Since today is Labor Day in the USA, why don’t we take a look exactly how well Labor has been doing? And since its also the US’s quadrennial Presidential election season, why don’t we do that by zooming in on every Pol’s favorite voting bloc, the middle class?

The charts below reveal what you probably knew already: The middle class has had stagnant or falling Incomes over an era when the costs of life’s necessities rose.

These five charts present critical evidence on the decline of the middle class. Incomes have fallen; share of the overall economic pie has decreased; fewer people are earning “middle-class incomes” (whatever that means). This as the costs of middle-class basics have risen dramatically. Given this, we should not be surprised to learn that Middle Class debt levels have increased.

The weakness of our middle class is a problem not just for those who are struggling but also for all Americans because a strong middle class drives economic growth, as economic research shows.

 

MEDIAN INCOME

˜˜˜

PERCENTAGE OF OVERALL US INCOME

˜˜˜

SIZE OF MIDDLE CLASS

˜˜˜

COSTS OF MIDDLE CLASS LIFESTYLE

˜˜˜

MIDDLE CLASS DEBT LEVELS

Source: Center For American Progress

 

 

One final note: Despite the overwhelming data, some people dispute that the middle class has been struggling or that they have suffered any sort of set back inb income or purchasing power.

 

The Brookings Institution’s Scott Winship maintains that “conventional accounts of how the broad middle is doing systematically overstate economic insecurity.” If one wants to argue exactly how far the Middle Class has fallen behind, and make the claim that the MSM has overstated it, well, that is a legitimate debate. I think its a losing argument, but, hey, its hardly incredible to say conventional wisdom overstates something.

On the other hand, the American Enterprise Institute fallaciously makes the less than credible or honest claim that there has been “considerable improvement in material well-being for both the middle class and the poor … over the past three decades.”

This is the sort of statement that you expect from a group that has given up any pretense towards reality. The AEI has moved from intellectually bankrupt to utterly dishonest, and I assume anything I read from them, on any subject, are willful lies, misinformation and propaganda.

As an asset manager, I cannot risk falling into an alternative universe that diverges form reality. That is the sand box AEI plays in. As such, I have been forced to SEQUESTER their nonsense, as their detachment from the real world is an expensive and potentially dangerous money loser for anyone who reads their foolishness. I mostly ignore their idiocy, and suggest you do the same.

Source:
5 Charts on the State of the Middle Class
David Madland and Nick Bunker
August 30, 2012
http://bit.ly/UdEUu4

Category: Employment, Really, really bad calls, Wages & Income

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.

56 Responses to “Labor Day, Income & The Middle Class”

  1. Jim67545 says:

    Listened to Bill Bennett on TV. He observed that his “equasion” regarding education is holding true. It is a variant on Parkinson’s Law (work expands to fill the time allotted) which is that the cost of education will expand to consume the funds available. So, he argued that expanding Pell Grants, student loan programs and the like will, and have, only increased the cost of education, rather than the availability. In other words, same number of students now pay more rather than more students paying the same.

    This seems to have some validity (as the charts would suggest) and (shudder) leads one over into Grover Norquist territory: starve the government. Perhaps, rather than pick individual programs to slash, with the resulting cries of outrage from the beneficiaries, across-the-board budget cuts administered on a federal departmental level is the answer.

  2. DeDude says:

    Predatory capitalism eating the goose that lay the golden eggs. And the top 0.1% are to stupid and self-absorbed to even understand what they are doing. If they had a clue they would be funding a super-PAC that advocated the immediate raise of the minimum wage to double digits.

  3. george lomost says:

    During the Cold War there was a battle for the hearts and minds of citizens. With the collapse of the Soviets and Deng taking charge in China all pretense for caring for people was discarded. We now see the markets for all their feral reality.

    But sooner or later, all things come to an end one way or another. Enjoy it while you can.

