Myth of the Declining Middle Class

Since 1979 lots of Americans have moved from the middle-middle class to the upper middle class

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RisingMiddleClassShutter999Dreamstime

The decline of the middle class has been a prominent theme in the 2016 election campaign. Various would-be presidential candidates, as the statistics nerd site FiveThirtyEight has pointed out, have asserted that the American middle class has been hollowing out over the past several decades. In today's Washington Post, columnist Robert Samuelson challenges this notion using data from a new study from economist Stephen Rose at the Urban Institute. "Is the middle class moving up?," asks Samuelson. The answer is, yes. Taking into account absolute income thresholds adjusted for inflation what Rose finds, and Samuelson reports, is that the size of the upper middle class grew from 12.9 percent of the population in 1979 to 29.4 percent in 2014. In other words, lots of Americans have moved from the middle-middle class to the upper middle class.

As Samuelson explains, Rose divvied Americans into five income groups; the poor at $0 to 29,999; the lower middle class, from $30,000 to $49,999; the middle class, from $50,000 to $99,999; the upper middle class, from $100,000 to $349,999; and the rich, $350,000 and up. He then examined how each group had fared between 1979 and 2014.

The percentage of American families with incomes over $356,000 grew from 0.1 percent in 1979 to 1.8 percent in 2014. Meanwhile during that period the percent of Americans in the middle-middle class, the lower middle class and the poor fell from 38.8 to 32 percent, 23.9 to 17.1 percent and 23.4 to 19.8 percent respectively.

For context let's compare the absolute amounts of inflation-adjusted national income that flowed to each income category in 1979 versus 2014. Between 1979 and 2014, U.S. GDP (in 2009 dollars) grew from $6.503 to $16.151 trillion. Roughly, the absolute amount of the GDP going to poor Americans rose from $480 to $580 billion; the lower middle class saw an increase from $1 to $1.2 trillion; and the middle middle class portion went from $3 to $4.2 trillion. The huge shift occurred for those fortunate American families whose inflation-adjusted incomes were greater than $100,000 per year. In absolute terms, the upper middle income portion of the GDP rose from $2 to $8.4 trillion; and the rich saw an increase from $260 billion to $1.8 trillion.

FiveClassIncomeUrbanInstitute

So most Americans in all income classes have gotten richer over the past 35 years, but the upper middle class and the rich got a lot richer. Interestingly, Rose speculates that "people in the middle class interact more with the upper middle class than they do with the very rich, and they may have stronger feelings of losing ground to the upper middle class versus their feelings about the inequality due to the huge income increases of those in the top one-tenth of 1 percent of the income ladder."

In other words, discontent over rising inequality may stem from envy among the middle class as they see the incomes of their upper middle class neighbors rising steeply.

Samuelson ends by observing, "We'll hear a lot about inequality in this presidential campaign. We need to strip away as much rhetoric as possible. Our central goal should be getting the bottom up, which is more important than pulling the top down. It's also tougher."

Alas, stirring class resentment and promising redistribution is a lot easier than encouraging economic growth.

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180 responses to “Myth of the Declining Middle Class

  1. GET YOUR GODDAMN MUSLIM HANDS OFF OF MY MEDI-WAR, RON BAILEY!

    1. There is nothing more depressing than Bailey’s incessant optimism.

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      1. Holy crap! No wonder the middle class is moving up.

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  2. I really wish reason would go after the Fed more and how they over value capital and under value wages. Its a position that libertarians need to take in order to fight the socialists why new wealth goes overwhelmingly to the 1% etc..

    1. mp: You might want to consider my Reason Foundation colleague John Tamny’s new book, Who Needs the Fed?

      1. Is this a news organization or a book shilling organization?

        Wait, never mind.

        1. It’s a libertarian outfit. If you can’t take product placement, go post at Salon!

          1. Yeah yeah, I already know it’s a place where people don’t understand humor.

            1. Humors are an outdated medical theory.

              1. Nice try, but you will have to pry the black humor out of my cold, dead, scotch-soaked liver.

            2. That’s not funny.

    2. The Fed should not be valuing anything other than maintaining the currency as a stable store of value.

      That is assuming the Fed should exist at all, but that is another subject.

