Free Markets, Free People


Is middle class income stagnation a myth (created by the income inequality crowd)?

The valuable James Pethakoukis weighs in with some new numbers to again shatter one of the myths that surround the “income inequality” nonsense that OWS and its ilk (*cough* Democrats *cough*) are pushing.  One of those myths is that middle class income has “stagnated” in the last 40 years.   And that’s because, per the OWS crowd, the rich have basically stolen taken ended up with the money generated.  Those pushing that premise are citing economists Thomas Piketty and Emanuel Saez study which claims the taxable income of the bottom 99 percent increased by just 12 percent from 1970 to 2008.

That premise and those claims are under serious assault.   In fact, the University of Chicago’s Tino Sanandaji finds that there has been pretty significant growth in middle class income.  His summary of what he found:

My simple method is combining the best income-distribution estimate (from Pickety&Saez) with the best income-growth estimates (from GDP numbers). This method shows that that between 1970-2008 the real per capita income of the “Bottom 99 Percent” grew by 80%, and the income of the “Bottom 90 Percent” grew by 60%.

80%?  Last time I looked that was a bit higher than 12%.   Oh, and plenty of charts, etc., to explain the difference at Pethakoukis’ site.

And there is statistical backup for Sanandaji’s findings:

From 1975-2009, real per capita GDP increased by 90 percent vs. 17 percent growth in real median household income, as measured by the Census Bureau.

On top of that:

These calculations are in line with new research from University of Chicago’s Bruce Meyer and Notre Dame’s James Sullivan, who find that “median income and consumption both rose by more than 50 percent in real terms between 1980 and 2009.”

Conclusion?  If the premise is that one of the reasons that upper income increased in that period is because middle class income stagnated, the premise just isn’t supported by reality.   Income is not a zero-sum game.  And one of the points on the pro side of capitalism is it lifts all boats – as demonstrated here.

~McQ

Twitter: @McQandO

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10 Responses to Is middle class income stagnation a myth (created by the income inequality crowd)?

  • “… the bottom 99 percent increased by just 12 percent from 1970 to 2008″
    That sounds more like a Democratic cry for more taxes. The “middle class” should beware of politicians proclaiming America as the “greatest nation on the face of the Earth” as this is always a preamble to a request for more tax revenue.

  • I always feel compelled to make this point—

    It isn’t about income…it IS about standard of living.

    And, until the Obamic era of chosen DECLINE, the American standard of living was on a very positive trend line.

    • @Ragspierre Following the #green plans to combat #ClimateChange means a drastic reduction in the standard of living, by government decree.

      • @myweeklycrime I know too well. As I’ve said, they want us to live colder, darker, less traveled, more ignorant, shorter and more painful lives.

        Nice Rush allusion!

  • “From 1975-2009, real per capita GDP increased by 90 percent vs. 17 percent growth in real median household income, as measured by the Census Bureau.”
    Exactly. Screw this household income nonsense, I gotta get me a slice of that GDP.

  • The problem for the middle class is that inflation is chewing through wage increases. This is not a rich versus poor problem but rather a problem of bad monetary policy coming out of the government.

  • The middle class has seen pensions significantly reduced or pensions stripped away. Increased work loads at work without any change in pay.

    Also most people have figured out the inflation baseline is bullshit.

    If ‘nothing to see here, move along’ is the message, it would be an awesome way to drive voters to the Democrats and for the Republicans to look completely out of touch. Regardless of what the stats say.

    Maybe this is all perception based on the last 5 years vs. the span covered in the assessment. But, I can’t stress how stupid a message that would be to try to sell the public at this point in time.

    • Meant to add in the first line ‘, increased healthcare burden also shifted to them. And any equity they just built up in the homes go poof’.

    • @jpm100 “Also most people have figured out the inflation baseline is bullshit.”

      Could you explain what you mean by this?

      “…it would be an awesome way to drive voters to the Democrats and for the Republicans to look completely out of touch.”

      To hell with Republicans and Democrats. For all the surface-level conflict in the Coke vs. Pepsi war drama, politicians of both parties generally collude to plunder the productivity of Americans as a means to increase their power. Stop falling for the contrived theatrics and recognize that they are all trampling on your rights. Whether the boot on your neck is a left boot or a right boot makes no difference.