  4. mikeinconyers says:

    I work in IT and most of the people I work with are in lower end of the the top 10% of earners. I live in a southern state, and unlike me, most of my colleagues are pretty conservative. When discussing the change in income shares that have taken place in my lifetime with my colleagues at work, I am struck by how little concern many of them have for the people who are not like us. I don’t think they have anything against the people in the lower economic status, I just don’t believe they even think of them. Some variant of “out of sight, out of mind”. In terms of picking a President, one of my greatest concerns about Mr. Romney is that he may be so disconnected from what it is like for a family to live below the median family income, that he would undervalue policies that were supportive of them.

  5. johnl says:

    Since it’s Labour day this is apropo.(see charts linked below) Interesting correlation with middle class incomes, I think if you can find the source of decline for one you will know why the other is falling. In my opinion it is related to trade agreements with 3rd world countries which launched the race to the bottom or new lower equilibrium.

    http://3.bp.blogspot.com/_otfwl2zc6Qc/S3SyC2rZ-BI/AAAAAAAAMvQ/YrcVFFSlgKc/s400/unions1.jpg

    http://www.colorlines.com/archival_images/unionrate.gif

  6. HowardA says:

    Excellent article. Mirrors many findings I uncovered reviewing economic changes since I was born in 1952 which is summarized here: http://alturl.com/pz8ek Projecting these trends out another generation to 2040 creates a really scary picture! I also surprised myself by coming to the same conclusion as DeDude regarding minimum wage: http://alturl.com/ktc6m

  7. MrPickle says:

    AEI is not concerned with discovering truth. Its purpose is to generate political cover for our plutocrats and their minions. And like it or not, it appears they are doing a very good job of that.

  8. Winston says:

    Couple of obvious things that we can glean from this data:

    (1) Debt, especially unsecured debt, rapidly expanded over the past thirty years. This debt supplanted income for the middle and working classes. Now that the average American consumer has pursued de-leveraging credit card debt, we can see a shift toward an increase in education debt. This is as unsustainable due to current job creation and unemployment rates as paying the minimum due each month on a credit card account. A different tack is needed.

    Brevity required of this message board limit me to a narrow focus – although a broader view would do the issue more justice.

    (2) Look at the inability of wages to keep pace with inflation on basic living expenses. A boost in the minimum wage and tying annual increases to inflation would ameliorate the middle and working classes’ inability to maintain a stable standard of living. Rising wages would address many of the issues that are perceived as problems today and further down the road. Two of these issues are Social Security and Medicare solvency. If we were to boost the wage floor then this additional income would translate into increased contributions to these funds and boost capital flowing through the economy.

    I advocate positions that stand opposite of supply-side economic theory.

  9. Jim says:

    I find that these charts often leave out one of the major expenses of the middle class. That would be elementary, middle & high school education. If you happen to live in an area with poor performing public schools your only options are to home school or pay tuition to a private school. Either of those two options comes with an economic cost. Tuition where I live ranges from $5,000-$10,000 for elementary school alone. High School goes up to $17,000 in tuition & fees. That is putting a dent in the ability of many middle class families and is accounting for a portion of the rise in household debt.

    ~~~

    BR: or move . . .

  10. uzer says:

    @mikeinconyers

    i imagine your co-workers do think of low/lower income people — as sinful and therefore deserving of their socioeconomic status — out of deep-seated propaganda and rationalization.

    -by uzerinmayretta

  11. algernon says:

    If I’m not mistaken, the picture is distinctly different if you look at individuals, rather than households.

    Not that I’m surprised that the middle-class is hurt by the combinations of socialism & economic fascism [our banking system in particular] with which we hamper our economy.

    ~~~

    BR: Can you pull some info on that ?

  12. 212frawk says:

    Any discussion of middle class incomes has to include the share of their “income” devoted to employer paid health care cost. As this chart (and everyone) knows

    http://tinyurl.com/cadkt7u

    health care costs, by any measure, have increased at a rate far outstripping inflation. Middle class incomes have risen considerably to the extent that employers pay these costs on behalf of employees. Yet official statistics do not consider this compensation. Add the value to these payments to official estimates of middle class income and you get a far different result.