    3. But Mashed….

      If the Fed did not artificially inflate the value of capital assets and thereby disproportionately increase the (at least paper) wealth of the upper class, Dear Leader Obama and his party would have “rising income inequality” to exploit as a political issue!

      Let’s keep our priorities straight here.

      1. “…would NOT have…”

  3. I’m not letting your facts get my way. I’m going to whine and bitch and shout about the unfairness of it all, and demand someone to DO SOMETHING, even if it means trying to freeze society in amber forever. That’s the ticket to income mobility.

    1. I would like to be in Amber…then I can walk the pattern and find my own personal libertopia.

      1. I have the omnibus edition of those books sitting on my bookshelf. I read them all when they came out, and its probably time to reread them.

        1. Both series or just the first?

          1. There was a second series?

            [Heads off to wiki]

            I’ll be damned. Those came out when I was in law school and still deluded into thinking I would be a big-firm lawyer. I missed them.

            1. In my opinion, from what I remember of it, the second series was better than the first. That being said, I really only found them slightly better than just OK and not really up to the hype.

          2. Probably both the Corwin and Merlin cycle.

      2. HA! I bet you’d fall off half way through and go chasing after a unicorn.

      3. Life, uh, finds a way.

      4. I would like to be in Amber

        Depends on who this Amber chick is…

  4. Look, we can’t be concerned about this ‘middle class’ foolishness. That’s just some words that the robber barons use to distract you while they steal all of the wealth. No, what we need is equality. Only when everyone is equal have we achieved anything. Look, see how equal everyone in Venezuela is now? They got that silly middle stuff class stuff out of the way. I get my dinner out of the garbage, you get your dinner out of the garbage. Equality! Viva la revolucion!

    1. It’s not fully equal yet – the Chavezes don’t get their dinner out of the garbage.

      1. TOP MEN are exempt. They aren’t part of society, they just run it.

        1. ^this^

    2. “I get my dinner out of the garbage, you get your dinner out of the garbage. Equality!”

      I’m sorry but that is just not equal enough. Some people manage to find better bits of garbage than others do and some people are more physically able to comb through the garbage than others are.

      That just will not do.

      Only when everyone is killed, ground up and mixed together into indistinguishable fertilizer will true equality be achieved.

      1. The ultimate goal is for everyone to have everyone hooked up to feeding tubes monitored by a new federal bureaucracy ensuring that an equal amount of calories in gruel is allotted to each citizen.

        1. Yeah, has to be this. If the biological resources are killed, then the ruling class important people can’t get anything done. We just have to ensure that one of serfs doesn’t cheat on their gruel rations.

  5. All this economics nonsense is boring as shit.

  6. Our central goal should be getting the bottom up, which is more important than pulling the top down. It’s also tougher.”

    It’s impossible. If someone refuses to produce anything of value or even develop the skills needed to do so, they’ll never have a decent adjusted income.

    Also, shouldn’t there be a sixth group below “poor” for people who have a net negative income every year, like criminals and shriek?

      1. You have to be rich to have net negative income.

  7. Your chart makes no sense.

    The Title “Changes in Income of the Five Classes 1979-2014” Means exactly what?

    You show ‘the rich’ at 0.4% in 1979 and 11% in 2014.

    What does this mean? That ‘the rich’ had in aggregate 0.4% of total national income in 1979 and 11% in 2014?
    Or is it reference some change in status (which the title suggests) in 1979 of 0.4%? If so what does that 0.4% reference?

    Also, the ‘classes’ referenced are not equal sized quintiles of the population. So demonstrating that the top two ‘classes’ have increased (in whatever way, it’s not clear from the chart) while the lower 3 classes have declined does nothing to counter the popular belief that the rich are getting richer.

    1. Anyone screeching about the rich are getting richer is an envious piece of scum who just wants to pillage their neighbors shit.

      The point here is that the [i]everyone[/i] has gotten wealthier. Income inequality cretins bitch not just about the rich getting richer, but do so in the name of the middle and bottom class getting poorer as if their is a fixed amount of pie to go around. Wealth is not a zero sum game.

