Fascinating graphic from Derek Thompson of the Atlantic:

 

Click for interactive graphic:

Source: The Atlantic

Category: Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

36 Responses to “How the 1% Ended the Middle Class”

  1. Tamu82 says:

    It’s Bush’s fault !!!!

    Just beating folks to the punch . . . :0)

  2. wally says:

    Actually, it’s Reagan’s. That’s when the “greed is good” attitude began in the U.S.

  3. ilsm says:

    It started when Reagan’s sponsors pushed him toward politics. What a salesman, the Gipper!

  4. Tamu82 says:

    Geez, guys, I was joking . . . just repeating the Obama campaign slogan for 2012. I realize this all started 30 years ago with Reagan and was compounded by Clinton and W’s deregulation . . . then compounded even worse by the useless Congress we’ve had for . . . how many years? It isn’t all Obama’s fault, nor Bush, nor Clinton, nor Reagan.

    The problem is no term limits. Career policticians. As long as you can make a living in government with incredible pensions and health care, why would you vote in any way to NOT help yourself? That is what has destroyed the middle class — Congress is so busy looking out for their vote, they don’t take care of the people who put them there.

  5. anewc2 says:

    Needs a log scale.

  6. RW says:

    ” That’s when the “greed is good” attitude began in the U.S.”

    That’s been fascinating: The transitions from avarice as a deadly sin, punishable by hellfire, took a long time to become something one was merely ashamed of but the transition from there through social acceptability to something almost akin to virtue has been astonishingly fast, at least as social mores go.

  7. GetReal1 says:

    Well it looks like trickle down economics stopped working in the 80′s. To understand this chart better I would like to see what groups of people made up the top 10% prior to and after the 80′s. Who are the piranhas here? Is it the financial services folks or the business leaders or execs, or all of the above.

  8. Rick Caird says:

    Without even doing much of an analysis, the only surprise here is the 90% got 70% of the increase. If someone is already making $1 million, $30k is a 3% increase. If they are making $30K, then it is 100%. It is much easier to increase my income by 3% than it is by 100%.

    Where is the surprise here and why is there any outrage at all?

  9. Frilton Miedman says:

    Marriner Eccles, Fed chair during the Great Depression, felt that Capitalism without regulation inevitably led to disparity.

    It’s a given that the wealthier you are, the more options and leverage you’ll have to further increase your wealth.

    The 1970-1980 timing of “trickle down” supply side only economics, Buckley v Valeo and the more recent even greater extremes of Laissez-faire, deregulation and tax policy that assumes anyone with wealth will create jobs with that wealth have exacerbated the problem.

    Add the SJC “citizens united” decision and the problem increases more rapidly from here, availing immense leverage over the rule of law and economy in the hands of the wealthiest, destroying Democracy.

  10. LiberTea says:

    I’d like to see the chart corrected for CPI, or some other estimate of inflation.
    REAL purchasing power.

  11. kek says:

    The middle class ended when the snot nosed baby boomers confused needs with wants.

  12. Frilton Miedman says:

    Josap, correct, if the above chart were strictly wages w/out CPI, what Rick Caird said might make sense.

    Rick Caird, I want what you’re on, stating “Without even doing much of an analysis” was an understatement, you cited the stats for 1921-1971 and concluded there’s no problem.

  13. NoKidding says:

    Comments below the linked article were somewhat more erudite.

  14. josap says:

    I like to blame TV advertising.
    Telling everyone what they should have, what the neighbors might have, be first on your block, be pretty, be wanted, be better …..

  15. formerlawyer says:

    The original numbers have been adjusted by inflation.

    Looking at the comments in the original article led to an interesting discussion at:
    http://randomcriticalanalysis.wordpress.com/

    I am not math capable nor inclined to dispute this analysis but from a cursory reading, he seems to be arguing that these extraordinary jumps are an artifact of how we report income; changes in the tax code and merely a 30%-40% increase in the top 1%’s share of income.

    This does not address the wealth ownership of the top 1% of the 1%.

  16. LiberTea says:

    Yeah, josap, that’s a terrible trend.
    But to see a CORRECTION by CPI of the data presented in the original graph would show the REAL loss in purchasing power of those nominally rising salaries.

    The Fed’s “Inflation Solution” is completely disorienting as to the value of anything. Part of the purpose methinks.