    Until health care cost inflation is brought under control, wages will stagnate as employers/govt divert compensation from the middle class to doctors, hospitals, big pharma etc.

    ~~~

    BR: A rise in health care costs (and increased insurance payments) are not what most people think of as wages & income

  13. farmera1 says:

    This article just supports what I have seen in my life. I am very familiar (live near one and grew up and have family in another) with two mid-western towns of about 10,000 population. In one all decent middle class manufacturing jobs are gone. Now what manufacturing is left (probably 60-70% has left for Mexico, China etc) pays $8-$10/hr. You aren’t going to live a reasonable middle class life on $16,000 to $20,000/yr.

    In the other town, there is one decent paying manufacturing plant left. All others are gone. Used to be three major manufacturing employers in town. Now one. Same thing has happened to wages, with remaining manufacturing jobs. The pay is around $10/hr. Not a wage a working man can support a family.

    The above graphs and articles just support what I have seen. It is ugly and getting worse. The plutocrats don’t care and even celebrate those that trash the US economy. IMHO not much hope as long as some 50% of the people place fear (of those other people) above all logic and reason.

    This I believe is a disaster, even though I no personal concerns about where my next meal is coming from.

  14. b_thunder says:

    mikeinconyers,
    Your IT co-workers are for a rude awakening. This decade is shaping up to do to IT what 1980s and 1990s did to the “manufacturing jobs.” Since the end of the recession in 2009 only 2 broad industries lost jobs: Government and IT.
    Where I work, in mid-west, the IT jobs are getting cut right, left and center. Thanks to the “cloud” and scalable computing some shops staff has been reduced from about 40 to 6-8 people. Even if your job cannot be eliminated and “moved to the cloud”, the supply of qualified and experienced IT people (who lost their jobs due to the “cloud”) will soon eat into your salary.
    a few decades ago computers and IT were blamed for the job losses. now computers are starting to cause losses in IT-related jobs.

  15. willid3 says:

    suspect you are right. no thought to those less fortunate than our selves. but also no idea how that has hurt us too, as the loss in potential customers has impacted all income levels. and shrunk the economy too

  16. RW says:

    Demonstrating the hollowing out of the middle class shares some of the same problems as demonstrating the reality of climate change or evolution: There is a growing web of evidence, from multiple lines of investigation, that points primarily but not always exclusively in one direction. That means it is difficult to design a “crucial experiment” to cut through to the core and falsify one theory or another and it is relatively easy to find counterexamples in support of or against the conclusions of any experiment or data set.

    This is why Imre Lakatos developed his model of scientific programmes to augment, and in some cases supercede, Popper’s model of falsfication: In Lakatos there is rarely if ever a single instance where something is conclusively proved or refuted (it can happen though), what there is is a developing research program that over time either makes progress, leading to new discovery and widening understanding, or begins to degenerate and increasingly devotes resources to the defense of core principles.

    The programs against evolution are completely degenerate while programs accepting evolutionary principles continue to make great progress (biotech, etc); the programs arguing climate change is minimal and/or independent of human affairs are largely degenerate — mainly an “ocean of counterexamples” with few organizing theories outside of conspiracy — while the climate change models and their connection to other sciences become increasingly robust with growing confirmation in the data.

    The programs arguing the middle class is still stable or even growing show much of the same incoherence as those arguing for climate stability/human independence: Counterexamples can certainly be found but supporting theories are weak or absent, connection to other disciplines weak or absent, and there is shrinking confirmation in the main lines of evidence themselves. These lines increasingly point to relative losses in real wages or income and relative losses of security decade over decade among a growing swath of the American population.

    The consequences to an economy oriented to consumption can hardly be overemphasized; neither can the consequences to a stable democracy. The odds favor those who invest accordingly.