      Moreover, the money the poor have would go a lot further if not for the policies supported by the same people who constantly bemoan how the rich are getting richer.

      1. That’s a fine theory, that has nothing to do with my questions of what that chart purports to demonstrate.

        1. It’s not to demonstrate that the rich aren’t getting richer – the idea being discussed is the meme that it’s bad that there are fewer people in the middle class. That idea seems to leave out the fact that the reason there are fewer middle class people is that more of them have become upper middle class or rich. Somehow that doesn’t seem like such a bad thing, especially when combined with a shrinking number of lower middle and poor classes as well.

      2. It’s not really theory. As Ron points out, the population of people clustered in the bottom class is smaller and the net wealth greater. What you are harping on is a share of the GDP shown in the chart. Your argument doesn’t hold water for the reasons I described.

        The bottom class, now smaller, has more wealth today than it had in 1979. It is not poorer no matter how you slice it.

        1. Then why did he preset the argument as a percentage of GDP? It’s a losing argument on that ground.

          1. Well, I guess if you don’t read the article, sure. If you don’t just look at a chart and instead follow his argument, it’s not. He presents the data above within it. A chart aids it. It does not encapsulate the entirety of his argument.

            Now, if you still question the logic, feel free to continue. But your follow up here suggests you didn’t so I’m left thinking you just didn’t read or didn’t comprehend it.

    2. Wealth as a metric should be held constant over time. Population should be allowed to fluctuate. It’s the only way to maintain a consistent standard over time, otherwise you have a frankly ridiculous paean to the poverty of the past because the perfectly proportioned upper two quintiles than the bottom three holds more wealth after x number of years, despite everyone getting wealthier over that period.

      If $25,000 is a pretty good income in 1974, its equivalent in 2016 dollars should still be a pretty good income, whatever the uppermost quintile is earning. What’s important is tracking where the population is trending across that spectrum.

      1. *sigh* Trust me to edit on the fly.

        because the perfectly proportioned upper two quintiles hold more wealth than the bottom three after x number of years

      2. Pretty good income? WTF? Why use a vague concept like that when “quintile” has a actual definition?

        What income qualified to just squeak into the top quintile in 1979, and what income qualified to just squeak into the top quintile in 2016? Then adjust the 1979 figure for inflation and see if incomes are keeping up with inflation or not keeping up.

        The idea that there can be a bigger percentage of people in a given quintile is the purest form of bullshit ever, which is what this article is peddling. There are 5 base classes: upper class, upper-middle, middle, lower-middle, and lower. All are 20% proportions, even if the infamous “1%” skews the living standards. For mathematical consistency, you could exclude the richest and poorest 1000 people to keep there from being any skew, but eliminating the poorest 1000 will make no noticeable difference. Eliminating 10,000 from both extremes still won’t make any noticeable difference on the lowest quintile but it sure will skew the top qunitle – downwards. Which is why these types of articles never do it the mathematically correct way.

      3. Wealth in real terms, as in standard of living, is not a fixed pie. Productivity and technology gains increase the amount of real wealth across all income bands. Population fluctuates due to cultural and technological gains. You don’t allow or disallow it (the disastrous Chinese and Indian “experiments” aside).

        The curve has shifted towards the wealthier side in terms of monetary income for all people. It’s not a bell curve and never has been, nor does it purport to be. We’re not measuring a normalized value like IQ.

        Most poor people in the US would be considered to be middle or upper middle class in most of the world based on standard of living. The problem is that we emotionally compare ourselves to others only in local terms.

    3. VGZ: The income classes are defined in the article – they are not quintiles, but inflation-adjusted income groups. The percentages in the chart are the proportions of GDP garnered by each of the defined income groups. Hope that helps clear up any confusion.

      1. The metric was doing OK until it dragged GDP into it. That’s a worthless measure given what gets thrown into the pot to make it.

        1. Indeed GDP is not an accurate measure of economic prosperity because the formula includes government spending.

          Government spending is just forced transfer payments.

