More Data on Middle-Class Americans

by Don Boudreaux on September 6, 2006

in Data, Myths and Fallacies, Standard of Living

Greg Mankiw links to this interesting essay by Stephen Rose; it’s entitled "What’s (Not) the Matter With the Middle Class?"  I believe it to be a superb essay.  (More on that in a moment.  But first….)

At the very least, the continuing debate over the economic fortunes of ordinary Americans shows the truth of the claim, attributed to Ronald Coase, that "if you torture the data long enough, they’ll confess."

Data — expecially data from the social sciences — very seldom speak clearly.  They are always the result of highly complex, often conflicting, forces, most of which are not directly observable.  Every statistic, being the result of choices investigators make about how to slice up and label and explore empirical reality, will have some fault, some weakness, something that can be criticized.

Every statistic reported in Rose’s essay can be challenged as missing this or over-emphasizing that; each statistic here can be interpreted differently from how Rose inteprets it.  But, alas, if we’re to understand reality as much as we possibly can, we have no choice but to rely upon statistics and, in every case, to use our knowledge and good judgment to assess their lessons.

So, what do Rose’s data show?  In short, most Americans are thriving.  Here’s a key selection:

It’s true that the middle class is shrinking — but that’s because more families are better off.
The share of prime-age adults in households with real incomes above
$100,000 rose by 13.1 percentage points from 1979 to 2004. The share of
households making less than $75,000 dropped by 14 percent. Fully 41 percent of prime-age American adults are in households with incomes above $75,000. 

Among married-couple households the picture is
even brighter. In 2004, the median income for these households was
$70,000, and $78,000 for couples with two earners.

I focus on prime-age households
(age 25-59), which are 68 percent of the population, because including
the very young and the very old distorts the picture of what’s really
happening with the middle class. Many young workers get paid very
little, but few will keep their low salaries as they move up in their
careers. Older Americans distort the wage and income picture because
they’re no longer working. Their incomes may shrink, but their standard
of living may not diminish. Indeed, Americans age 55-64 have greater
net wealth than any other group

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{ 5 comments }

panasianbiz September 6, 2006 at 4:48 pm

These figures are rather startling as they seem to contradict other reports. I'd like to believe this is true and that the middle class is actually better off than previously thought!

Aaron Krowne September 7, 2006 at 8:42 am

I am suspicious of this data, as it doesn't seem to square with either the flat median income, or the negative savings rate.

The only real-world effect that occurs to me that would support the data here is the explosion of high-paying government contracting jobs since 9/11, which isn't exactly something to cheer about.

fiona September 7, 2006 at 2:35 pm

Government jobs (not contracting) are indeed a fast growing segment of the economy (including state and local employees) and come with some really magnificent benefits funded by taxpayers who do not enjoy the same benefits.
Are you cheering yet?

vickus September 7, 2006 at 7:59 pm

as a government contractor, i have to say that government jobs are harder to get then contracting ones (i say this from personal experience)….

alex September 8, 2006 at 12:46 am

The data seems fine to me. However, I would like to point out that from 1966 to 2001, only people in the top ten percent, making 80 grand a year or more, saw real income gains which matched productivity gains. Now thats screwed up.

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