More Evidence of Evidence

by Don Boudreaux on January 11, 2015

in Myths and Fallacies, Standard of Living

With the debate with David Cay Johnston fresh in mind, I offer here an updated version of a PowerPoint slide that I use in a presentation that I frequently give – a presentation entitled “The Myth of Middle-Class Stagnation.”  Notice that the income figures are real (that is, adjusted for inflation, here using the CPI).  As the url at the bottom of the slide indicates, these data are from the U.S. Census Bureau.  (Click on the image to enlarge it.)  The bottom row in the image shows the percentage-point changes, between 1975 and 2013, in the number of households in each income group.

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Notice that, in one sense, the American middle-class is disappearing – at least as this class was defined, household-income-wise, in the mid-1970s. But it’s disappearing by becoming richer, even when measured in strictly real monetary incomes.  The percentage of American households with what might commonly be regarded to be middle-class incomes is indeed falling – but so, too, is the percentage of American households with what are surely “poor” incomes.  So once-middle-class Americans are not becoming poor.  Instead, they’re becoming rich; their real monetary incomes are rising.  The percentage of American households earning high incomes ($100,000 annually and above) is on the rise – and impressively so.  Let me emphasize: A much greater percentage of households today (compared to 1975) have annual incomes of $100,000 or more (in 2013 dollars).

I’ve no room on the slide to do so, but if you follow the Census Bureau and divide the above-$100K households into finer groupings, here’s what you get: the percentage of households earning $100,000-$149,999 in 1975 was 8.0 while today it’s 12.4; the percentage earning $150,000-$199,999 in 1975 was 1.8 while today it’s 5.3; the percentage earning $200,000 or more in 1975 was 1.0 while today it’s 4.8.  (Again, these dollar figures are in constant 2013 dollars.)

Here are a few other things to note:

(1) the average number of persons per American household today (2013) is 13.6 percent fewer than in 1975, so each real dollar of household income is today shared by fewer people than in 1975 – meaning that the increase in “per-person-in-household” annual real incomes is even more impressive than these data show;

(2) these data are pre-tax yet post-cash transfers (such as Social Security payments);*

(3) these data include neither fringe benefits (which today are a larger portion of the typical American worker’s income than was true in 1975) nor non-cash transfers such as food stamps and energy assistance;*

(4) the happy tale told by these data is not diminished by pointing out that today a greater percentage of women work in the market for cash incomes rather than remain at home as housewives.  The reason turns on the reason that more women today work outside of the home, namely, that goods and services that were once most efficiently produced in-house by stay-at-home moms and wives – goods and services such as delicious meals and clothes laundering and ironing – are today produced in much greater proportion more efficiently either outside of the household (such as excellent prepared meals of the sort that simply were unavailable to ordinary Americans in the mid-1970s) or within households in ways that today consume far less time and effort than was true in the mid-1970s (such as washing and ironing clothes).  In short, households today still get the valuable goods and services once produced by stay-at-home moms and wives but get also whatever other goods and services are purchased with the market incomes earned by moms and wives who work outside of the home.


* See pages 9-3 and 9-4 of the Glossary here.


Unrelated bleg: Today, for reasons that I can’t discover, both of my posts give this sort of message:

Warning: cannot be crawled by Facebook’s servers.

How can I correct this problem in order to allow people again to comment on my posts by using Facebook?


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