      2. I see I’ve been using “quintile” incorrectly.

        1. I too will admit my errors and beg for forgiveness.

      3. The percentages in the chart are the proportions of GDP garnered by each of the defined income groups.

        That is what I thought.

        In which case, it demonstrates that the percentage of aggregated income going to the top two groups in the chart has increased at the expense of the bottom 3 groups – which is essentially the argument that the rich are getting richer, the poor poorer and the middle class squeezed.

        1. It seems like this interpretation by VG is correct. Is it not?

          1. It is predicated on the presumption that the number of people in each grouping is constant.

            The graph does not provide this data. It is literally useless without the size of the population in each group at each point in time.

        2. VGZ: You write “the rich are getting richer, the poor poorer and the middle class squeezed.” This is wrong according to Rose. The rich are getting richer faster, but most Americans, even the poor, are still richer than they were back in 1979. So most are getting richer and nobody’s getting “squeezed.”

        3. I saw this argument somewhere else and from what I recall, there are more people in the the top 2 income groups now + the people on the left of the graph have shifted to the right. Meaning there are fewer people, proportionally, in the poorer groups.

      4. The income classes are defined in the article – they are not quintiles,

        Then they are goalposts strategically picked to peddle a fiction.

    4. VGZ: That is the percent change of U.S. GDP that folks making over the inflation-adjusted income threshold of $350,000 per year.

      1. Please rephrase the above as a proper English sentence.

        1. VGZ: Let’s try this: Back in 1979, the families making over inflation-adjusted incomes over $350,000 per year received only 0.4 percent of GDP. In 2014, families making over inflation-adjusted incomes over $350,000 per year received 11 percent of GDP. Thus the percent change of in the amount of GDP for folks making over $350,000 per year went from 0.4 percent in 1979 to 11 percent in 2014. In absolute amounts the total amount of GDP received by folks making over $350,000 per year increased from $260 billion in 1979 to $1.8 trillion in 2014.

          That is to say, again, $260 billion was roughly 0.4 percent of 1979’s GDP (in 2009 dollars) calculated $6.5 trillion – 0.04 x $6.5 trillion = $260 billion – and 0.11 x $16.1 trillion = $1.8 trillion.

          With respect, I really don’t understand the source of your confusion – you might have benefited from a more careful reading of the post.

          1. And again, this not only fails to counter, but bolsters, the argument that a majority of the economic gains fo the last 3+ decades have gone to the wealthiest people.

            1. VGZ: Nobody is saying otherwise. The point is that most Americans are making more; their real incomes are NOT declining.

              1. The article make no proof of that whatsoever because the income ranges were not picked to take the bias out.

          2. If you can’t understand why the inflation-adjustment ITSELF is all wrong, then you sure as hell shouldn’t be using it to confirm your own bias. To give one example where the adjustment is wrong even if it is correct – poor people RENT their housing, wealthier people OWN their housing. The inflation basket has a constant weight – 9% or so for rent, 20% or so for ‘owner equivalent rent’ (which is mostly just BS but lets pretend its accurate).

            For homeowners, an inflation-adjustment gives them all the benefits of lower mortgage interest rates over the last 30+ years. Renters do not benefit from that since lower interest rates actually tend to increase their rent. And since 9% is a lot further away from the actual portion of income spent on poor housing than 20% is from the portion of income spent on wealthier housing; the effect is to distort ACTUAL inflation faced by these two groups. IOW – low incomes are rising OK but they are getting hammered by inflation that is not weighted correctly. They ARE getting squeezed.

            The effects compound when you include all the hedonic adjustments (which affect spending at the top more than the bottom) and the reduced prices from imports (same).

            Inflation statistics were polluted for political reasons just like stats in the USSR were. And it now appears that ‘libertarians’ have fallen for the same BS that the Soviet central planners did. We believe BS govt-produced stats reflect reality.

    5. Also, the ‘classes’ referenced are not equal sized quintiles of the population.

      Don’t let silly things like mathematical consistency get in the way of another government-fellating article from Ron Bailey.

      The only proper way to do this would be to START with 5 equal-sized population groups, then compare the current income ranges that define each group, then compare that with the inflation-adjusted 1979 quintiles. And these should all be NET INCOME, not GROSS INCOME.