    NB: Bill Bennett is innumerate and his ‘equasion’ is trivial: In both the public and private sectors, programs that do not consume all funds available normally get their funds cut and, eo ipso, such programs are rare. Identifying a program that did not expand to consume the funds available and identifying what ‘incentivizes’ efficiency might be an interesting exercise but Bennett doesn’t really do that; the only incentive he seems to be aware of is fear and so ‘accountability’ and how to enforce it while playing the scold is the game he plays.

  17. RW says:

    NB2: One data series I’d be careful with would be Median Household Income. It has certainly declined over the past decade but the picture it portrays of what is really happening to households is cloudy without more context.

    Example 1: since household income includes non-wage income that means asset sales or other sources of income can increase household income even when real wage income continues to erode.

    Example 2: if a part-time worker is added, an older child say, then household income can go up at the same time median household wages go down.

  18. louis says:

    Mailroom at Goldman, Go get cheeseburgers for traders, become a bond trader, invent way to rape fellow americans, sail the world.

  19. Jim67545 says:

    RW:
    Pointless ad hominem aside, Bennet was talking about an industry (education) not a “program.” I suppose the same could be said of any other industry – hotel/motel, energy, automobiles, etc. If you subsidize the consumer with public money (or loans), the industry will tend to respond by absorbing that excess by raising prices. The case of automobiles is supportive of this. The Cash for Clunkers program swelled available funds and so increased prices/reduced dealer discounts. Another example was the first time homebuyer’s program. Another is the subsidy given by some jurisdictions for purchasing low water consumption washing machines. At least where I live the water conscious washers are more expensive by just about the same amount as the credit from the water department. Coincidence?

  20. Jim67545 says:

    I should add that in nearby communities which give smaller credits the difference between the water conscious and non is also smaller.

  21. Expat says:

    Why argue with them? It’s not as if it matters if you are right. You may argue that Wall Street is a fundamentally corrupt institution populated with sociopaths who have sucked up billions in direct and indirect government aid and siphoned the money off to finance their cocaine and condo habits. You may claim that Bush and Obama have murdered and tortured innocent civilians and soldiers. You may protest the unconstitutional intrusions into your privacy by the NSA, CIA and DHS. You may demand explanations for tax refunds paid to America’s largest corporations which pay their CEO’s millions while laying off workers.

    You may do all that. And good luck, too. Call me when we start handing out lengths of hemp and reconnoitering convenient lamp posts.

  22. socaljoe says:

    I wonder if “median family income” includes approximately $2 trillion, or about $25000 per family of four, in federal social transfer payments?

    ~~~

    BR: The Census report defines that

  23. slowkarma says:

    “Middle class” is a pretty large chunk, and within that chunk, shifts in more-defined groups could (I say could, not would — I’d be interested in knowing the fact of the matter) account for the decline. For example, a sharp decline in tens of thousands of well-paid automotive jobs in Detroit alone might account for much of the drop, as might the sudden decline in the home-building industry, or the general decline in manufacturing. If any of those declines in relatively limited groups of people accounted for the drop, then it’s possible that the rest of the middle class, which perhaps is not doing great, is not doing so badly, either, considering the current economic conditions. As I said, I’d lke to know that fact of the matter, as “middle class” is a bit too vague and too big to really digest.

    I suspect that these numbers (especially since the start of the Great Recession) heavily reflect the current unemployment rate; but it’s elementary to observe that while the current rate is ~8%, a “full-employment” rate is around ~5%, a difference of 3 people out of 100. The other 90%…it’d be nice to know what happened to them, not to say that what happens to the unemployed doesn’t lead to numerous tragedies.

    And I have to say I’m really getting tired of these comparisons to the 1%, which has almost nothing to do with the condition of the rest of the population. This seem to be the old saw that if the rich get their money by taking it away from the poor: as if Steve Jobs got rich on the backs of the 47,000 people now working for Apple, and those 47,000 have been impoverished by that employment. The so-called 1% isn’t 1%, it’s not even .01%, it’s more like .0001% that have some of the characteristics of the people we’re being trained to hate — a few hundred or a couple thousand people in a nation of three hundred million. I just don’t have the time for that.

