The Myth of Middle Class Stagnation
In an apparent paradox, the same Census Bureau database that told us that median household income was essentially unchanged in 2007 versus 2000 also tells us that the middle class enjoyed a higher income growth rate than did either the overall economy or the rich — and therefore that their income gap versus the rich had actually decreased.
The key lies in the difference between the “median household” versus the “middle class.” The median household is a single theoretical household exactly in the middle of the entire income-ranked list of U.S. households and its behavior can be misleading:
- The Gini index of income inequality, comparing 2000 versus 2007, indicates no discernible change in overall inequality.
- Census Bureau statistics clearly show that the middle-income quintile equaled or increased their share of aggregate income in 2007 versus 2000, while both the top quintile and the top 5 percent lost income share.
- The household income statistics for 2010, released this month confirm that the middle three quintiles maintained or increased their income share, while that of the top 5 percent decreased.
I don’t think the middle class is having trouble with their income statement (at least the revenue part). It’s a balance sheet issue that plagues them.
Sure, there are some for whom unemployment is a huge problem. But, the vast majority of Americans are simply living above their means.
Proponents of progressive tax policies argue that the U.S. is experiencing a “hollowing out” where the middle class is becoming stratified into rich and poor.
What worries progressives the most is unions are losing power because some of the formerly middle-class occupations are being off-shored since they are no longer competitive. The only way to slow this progression is through restrictive trade barriers and history has shown what becomes of countries that implement them. The road to prosperity is not to unionize and protect unskilled people from competition. It’s to train unskilled people.
Very good analysis. The opposite of what we hear all the time.
I agree with Buster. Protectionist policies may end up really hurting this country’s competitiveness down the road.