Free Markets, Free People

Tino Sanandaji


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