  17. Joe Friday says:

    Tamu82,

    I realize this all started 30 years ago with Reagan and was compounded by Clinton and W’s deregulation

    Actually, after the Standard of Living went backwards during the 12 years of Reagan/Poppy Bush, with real (inflation-adjusted) wages declining by about 20%, we saw the fastest and longest consecutive-years increase in real wages since the 1960s during Clinton’s eight years, then real wages once again declining during the eight years of Chimpy Bush.

    * Not sure what metric the chart is utilizing for “income over time“, but obviously “income” is comprised of a lot more stuff than wages are.

    * “Average income” is a particularly bad metric, as I’ve previously pointed out.

    Once again, if you and Warren Buffett are in a room, the AVERAGE net worth of everyone in that room is about $25 billion (or half of whatever Buffett is worth these days, I haven’t checked), which quite obviously does not accurately reflect the net worth of either of you.

    Therefore, utilizing “average income” to contrast the top 10% to the bottom 90% will produce a very skewed result, meaning the reality is much worse than is being depicted.

  18. mpappa says:

    The 1% were heavy Obama supporters who wanted a Wall St. bailout and needed stimulus to support their government contracts.

  19. Frilton Miedman says:

    To dispel a growing myth, generalizing the 1% – roughly 65% of the 1% are in favor of an increase on their own tax rates.

    It’s the 0.01% making deals on K street with political whores causing the problem, defying Democracy and further prodding us into a 12th century Feudalistic society for their own gain & control.

  20. victor says:

    “How the 1% Ended the Middle Class” implies that the bad 1% somehow screwed the rest of us and so they became rich. But everybody knows that in the US the main driver of wealth has not been inheritance, Steve Jobs didn’t screw anybody he simply took more from the INCREASING economic pie. Maddoff did screw his clients and he’s in jail now. True, countless scoundrels also stole, but legally: Grasso, Nardelli, Rubin, etc. I’d like to see the chart depicting generational income not a snapshot in time. And remember that capitalism is an economic (not social) system BASED on inequality and it is up to the (lucky) ones living in it to make it socially acceptable. And finally Capitalism’s role is not to make us happy, may be rich and free (look at China now compared to recent past) but not happy.

  21. CSF says:

    The data don’t suggest that the middle class “ended,” nor do they suggest that the 1% caused this “end.” The charts leave out essential facts: today’s 1% are not the same persons as in the 1920s, nor is the middle class. There are disparities of income within the middle class – disparities of gender, region, vocation, etc.

    It’s important to understand the roots of middle class income stagnation, beyond excessive CEO compensation. The list includes globalization, inadequate education and jobs training, unfair trade practices by our partners, etc. Yes, we can raise taxes on the 1% but the long-term solution is to become more globally competitive.

  22. Edoc says:

    A few other points, which I’m not sure how to weigh-in or correlate.

    1. Union participation declined steadily since the 70′s. Unions had forced wages higher.
    2. Companies started to outsource manufacturing to cheaper foreign suppliers. The US evolved into a service economy, which relies less on skilled/unskilled labor.
    3. The money business (aka Wall Street) really exploded when 401k’s and money market funds arrived on the scene. Public companies became singularly focused on quarterly earnings.
    4. The best and brightest graduates started going into business school, law school or medical school. The MBA’s drove the financialization of the economy and CEO worship, lawyers drove the litigiousness of society, the doctors drove hyperspecialization of health care. None of these groups were particularly motivated by calling, but rather by money– and they competed in a professional form of “keeping up with the Joneses”.

  23. Tamu82 says:

    Yeah, these nominal charts really distort things. Needs an adjustment.

  24. VRWC says:

    The footnotes on methodolgy do not say whether this is based upon per capita or household incomes…. pretty big difference since average household size has shrunk tremendously over the last 40 years due to divorce, the rise in single parenting, huge increase in single elderly due to lifespan increase, later family formation, fewer large families etc.

    If I missed it sorry, but it was not spelled out in the methodology fine print.

  25. VRWC says:

    And of course, it’s always interesting to hear liberals complain about slow wage growth for the middle and lower class, without mentioning that we’ve let in something like 30 million plus illegal competitors for their jobs….