      Do that, and you’ll find that it takes a lot less net income to make it into the top quintile now. And then you get the idiotic “movin’ on up” bullshit articles like this one even though it really means net incomes are declining.

  8. But the super wealthy is now much wealthier than the super poor than they used to be, and their rate of growth in population is much faster than any other quintile, therefore income inequality is still the biggest issue facing America besides gay wedding cakes.

    1. If not for the end of that statement marking it as sarc, I’d have thrown a thatcher clip at you.

      1. You’ll put somebody’s eye out with that thing.

      2. A thatcher clip? Are they made of iron?

        1. I think this one is made out of 1s and 0s.

    2. ..and xe bathrooms.

    3. “therefore income inequality is still the biggest issue facing America besides gay wedding cakes.”

      Don’t be absurd.

      Transgender bathrooms are the biggest issue facing America today.

  9. I love this study.

    It calls Trump and Bernie Sanders outright liars with their class warfare bullshit.

    1. And you would know how to recognize a liar, being one yourself.

      1. Are you a Trumptard or a BernieBro?

        1. Get to licking those cankles, shreek.

        2. Ladies and gentlemen, I’m just a caveman. Your world frightens and confuses me…

      2. I’m a simple man who believes in paying ones debts and bets.

        1. Lannister scum

    2. Which is no different than Hillary’s class warfare bullshit.

  10. I don’t doubt that wages and incomes and the number of people earning those incomes has changes. A lot has happened over the course of those 35 years. However lots of studies tend to show that purchasing power peaked about 1968~1970 time frame. They tend to show a decline in purchasing power through the 70’s and a reversal in the 80’s The 90’s are a bit mixed but in the 80’s and 90’s it never got back up to the peak around ’69. Since 2000 the trend resumed and we are back about where we were in 79. Yes incomes are up, but if your standard of living is down what difference does it make how much money you make.

    I think it is foolish and unwise, to try to convince people that the financial pain they feel is not real. I think you need look no further than Trump’s success to see that people feel genuinely frustrated with the direction the country is headed, financially or otherwise. While I don’t think he has a clue how to fix it, the feelings he has tapped into are real, the anger is genuine and deeply rooted.

    That’s not to say that good news can’t be found, but when your drowning, you don’t want to be told don’t worry the water is not really that deep.

    1. What you say is mostly bullshit since the price of almost every commodity has gone down in number of hours worked to purchase a unit of said commodity since 1979.

      So, if you are earning more, food cost less in hours worked, almost everything cost less in hours worked (cars are a curious exception), then you do not have a real income inequality problem. Under those circumstances such a thing is impossible.

      1. Yes, the price of coffee, chicken and gasoline has decreased in real terms over the last forty years.

        However, the cost of housing, education and medical care have increased dramatically, and those costs are a larger percentage of the spending of the overwhelming majority or people in the country.

        I really don’t understand why libertarians want to argue this point as the three areas of substantial cost increase are all dominated by government policies.

        1. VGZ: You may want to look at this inflation-adjusted analysis of per square foot costs of housing in the U.S.

          And yes, education and medical costs are have gone up substantially. It is no coincidence that both are highly regulated sectors of the economy not subject to market competition. But that is a different argument.

          1. This does not in any way, refute the assertion that the cost of housing has consistent grown faster than the rate of inflation. Nor that housing in a larger percentage of most people’s expenditures than food, clothing or other consumer goods.

            1. It does refute it.

              If you buy the same house in 1973 and 2013, they will cost the same amount (inflation adjusted). Housing hasnt grown faster than inflation, Houses have.

              1. robc: Well said. Thank you.

              2. If you buy the same house in 1973 and 2013, they will cost the same amount (inflation adjusted).

                robc, you ought to know better than that. Economics does not work in that sort of a vacuum. Cherry-picked “new single family homes” ignores the increasing trend in condos and townhouses compared to 1973.

                Also, location location location. I guarantee you the house I grew up in is now worth 50K LESS than it was when I grew up in it. And that is NOT inflation adjusted. And I can guarantee you the property tax rates are much higher – which probably explain why the value has dropped so much.

