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Open Letter to PBS Economics Reporter Paul Solman

Posted By Don Boudreaux On October 18, 2012 @ 12:12 pm In Growth,Myths and Fallacies,The Hollow Middle,Trade | Comments Disabled

Mr. Paul Solman, Economic Correspondent
PBS NewsHour
Washington, DC

Dear Mr. Solman:

Donald Barlett and James Steele assert, in your interview of them, that free trade is causing America’s middle-class to disappear (“What Happened to a Dream ‘Betrayed’? Authors Blame Trade for Middle Class Demise [1],” Oct. 16).

Overlook the flawed ‘economics’ that leads Messrs. Barlett and Steele to mistakenly conclude that trade with low-wage countries impoverishes ordinary people in higher-wage countries. Focus instead on their assertion that America’s middle-class is in “demise.” Recent data from the Census Bureau show that assertion to be flat wrong. Reckoned in 2009 dollars (that is, adjusted for inflation) the percent of households in America that are poor or lower-middle-income is shrinking while the percentage that are upper-middle-income and wealthy is rising.

Consider that in 1975 the percent of U.S. households that earned annual incomes of less than $75,000 was 80.6; today (or 2009, the latest year for which data are available) the percent of households that earn less than $75,000 annually is 68.4. Put differently, nearly one-third of all households in America today have annual incomes of $75,000 or more, while in 1975 only one-fifth of U.S. households were so well off income-wise. Drilling further down into the data reveals that for each of the Census Bureau’s five income categories below $75,000, the percentages of households earning these relatively modest incomes have fallen, while for each of the two higher-income categories – $75,000 to $99,999 and $100,000 or more – the percentages of households earning incomes in each of these categories have risen.*

And 1975 is no outlier among past years. Compare today’s figures to almost any other year in the past and you’ll find evidence of the same happy trend.

These data are powerful evidence that, to the extent that trade affects America’s poor and middle-class, it’s making them richer.

Sincerely,
Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA 22030

P.S. Even these data underestimate the improvement over the past few decades in ordinary Americans’ economic well-being.  The reason is that these data do not account for the decrease in the number of people living in the typical American household; nor do they account for the increase in the portion of employee compensation paid in the form of fringe benefits.

See these data from the U.S. Census Bureau [2].

(HT Mary Hussong)

…..

Question: Why does the fact that more women are in the paid workforce today likely not render the conclusion of my letter invalid?

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URLs in this post:

[1] What Happened to a Dream ‘Betrayed’? Authors Blame Trade for Middle Class Demise: http://www.pbs.org/newshour/bb/business/july-dec12/makingsense_10-16.html

[2] See these data from the U.S. Census Bureau: http://cafehayek.com/2012/10/open-letter-to-pbs-economics-reporter-paul-solman.html/see-this

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