    ~~~

    BR: Again, I ask — can you please provide some data on that

  24. [...] Labor Day, Income & The Middle Class  How to create a banana republic in five easy charts. [...]

  25. constantnormal says:

    mikeinconyers, your observation about your colleagues in IT pertains equally well to any other group in Bananamerica.

    The Me generation is in charge now, and people do not worry overly much about their kids, let alone the family next door. Families in other neighborhoods, towns, states might as well be living on Mars.

    Possibly this is due in some part to the past mobility of our nation, and the movement to cookie-cutter suburbs where nobody knows anybody else. As people move back to the cities (assuming that actually happens), the pendulum may shift the other way.

  26. Joe Friday says:

    I know the CFAP means well, but once again “Median Household Income” reports a faulty result.

    During the period of time from ~2004 to ~2007, where the first chart indicates a rise in “Median Household Income”, actual real wages and salaries were DECLINING. So “Median Household Income” is not just a meaningless metric, but a extremely misleading one as well.

    A much more revealing metric is real wages delineated from the ‘Average Weekly Earnings’ of production or nonsupervisory workers (and here, “real” refers to inflation-adjusted).

  27. willid3 says:

    constantnormal. suspect you maybe right about IT. not that long ago it seemed to be dieing out. and this times its not automation. was a few years ago that there was a big interest in computers writing their own programs. didnt go far. that died off over a decade ago.
    today its all about cost. nothing else. doesn’t matter how well or not the work is done
    either

  28. constantnormal says:

    Joe Friday: data?

    When I look in FRED, I don’t see that … granted, I’m not looking at constant-dollar wages, but the growth was so strong that it seems improbably that the inflation-adjuster factor could reverse it. And looking at wages misses the impact of unemployment, as zero wages (or even that large reduction that comes with a shift to unemployment insurance) do not get averaged into the totals. That’s where the household income metric has value — if one of the wage earners (and you will note that I assume that two wage earners is the norm, it is certainly necessary for most middle class households) loses their job, the household income takes a hit that will show up in the survey data. The wage data misses that.

    http://research.stlouisfed.org/fred2/graph/?id=CES0500000030#

    Or perhaps there is a better data element I should be looking at?

  29. constantnormal says:

    willid3 — as a veteran of that industry, I can confirm you are 100% correct in that statement.

    Cost is not just everything, it’s the only thing.

    And I’m pretty sure that this holds outside the IT industry as well. Except maybe for Wall Street and the banksters.

  30. bonzo says:

    problem with using household income is that size of households can vary over time. For much of the period after 1970, size of households was declining. More singles, young people moving out to be on their own at a very young age. Recently, I believe average household size is growing, though statistics may not capture this, due to young people moving back in with their parents and other forms of doubling up. Anyone know the sorts of criteria the government uses to determine household size? What sorts of questions they ask when doing surveys?

    BR: why ignore the crazies? why not use them? I credit plunging in 100% back in March 2009 to listening to Glenn Beck warning that the stock market was going to zero and it was time to load up on gold, canned food and ammunition. With intelligent people, there’s so much nuance that even when everyone agrees about something, you still can’t figure out what is being agree upon: Is the earth really “round”? What exactly does “round” mean in terms of general relativity? Whereas, everything is black-and-white in the world of the crazies. So whenever they all agree, you know to do the opposite.

    ~~~

    BR: It is appreciated if commentors cite reliable sources
    1. After 50 years of decline, household size is growing
    2. Measuring Average Household

  31. Expat says:

    Let me dial that back a notch…there is no point debating this since it changes nothing.

  32. BITFU Search Engine says:

    “I have been forced to SEQUESTER their (AEI) nonsense, as their detachment from the real world is an expensive and potentially dangerous money loser for anyone who reads their foolishness.” Certainly a reasonable statement.

    And yet, you have no problems citing The Center for American Progress.

