Life-Cycle Adjustments
…reduced cost for most goods and services helps to explain the apparent contradiction between undeniable improvements in living standards and misleading statistics (beloved by alarmists) that show falling household income in recent years.
Economist Stephen Rose… points to numerous ways in which frequently cited income figures fail to reflect reality. Most obviously, they don’t include the value of benefits — particularly employer contributions to retirement savings plans and health insurance premiums — which have risen far more rapidly than wages.
Rose, writing in the Washington Post, also shows that the statistics for household income ignore the changing size of American households — namely, many more people live in single-adult households now than thirty years ago… This means that even the same reported household income supports fewer people, resulting in more money per person and a higher standard of living. Rose adjusts income numbers to account for the shift in household size and the boost in employer benefits and determines that “the real middle class median income has risen 33 percent, or $18,000, since 1979.”
Ths numbers, in short, show steady and continuing improvement in the status of typical Americans, rather than a “war on the middle class.” Placing the figures in the context of the normal life cycle brightens the picture even further. In a Huffington Post piece titled, “What’s the Income of the Typical American?” Rose notes that most Americans earn less at the beginning and end of their adult lives without necessarily suffering in terms of living standards. “Many graduate students have very low incomes for several years,” he writes. “But few would classify this group as poor given their long term prospects… At the opposite end of the spectrum, retired people have much fewer direct expenses, often have paid off their mortgage, have a home filled with furniture and appliances, and are not likely to have to subsidize their adult children. Consequently, a retiree’s income of $40,000 translates into a very different standard of living than a young couple with a new born child.”
With this in mind, Rose focuses on “prime-age” adults between the ages of twenty-five and sixty-two and finds a median income of $60,000. “Your typical husband-wife couple in this age range,” he adds, “has a median income of over $70,000; and couples in which both husband and wife work at least part of the year had a median income of $81,000″…
The statistical evidence for a rising standard of living for every segment of the population is so overwhelming that charges of a “vanishing middle class” rely on sleight of hand that grossly distorts Census Bureau numbers.
It’s true that between 1979 and 2006, the percentage of middle-income households ($30,000 to $75,000 in inflation-adjusted dollars) went down sharply, by 13.1 percent. But lower-income households (below $30,000) also went down slightly (0.6 percent).
What happened to these formerly middle-income and poor people? They got richer.
As a matter of fact, the only income group that increased at all was households earning more than $100,000, which rose by nearly 15 percent, from 13 percent to 28 percent of the population. In other words, a major chunk of the middle class disappeared into relative affluence, not poverty.
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Increasing Leisure, Not Work
Despite the endlessly repeated charge that Americans work longer hours for less and less pay, the numbers actually show sharp long-term increases in both disposable income and leisure time. Economists Mark Aguiar of the Federal Reserve Bank of Boston and Erik Hurst of the University of Chicago examined five decades of time diary surveys administered by research universities and the government. James Sherk of the Heritage Foundation reports the economists’ key findings:
- “Since the mid-1960s, the amount of time that the typical American spends working fell by almost eight hours per week, while the time spent on leisure activities rose by just under seven hours per week.”
- “This additional leisure time is equivalent to an extra seven to nine weeks of vacation per year.”
- “Leisure has increased unequally. Less educated and lower-income Americans now work less and enjoy more leisure than Americans with higher incomes. This explains part of why they have lower incomes.”
Meanwhile, all Americans spend more time and vastly more money on recreational pursuits. The Census Bureau reports that inflation-adjusted spending on recreational per capita soared from $854 in 1970 to $2,551 in 2005, an increase of nearly 300 percent. Even as a percentage of total consumption, recreation went up dramatically — from 6.5 percent in 1970 to 8.7 percent in 2005.
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The Myth of Permanent Misery
…A November 2007 Treasury report, based on 96,700 tax returns from 1996 and 2005, discovered that 58 percent of filers who found themselves in the poorest income group (the bottom 20 percent) in 1996 moved into a higher income category in just ten years. In fact, after inflation, the median income of all tax filers increased by a solid 24 percent in the decade. Two out of three workers had a real income gain since 1996 — contradicting the common charge that the working class has steadily lost ground.
In terms of the American dream of reliable advancement, there’s been no nightmarish transformation. The Treasury Department explains: “The basic finding of this analysis is that relative income mobility is approximately the same in the last ten years as it was in the previous decade.” There you have it, in the unadorned conclusion of the federal bureaucracy itself: despite terrorist attacks, war expenditures, and hysterical denunciations of the Bush administration’s alleged devastation of the working class, ordinary Americans retained the same ability to climb the economic ladder that they enjoyed between 1986 and 1995 — the last years of the Reagan boom and the opening years of the Clinton expansion.
…the economy functions exactly as it should — providing greater rewards for those with more experience in the workforce. There’s no evidence whatever that today’s young people constitute the first generation in American history to fail to advance as they move forward into their prime earning years…
Michael Medved
“A War on the Middle Class Means Less Comfort and Opportunity”
The 10 Big Lies About America