                Also, you wouldn’t even be allowed by the government to build the same house to the same specs and expect to pay the same inflation adjusted-price. Ignoring the property taxes and keeping the square footage the same, the building codes require so much more that ADD to the cost of a house without actually making it “more livable”.

                I won’t even mention the mass transit fare mandates which turned good mass transit into crappy public transit and transformed a walkable suburb into a car-required suburb.

            2. VGZ: I begin to doubt your graph parsing abilities – the point of the analysis is that inflation-adjusted costs per square of foot of housing is almost exactly were it was back in the 1970s. Look again.

              What people pay for housing as gone up for many reasons, but surely the fact that the average house is 1,000 square feet bigger than in the 1970s and that the amount of space per person has increased from 551 square feet in 1973 to over 1,000 square feet person now accounts for a good bit of the increase. Perhaps people are choosing to allocate more of their incomes toward housing because they want to live in bigger houses? Just a thought.

              1. “I begin to doubt your graph parsing abilities”
                Hate speech! Shame this man!

              2. “Perhaps people are choosing to allocate more of their incomes toward housing because they want to live in bigger houses?”

                Except for the folks on all those “Tiny House” TV programs.

              3. This is a fair point. Why are houses getting bigger?

                I suspect it is because people are hoarding way too much stuff. I know multiple people who have an extra bedroom that is being used for storage. They need a bigger house so they have room to keep all their crap.

                Any other theories?

                1. They don’t REALLY need that stuff do they? I think we need some goons to go in and take what is not actually necessary.

                  1. Well, it annoys me that these fuckers are driving up housing prices. I just want a normal sized house at a reasonable price where I can use every room and not keep a lot of crap I don’t need. But these assholes are fucking up the market.

                2. Seems like an appropriate place for this

                3. This is a fair point. Why are houses getting bigger?

                  Be careful. “Houses” is a loaded term – usually ignoring multi-family housing like townhouses which, if counted, would drastically reduce the square footage numbers quoted.

      2. But that is not what I said.

        Costs of commodities going down impacts all economic classes equally.

        What I said was that the relative difference between what a family of 5 living in San Francisco earning $160,000 a year and a family of 3 earning $80,000 a year in Des Moines was tiny.

        Yes both of those families lifestyles would compare well when you compared them to their 1979 equivalents, but when you compare them to each other the family earning $160,000 a year gets basically nothing that the family earning $80,000 can’t afford.

        This is the problem with looking at aggregate income data. The meaning of that data is so highly situation dependent that the aggregates are meaningless. Family size and location have more to do with what kind of a lifestyle you can afford than your nominal income does.

        A single individual earning $75,000 a year in Columbus Ohio is closer to being rich than a family of 4 earning $200,000 in NYC but in this analysis the first is considered middle middle class and the second upper middle class. Hell that individual is closer to being rich than a family of 4 in Columbus earning $150,000 and so I highly doubt that their neighbors are looking at the couple with 2 kids struggling to pay their bills with more envy than they are the guy who earns half what they do combined but can spend all his money on himself.

        1. 160k in SF is about 81k in Des Moines, so you are accurate.

          Except for one thing…there is some sort of intrinsic value that causes someone to live in SF over DM that is apparently worth about 79k per year.

          1. Actually there is not because the person working in SF doesn’t see a dime of that extra money.

            if your salary is exactly equal to the the difference in exchange rates then you have not gained or lost anything by making either choice.

            It is only when someone accepts a job for $150k in San Fran that would have paid $81k in Des Moines that you can say they valued living in San Fran more

            1. $150K is nowhere near what it would take for me to live in SanFran.

              1. Same for me. Which is why I dont. I could probably make that there. But ugh.

            2. A person makes 150k in SF can make close to that (more than 81k anyway) in DM. So they are choosing SF for some reason.

              1. Gay wedding cakes and transgender bathrooms, duh!

        2. Yes, its also possible that the study is capturing the effects of urbanization. Maybe more people are just living in expensive urban centers where the rent (and thus wages) are higher?

