classes fell too. The sum total across the $35K to $75K categories fell by 5.4 percentage points (from 38.2% in 2000 to 32.8% in 2006). In other words: the net movement of households was an 11.5 percentage point gain in households above $75K and a net reduction of 11.5 percentage points in houses below $75K. So the percentage above $75K rose from 18.9% to 30.4%. That is, it increased by more than 50% (see chart above).
Throw on top of this the fact that most everything people buy costs less in real terms and you have a recipe for increasing wealth across the board. Not bad for what so many people claim is 30 years of stagnation.
See CD posts here and here about the significant decrease in costs for typical consumer items since the early 1980s.
Thanks to Don Boudreaux
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10 Comments:
It would be interesting to see how folks are doing now compared to 2006 data when real estate and stock market values were so high. I agree that the standard of living has increased in the last 20 years but I would think there has been some erosion in the middle class and upper middle class due to price declines in key assets.
The credit bubble has burst and there is massive unemployment along with underemployment. I want to be optimistic, which is natural for me as a U.S. citizen, but I am skeptical of this article's sentiment for the near future.
Add the census date for 1990 and 2000 to see a better picture. In 1980 there were fewer woman in the workplace contributing to household incomes.
Chuck nailed it. The real median income of full time year round males has risen a grand total of $290 from 1980 to 2007. A rounding error. It is the combined increase in female labor force participation and female median incomes that have driven increases in household income.
Basing conclusions upon a notoriously "massaged" number like CPI is unwise at best.
You also need to account for the cost of the second income. Higher taxes, transportation, child care etc. I've seen cases where the costs of the second income are more than the second income; ie. the family would be better off on one income.
This may be the first non-productive contribution to this post, and yet... impressive, good work, ladies and gentlemen. 2006-2009, female employment, and CPI adjustments are all relevant considerations - the quality commentary is no small part of the appeal of Dr. Perry's blog.
That said, I would pay a non-trivial amount of money to see Lou Dobbs vs Don Boudreaux in a Jeopardy-style quiz on economic fundamentals. Care to guess which of the two would decline to participate?
"You also need to account for the cost of the second income"...
Why?
Its all about the income not about what people chose to spend it on...
Speaking of Steven Horowitz, he has a new commentary in the Tampa Bay rag:
Polluting us with debt
While there is the upward pressure on household incomes like more women working, there is also the opposite factor that you must consider: far more people live alone or as a single parent today than in 1980, which would have the opposite effect on household incomes.
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