    As an asset manager, I trust you’ll find this gem from The Center on the “revived” auto industry to be anything but “an expensive and potentially dangerous money loser”.

    http://www.americanprogress.org/issues/green/report/2012/08/28/34054/5-ways-the-obama-administration-revived-the-auto-industry-by-reducing-oil-use/

  33. phillips49 says:

    When I was growing up, (long, long ago, far, far away). My friends that weren’t going to college or into the service had aspirations of working in the same factory as their dad and grandfather. Working 30 and out with a pension.

    Those jobs provided enough compensation to allow, blue collar workers, without a degree, to earn a decent middle class living.

    Those days of course are gone now. And I suggest a chunk of middle class with them.

    I pulled data from the BLS and we have lost 5 million manufacturing jobs since 1991. The loss started long before the financial crisis. It was masked in part by the increase in construction employment of 4 million between 1991 and 2007 which then collapsed.

    There are various reasons for the change. Globalization, automation, regulations (environmental and safety), changes on corporate philosophy. (Years ago, companies had some sense of community and some sense of loyalty, today shareholder demands rule).

    Our economy is now structurally flawed. Manufacturing is a value added, wealth and job creating business. Manufacturing pays better and generates more secondary jobs than service, health care and retail. And turning raw material into a usable product creates real wealth.

    We will always have a portion of our population that don’t get advanced education and we need jobs for that part of our society to restore structural balance.

    To my mind, this change in economic structure accounts for the anemic recovery, the shrinking middle class, decline in real income and facilitates the gap between the haves and the have not’s.

  34. constantnormal says:

    Phillips49:

    And it’s not just manufacturing. Technologies like Watson are putting us on the path to automating away high-skilled “expert” jobs as well. Robotic assists like the da Vinci machine can perform delicate surgeries without getting tired or sloppy, lacking only a goal-directed intelligence from becoming a complete replacement for many surgeons, an actual “robodoc”.

    Isn’t this the purpose of technology and science? To free us from having to work?

    Whose fault is it that we are so committed to the labor pyramid from (at least) the Middle Ages? Why has not anyone performed any serious research (and ideally pilot projects) into different social organizations, different ways of distributing the fruits of the labors of the fine machinery that society has built??

    There’s nothing noble or heroic about the capitalistic labor pyramid. It’s a form of labor organization that treats people like cogs in a machine, regardless of their abilities, hopes or aspirations … shackled into that social machine by quirks of luck and circumstance.

    One might cynically think that the basis-pointers, who own most of everything and are (loosely) directing society, have the intent of throwing away the 99% after they have no further use, allowing them to revert back to savagery, starving themselves back to the sustainable population levels that would permit survival without the fruits of our technological society.

    But that’s just an overly cynical me. The future is coming. We either shape our society to take best advantage of it, or suffer the consequences.

  35. LiberTea says:

    The one perhaps rational bit of behavior is that level of debt did not increase from 2007 to 2010.

    The fact is that the ‘standard of living’ of this nation is more than we can afford, as evidenced by the >$100 trillion in unfunded liabilities.
    It is maintained by military and dollar hegemony manipulating–for a while–the rest of the world’s economies.

    A correction of the lifestyle to a realistic standard that we can sustainably afford will eventually happen, and better sooner than later.

  36. SecondLook says:

    To put some figures on what constitutes middle class by using the three mid quintiles (60% of households):

    4th quintile: $41,400 to $63,400
    3rd quintile: $63,401 to $96,300
    2nd quintile: $96,301 to $259,600

    This is based on gross total household income, including salaries, capital gains if any, non-cash benefits (such as the amount that employers contribute to SS), pensions etc. In other words comprehensive of all monies, whether directly or indirectly received.

    The numbers do vary depending on the number of people in the household, for example a single person household would have the following:

    4th quintile: $19,800 to $33,500
    3rd quintile: $33,501 to $49,600
    2nd quintile: $49,601 to $74,400

    Obviously, the more people, the more likely there are more streams of revenue coming into the house.

    Hope this helps.