  26. Rick Caird says:

    OK, for Frilton Miedman

    In the 2009 data, the top 5% received 21.7% of the income.

    http://www.census.gov/compendia/statab/2012/tables/12s0694.pdf

    So, it is not unreasonable to think the top 10% gets 30% of the income increase. I don’t see what about that is so surprising to you.

  27. Edoc says:

    @VRWC
    Last I checked, most of the illegal/undocumented workers took unskilled jobs at or near minimum wage. Did minimum wage in the US ever equate to a middle-class lifestyle?

  28. Joe Friday says:

    CSF,

    It’s important to understand the roots of middle class income stagnation, beyond excessive CEO compensation. The list includes globalization, inadequate education and jobs training, unfair trade practices by our partners, etc.

    But it’s overwhelmingly inadequate pay and tax policy.

    Yes, we can raise taxes on the 1% but the long-term solution is to become more globally competitive.

    That’s merely an argument for LOWER wages.

  29. VRWC says:

    @Edoc
    Check again…. not only do many illegals climb the wage ladder, but it is not just how much illegals make per se that matters, what matters is their presence as competition which helps hold wages down for the next step up the ladder…. and that leads to pressure on the next step.

    Econ 101 dude…. we are talking about 10% of the total US population… and somewhere between 15 to 20% of the working population…. do you honestly believe that a 20% increase in labor supply, even at the bottom of the wage scale, has no effect on the price of labor?

  30. CSF says:

    Joe Friday,

    I agree with you. “Inadequate pay” means stagnant income. How would you raise middle class pay / income? I advocate making the U.S. a desirable location for research, design, manufacturing, finance, and other jobs that capture the upper-end of the value stream. This requires better education, skills upgrades, better infrastructure, better trade policies, smarter regulation, etc. And sure, we could pay for some of these investments through higher taxes on the 1%.

  31. Edoc says:

    @VRWC
    All of the economic/labor data I’ve read over the past decade has said that illegal (low or unskilled) workers by-and-large do not climb the wage ladder and have little hope of achieving economic parity with native workers. Illegal workers do hold down wages, but for native groups who they compete with– unskilled/low-skilled workers lacking high-school diplomas (20% to 25% of the population), i.e., the working poor. If you have links to articles by labor economists that state otherwise, please share.

  32. Frilton Miedman says:

    Rick Caird Says:
    September 13th, 2012 at 12:15 pm
    ” OK, for Frilton Miedman
    In the 2009 data, the top 5% received 21.7% of the income.
    http://www.census.gov/compendia/statab/2012/tables/12s0694.pdf
    So, it is not unreasonable to think the top 10% gets 30% of the income increase. I don’t see what about that is so surprising to you. ”

    The 21.7% you cite has an upper limit of $180K in the same column, it doesn’t cite total income, only the median.

    If 5% of 115 million H-holds made $180K @ 5% of all income, that would add up to a total of $9.5 trillion for 115 million h-holds..

    Total us income is $13 trillion, not $9.5.

    If the wealthiest individuals in America made no more than $180K, you’d have a point.

    You have no point.

    The truth lies in the top 2%, 1% and even more so in the breakdown within the top 1%, .1% and .01%.

  33. Frilton Miedman says:

    EDIT, on the math,, @ $180K for a representative 21.7% of all income for 5% of 115 million h-holds, total income would be $4.76 trillion, NOT $9.5.

    This means assuming the 21.7% of all income is represented by the median top 5% at a max income of $180K misses a MASSIVE amount of total income.

  34. Joe Friday says:

    CSF,

    I agree with you. ‘Inadequate pay’ means stagnant income. How would you raise middle class pay / income?

    Right out of the box, I would increase the Federal Minimum Wage. We know from prior experience that increasing the FMW also tends to increase the wages of those workers just above the FMW who are in the lower Middle-class.

    The added benefit is it would be stimulative, as we know that workers at those pay grades spend 95%+ of any increase in pay right back into the economy, which also tends to ignite the multiplier effect.

    I advocate making the U.S. a desirable location for research, design, manufacturing, finance, and other jobs that capture the upper-end of the value stream. This requires better education, skills upgrades, better infrastructure, better trade policies, smarter regulation, etc. And sure, we could pay for some of these investments through higher taxes on the 1%.

    That’s the ONLY place you’ll find the kind of money you would need for anything like that agenda.