        3. Personally, I don’t think you adjust for geography.

          If you are living in an expensive city, well, doesn’t that just mean there are all sorts of reasons why you value that city more than a cheaper city? All the amenities, conveniences, whatever? That’s part of what you buy with your paycheck, is it not?

          Should we adjust within cities, too? Some people spend a lot more on houses because they want a given school district, or just to live in a tonier neighborhood. What’s the difference between spending more to live in a given neighborhood, and spending more to live in a given city?

          I don’t like big cities. I’ve probably passed up a crapload of nominal income because to me, big cities aren’t worth it. Why isn’t the converse also true?

    2. You are better off because quintiles. And graphs. So shut up.

    3. It is housing prices that are the problem. And housing matters more than food, clothing and entertainment.

    4. That’s not to say that good news can’t be found, but when your drowning, you don’t want to be told don’t worry the water is not really that deep.

      If you put on lead boots and handcuff yourself and then voluntarily jump into deep water because some idiot tells you to, don’t expect much sympathy.

  11. “In other words, discontent over rising inequality may stem from envy among the middle class as they see the incomes of their upper middle class neighbors rising steeply.”

    There is a problem with this.

    while upper middle class incomes are rising faster than middle class incomes thanks to the graduated income tax, the phasing out of various tax credits, the alternative minimum tax, and the fact that jobs with upper middle class pay grades are heavily concentrated in the most expensive parts of the country means that the lifestyles of those earning $100,000 to $200,000 are not significantly different from those earning $75,000 to $100,000. Yeah they might drive a bit nicer of a car and have a bit nicer house but overall their lives will look very similar from a financial stability and consumption spending standpoint.

    It depends on location but realistically you need to have a household income of $75,000 plus somewhere between $10,000 and $25,000 for each person after the first in the house to be able to afford what most people would say looks and feels like an upper middle class lifestyle

    1. R: The threshold set by Rose for a standardized upper middle class family of three is $100,000 and $350,000 per year and the size of that upper middle class group grew from 12.9 percent of the population in 1979 to 29.4 percent in 2014. So it’s about what you are saying, right?

      1. Depends on where you live. In Balt/DC area, 100k for a family barely gets you out of poverty and into the lowest tier of middle class.

        1. It also gets you a higher tax bracket, thanks to O’Malley and his gang of merry Democrooks in Annapolis.

        2. 100k in Baltimore is equivalent to $79,700 in Bowling Green, KY (according to an online cost of living calculator). That may or may not be upper middle class, but it aint “barely out of poverty”.

          1. If you look around you will find that there are multiple of those calculators all of which give varying equivalence rates.

            At one point a few years ago I was living in Louisville KY making $85k and in negotiations with a company for a job in Boston Ma. The estimates of the equivalent wage across 7 different cost of living calculators ranged from a low of $97k to a high of $135k.

            Having actually now moved to Boston (albeit for a different job) I can tell you that all of them were too low on the estimates, $150k would have been closer

            1. That sounds more right. See my post above.

            2. The one I am using says 85k in the Ville is 133k in Beantown.

              1. Having lived in both in the last 5 years I can tell you that it is underestimating.

                That might just barely be accurate if you are in a position to drop $500k on a house here (or $170k there, either way you’d be getting functionally the same house), however if you can’t or don’t want to buy Boston is way more expensive than they are estimating because there is a critical shortage of rental housing available here right now. There are literally more scam ads for rental housing than there are real ones here and bidding wars for rental properties are common.

                Basically if you are looking for a 3 bedroom single family home prices start at $3500 a month and go up from there. A 3 br 1400 sq foot apartment will run you a minimum of $2600 a month. Rents in the Ville are somewhere between a third to maybe half that at most.

                1. That COL calculator says 553 v 241 for the house difference.

                  Of course, a lot is about neighborhoods. I know the identical house in Middletown vs Okolona is 30+% in price. I know, because I got deja vu house shopping when I walked into a house that was the exact layout of my parents house.

                  I would assume the same is true for Metro Boston.