  37. Joe Friday says:

    constantnormal,

    When I look in FRED, I don’t see that … granted, I’m not looking at constant-dollar wages

    You want inflation-adjusted wages, otherwise it’s Jello.

    but the growth was so strong

    Now that’s a knee-slapper.

    And looking at wages misses the impact of unemployment, as zero wages (or even that large reduction that comes with a shift to unemployment insurance) do not get averaged into the totals.

    I don’t even know what the hell that’s supposed to mean.

    That’s where the household income metric has value

    Nope.

    It is a metric of absolutely NOTHING.

  38. Francois says:

    @BITFU Search Engine

    “And yet, you have no problems citing The Center for American Progress. ”

    Is it that hard to understand the difference between occasional screw ups of CAP and living in an impossible-to-puncture fuckuposphere like the AEI?

    For those who manage assets and MUST reside in the reality-based community, it is possible. For the partisan hacks OTOH…

  39. victor says:

    This piece and many comments here seem to yearn for the good old days when by all metrics shown, the US had the “right” middle class. but no more. In my simple mind, the only logical way to “restore” the glory days is via increased productivity coupled with vigorous economic growth including population growth and I don’t see this happening given the political and social dynamics in our country.

  40. howardoark says:

    Joe Friday’s idea of rational discourse. It is very sad there’s no ignore feature on this site.

  41. UncleMilty says:

    How much of this is explained by the shrinking size of the median family and the impact of lower marriage rates and higher out-of-wedlock birth rates? Using median household income probably skews the data to make the problem seem worse than it is.

    We also have to consider that many things have gotten better. More median households have diswashers, cell phones, computers, bigger houses, more fuel efficient cars, medical advances, etc. Technology has made up for some of the decrease.

    I’d rather be a median household now than in 1970, assuming I was still married to the same woman and with a similar education.

    ___

    BR: Is median family size shrinking? The US has a faster pop growth rate than most other developed countries

  42. 212frawk says:

    BR: A rise in health care costs (and increased insurance payments) are not what most people think of as wages & income.

    Maybe not but if you are the employer (like me) that keeps paying higher health care costs as a portion of the compensation you (I) give to employees, the less revenue there is to fund increasing wages. Bottom line is employer paid health care is compensation and should be included in the calculation of middle class wages.

  43. ToNYC says:

    ” Bottom line is employer paid health care is compensation and should be included in the calculation of middle class wages.”

    Health care costs have blown out because they are perceived as free entitlements; get them while they are hot. The proof of course is that the real price is unaffordable. The other side of the “something for nothing” coin are the words “system fail”. Nature wouldn’t have it any other way.

  44. UncleMilty says:

    To BR:

    Yes, the US is growing, but the size of the median family has been shrinking over the last 30 years. There are a lot more single mothers out there, which obviously shatters earning potential.

    When you invest in a business, do you look at the median store results, without considering if the size/capacity of the median store/plant has changed? And yet, you continue to parrot the median family income statistic as the most meaningful commentary on the middle class.

    As this post below shows, you can splice the data to tell a completely different story. The truth is probably somewhere in the middle, and likely explained by choices (out of wedlock birth, divorce, unfinished education, etc.) and technology/globalization. No boogymen here.

    http://mjperry.blogspot.com/2008/08/adjusted-for-household-size-real-income.html

  45. [...] Barry. (2012). Labor Day, Income & The Middle Class. The Big Picture. This entry was posted in Economy and tagged AEI, disingenuous organization, [...]

  46. krice2001 says:

    @212frawk — “Bottom line is employer paid health care is compensation and should be included in the calculation of middle class wages.”

    Health care is a ‘benefit’, not unlike any matching funds paid to a 401k or to help paying for life insurance. And while it is a cost to business, similar to wages, it is not paid out directly in dollars to employees and therefore cannot be spend on goods and services. So to the employee, it is very different than wages.

    Job seekers fortunate enough to have options would certainly weigh both wages as well as benefits in their calculation of whether to accept employment.

