This was first published at The McAlvany Intelligence Advisor on Monday, July 15th, 2013:
Two favorite economists, Donald Boudreaux of George Mason University and Mark Perry of the University of Michigan, have contested and decried the dominant social theme that America’s middle class is disappearing. For instance, back in January their arguments reached the pages of the Wall Street Journal in which they stated flatly that that favorite “progressive” trope was “spectacularly wrong.”
- Inflation doesn’t take into account the increase in variety and improvements of today’s products compared to those available in years past.
- Wage calculations don’t take into account fringe benefits, which amount to 31 percent of wages, according to the Bureau of Labor Statistics (BLS)
- Average wages have been held down due to the influx of women and immigrants into the economy over the past three decades
In that article they looked at life expectancy which, at 79 today, is a full five years longer than it was in as recently as 1980, and ten years longer than in 1950. They also noted another government study that showed that the average America family now spends just 32% of its disposable income on the “basics” – food at home, automobiles, clothing and footwear, household furnishings and equipment, and housing and utilities – compared to 53% in 1950 and 44% in 1970.
In that article they concluded that:
Even though the inflation-adjusted hourly wage hasn’t changed much in 50 years, it is unlikely that an average American would trade his wages and benefits in 2013 – along with access to the most affordable food, appliances, clothing and cars in history, plus today’s cornucopia of modern electronic goods – for the same real wages but with much lower fringe benefits in the 1950s or 1970s, along with those eras’ higher prices, more limited selection, and inferior products.
Despite assertions by progressives who complain about stagnant wages, inequality, and the (always) disappearing middle class, middle-class Americans have more buying power than ever before. They live longer lives and have much greater access to the services and consumer products bought by billionaires.
Along came a study from the Census Bureau that confirmed their conclusion, in spades. It was titled “Money Income of Families – Percent Distribution by Income Level in Constant (2009) Dollars: 1990 to 2009.” Such a title may put most readers to sleep at this point, but hang tight: it’s worth the brain damage!
Between 1990 and 2009, the percentage of families in the “lower class” (defined as income of less than $25,000 a year) declined only slightly, from 18.1% of the population to 17.8%. The “middle class” (defined as incomes between $25,000 and $75,000 a year) dropped from 48.4% to 43.2%.
Question: if the “lower class” stayed about the same while the “middle class” was shrinking (allegedly), where did those with “middle class” incomes go? They “disappeared”… into the “upper class!” The “upper class” grew from 34% in 1990 to 39% in 2009.
In fact, that “disappearing” has been going on for decades, but most people haven’t noticed. Going back to 1967, almost 62% of American families were “middle class” – remember, this is in constant dollars. The number now is just 43%, while the “lower class” dropped from 22% in 1967 to 17.8% in 2010. The “upper class?” It increased from 16.3% in 1967 to 39.1% in 2010!
As Perry noted in his blog on Friday:
In other words, America’s “middle-class” did start largely disappearing in the 1970s, but it was because they were moving up to a higher-income category, not down into a lower-income category.
What’s more amazing is that this has taken place under our noses at the same time that the attack on the free market economy has escalated dramatically. The “progressives” haven’t yet been able to kill the goose.
Mark Perry: “Yes, the middle-class has been disappearing, but they haven’t fallen into the lower-class, they’ve risen into the upper-class.”
Census Bureau Table 696: Money income of families in constant 2009 dollars – distribution by income level
Donald Boudreaux and Mark Perry: The Myth of a Stagnant Middle Class
Forbes: The Democratic Party’s Secret Attack on the Middle Class