Out of Control Policy Blog

The Middle Class is ShrinkingˇHooray!

With election season looming, brace yourself for more tales of woe. Like their somber predecessors the tellers of these new tales will probably miss the bigger point:

    It's true that the middle class is shrinking -- but that's because more families are better off. The share of prime-age adults in households with real incomes above $100,000 rose by 13.1 percentage points from 1979 to 2004. The share of households making less than $75,000 dropped by 14 percent. Fully 41 percent of prime-age American adults are in households with incomes above $75,000.

    Among married-couple households the picture is even brighter. In 2004, the median income for these households was $70,000, and $78,000 for couples with two earners.

Just as interesting as the message is the messenger--Stephen Rose writing in the lefty American Prospect. He highlights another reason why the old "middle class is getting hosed" saw doesn't cut it:

    I focus on prime-age households (age 25-59), which are 68 percent of the population, because including the very young and the very old distorts the picture of what's really happening with the middle class. Many young workers get paid very little, but few will keep their low salaries as they move up in their careers. Older Americans distort the wage and income picture because they're no longer working. Their incomes may shrink, but their standard of living may not diminish. Indeed, Americans age 55-64 have greater net wealth than any other group.

Rose argues that progressives should cool it with all the hand-wringing:

    Rather than documenting how the middle class is falling behind (it isn't), progressives might do better finding ways to help more middle-class families succeed. In its recent report, Politics of Opportunity, the group Third Way counsels progressives to adopt a message and policy agenda that looks to middle-class aspirations and seeks to create middle-class opportunity. One way to do this, for example, is to look at the characteristics of the top income quintile and use public policy to replicate that success.

    Two things set the top quintile apart: people in the top quintile are much more likely to have finished college, and they are much more likely to be in married, two-earner families. We can move more people up the ladder by doing two things: one, by helping more students graduate from college, and two, by supporting two-earner families in balancing work and family. This means such things as broad-based tuition tax relief, paid family leave, and more tax breaks for child care costs.

Do read the whole article (via Greg Mankiw); it's packed with lots more conventional wisdom-puncturing figures. For example, guess what the median credit card debt for all American households is. Hint: it's roughly equal to the likelihood of the Dems listening to Rose.

Actually, neither party wants to acknowledge that things gradually get better regardless of who is in office because it robs them of their favorite campaign hammer: "Things have gotten worse since the other guys have been in charge!"

Related: If things are so great, why do I feel so lousy, parts I and II

Related: What a great time to be poor

Ted Balaker is Producer


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