  47. victor says:

    BR: The US population growth has been at replacement levels with all consequences still to fully impact our economy. The population growth we still see in the developed countries (even in Spain with a disastrously low fertility ratio) is due to temporary demographics dynamics, see Japan whose population is declining now. And Uncle Milty is right, the size of the US household has been shrinking, see:

    http://www.census.gov/newsroom/releases/archives/families_households/cb10-174.html

    and also

    http://www.msnbc.msn.com/id/14942047/ns/technology_and_science-science/t/census-us-household-size-shrinking/

    I’m not sure how this stuff would impact the data in the post. I’m not even sure that the US has a God given right to some ideal middle class in size and income given, again the social and political dynamics here.

    On one hand we have the pretty people in the Forbes 400 and then we have the 40 million plus at or under poverty level or 15% of the US population, for more data on this by race (27.4% of blacks under poverty level) see US census stat’s:

    http://www.census.gov/hhes/www/poverty/about/overview/index.html

    Per same US census stat: “The poverty rate in 2010 (15.1 percent) was the highest poverty rate since 1993 but was 7.3 percentage points lower than the poverty rate in 1959, the first year for which poverty estimates are available”

  48. 212frawk says:

    Krice:

    Benefits are a portion of an employees total compensation pure and simple. If it were withdrawn, would the employee be richer or poorer? It must be counted in the total compensation paid to anyone, middle class or otherwise regardless of whether the IRS chooses to tax it or not.

  49. SecondLook says:

    My earlier post listing income levels by quintiles includes all compensations, and household revenues. It shows higher incomes than what most people think if they try to estimate what middle class households actually have, but nevertheless, it’s clear that total income levels have either declined, or been stagnant over the past several decades – save perhaps for the 2nd quintile which has had a benefit of – say using a car racing analogy, drafting behind the fast top 20%.

    Probably a more accurate way to describe the middle class in America is to label those 3 quintiles as lower, middle-middle, and upper-middle; although the last would resist the term of upper-middle class.

  50. constantnormal says:

    Joe Friday:

    A metric of nothing.

    Not at all. “Nothing” is what you have presented to support your allegations.

    I could take other FRED data and derive constant dollar results for the data I offered up, but I know (from having looked at it) that it is much smaller than the wage growth cited in the survey data. It did not seem to be worth the effort, then or now.

    And my point about wage growth missing the unemployed remains valid — wages are a poor substitute for household income in this matter.

  51. Ezra Abrams says:

    suppose Liberal economists (purely as an example, Krugman or someone like that) were arguing that middle class incomes had stagnated. And suppose that conservative economists pointed out that the size of households had declined and suppose the liberals kept publishing teh same argument, without *explicitly* addressing the house hold size argument…and suppose the liberals published a chart about avg household debt level over time, without correcting for interest rates…

    ~~~

    BR: Are you actually arguing that because there are less children per household today (and less extended families with Grandma and/or Grandpa living with them) this is the cause of decrease in income?

    Please remind the readers how much children & retirees earn . . .

  52. [...] Barry Ritholtz on the state of the middle class. [...]

  53. Joe Friday says:

    constantnormal,

    Not at all. ‘Nothing’ is what you have presented to support your allegations.

    Apparently you weren’t paying attention, as you are arguing with the chief of the ‘Housing and Household Economic Statistics Division’ at the Census Bureau, as I previously pointed out in this thread:

    LINK

    And my point about wage growth missing the unemployed remains valid — wages are a poor substitute for household income in this matter.

    Wrong again.

    The metric of real wages is accurate.

    The metric of ‘Household Income’ (median or otherwise) is inaccurate, because it is a measure of nothing.

  54. [...] Personal Stake in the Election We’re all dependent on government, and it has long been thus Labor Day, Income & The Middle Class Diary of a Mad Fact-Checker ‘The Decline of the Middle Class’ Revealed: the grubby [...]

  55. [...] that same article linked above pointed out that wages hit an all time low. The middle class is shrinking. This isn’t so [...]