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Labor Day, Income & The Middle Class

Posted By Barry Ritholtz On September 3, 2012 @ 9:30 am In Employment,Really, really bad calls,Wages & Income | Comments Disabled

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 [1] drives economic growth, as economic research shows [2].

 

MEDIAN INCOME
[3]

˜˜˜

PERCENTAGE OF OVERALL US INCOME
[4]

˜˜˜

SIZE OF MIDDLE CLASS
[5]

˜˜˜

COSTS OF MIDDLE CLASS LIFESTYLE
[6]

˜˜˜

MIDDLE CLASS DEBT LEVELS
[7]
Source: Center For American Progress [8]

 

 

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 [9] 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 [10] 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 [8]
David Madland and Nick Bunker
August 30, 2012
http://bit.ly/UdEUu4


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2012/09/the-middle-class/

URLs in this post:

[1] strong middle class: http://www.democracyjournal.org/20/growth-and-the-middle-class.php?page=all

[2] economic research shows: http://www.americanprogress.org/issues/economy/report/2012/05/17/11628/the-american-middle-class-income-inequality-and-the-strength-of-our-economy/

[3] Image: http://www.ritholtz.com/blog/wp-content/uploads/2012/09/MiddleClassGraphs_web_12.png

[4] Image: http://www.ritholtz.com/blog/wp-content/uploads/2012/09/MiddleClassGraphs_web_21.png

[5] Image: http://www.ritholtz.com/blog/wp-content/uploads/2012/09/MiddleClassGraphs_web_31.png

[6] Image: http://www.ritholtz.com/blog/wp-content/uploads/2012/09/MiddleClassGraphs_web_41.png

[7] Image: http://www.ritholtz.com/blog/wp-content/uploads/2012/09/MiddleClassGraphs_web_51.png

[8] Center For American Progress: http://www.americanprogress.org/issues/economy/news/2012/08/30/33600/5-charts-on-the-state-of-the-middle-class/

[9] maintains: http://www.tnr.com/article/politics/100363/middle-class-mobility-crisis-low-income-poor

[10] American Enterprise Institute : http://www.aei.org/papers/society-and-culture/poverty/the-material-well-being-of-the-poor-and-middle-class-since-1980/

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