                  1. Consider this. You cannot live anywhere in lower priced areas in DC/Baltimore if you place any value on your life. You don’t even drive through those areas, let alone live there. A 3 bedroom home in a good area here starts at around 450k. The same home would be 150k in many other parts of the country. So I bet that statistic is skewing the data.

                    1. I live in NoVa and concur with … ummm… Butthurt Lotion ….

                      Let’s just say that I am in the aforesaid category of “at least $100K” and I am currently renting half a duplex. Buying one of those $700K McMansions dotting the area would be completely out of my reach. It’s all about housing prices and location.

                      And you just don’t feel upper-middle-class if you don’t own a house.

                  2. Yes neighborhood is a factor but that really isn’t relevant to this discussion.

                    If living in a gangbanger neighborhood where you need to send your kids to school wearing bullet proof vests is what it takes for you to be able to afford a Lexus, and annua; vacations where you actually go somewhere, and still being able to put 10% of your salary aside for retirement the can you really say you are “upper middle class”?

                    1. After taxes (federal and state), 401(k), and health insurance, I probably make about half my nominal income.

                      Every time I do one of those mortgage calculators online telling me what kind of house I can afford, I have a really good laugh.

            3. Exactly. The calculator is premised on Louisville being comparable to Southie.

            4. And I’m currently living in Bowling Green, having moved a few years ago from Louisville and getting ready to move to Lexington. Pretty much on a fixed income, so I really see the differences in standard of living based on location. Wish I could stay here (aside from the lack of good transportation – buses cost more and go to fewer places).

          2. Umm, I don’t think that can be correct, if you figure in the price of rent/real estate. The cost of real estate/rent is probably at least 300% higher in Baltimore than in Bowling Green. It most definitely is if you compare it to NC or SC, or TN.

            I bet it’s more like 100k here is equivalent of 55-60k in Bowling Green if you consider real estate.

            1. BG real estate is high. It was a shock when I moved from Louisville, as everything else is cheaper here.

              The same calculate says Louisville is about 2% higher to live in that BG, but that real estate is cheaper in Louisville. It seems accurate to me.

              This calculator says 458k to 263k for housing value change at that income level. I know what a 263k house looks like in BG, that is about what I have. Im guessing in Baltimore, the lot size would be smaller.

              1. I’d forget about Bowling Green then and instead consider somewhere like Greenville, SC, Anywhere in eastern TN, or even Charlotte, NC. That 263k house in Bowling Green will be 150k in any of those areas.

      2. No what I am saying is that thanks to various factors the aggregate income data is meaningless when trying to translate it to the real world.

        People don’t feel jealousy over the raw number of dollars someone else makes, they feel jealous over the stuff those dollars allow them to buy that they themselves cannot afford.

        So if we instead of defined the classes by a list of things that they could afford with their income in terms of housing (how nice/big of a house, how good of a school district, how desirable of a location), Transportation (are you driving a porsche or is public transport the most you can afford), leisure (everything from big ticket vacations to being able to eat out more), savings (retirement, and being able to save up for big ticket purchases/rainy day funds), etc. And then looked at the income levels needed to afford a given level of lifestyle you would find that the minimum needed to afford an “upper middle class” lifestyle would range anywhere from $75,000 through $250,000 depending on where you lived and your family size.

        So trying to say that people “feel jealous” because the “upper middle class” incomes are further ahead of them makes no sense. A large chunk, probably a plurality and possibly a majority of those who are upper middle by income are not actually upper middle by lifestyle.

        1. But they are on april 15th and isn’t that what really matters?

          1. As someone whose effective federal tax rate went from 4% to 18% in less than 4 years just because I moved to a more expensive city I can confidently say, yes, yes it is

  12. The worst part of the class warfare nonsense is the intentional bastardization of terms. The wealthiest Americans aren’t the ones with a $350k income. The Heinz-Kerrys of the world aren’t making a lot of income. They are already hugely wealthy, and they can stay wealthy without an income.

    If we tax the hell out of income, it locks them in as a permanent wealthy class.

    1. Very good point. I have always tried to point out the intentional conflating of “income” with “wealth,” and how many of the greatest Progressive advocates for taxing incomes came from families with great accumulated wealth. (This means you, Teddy and Franklin).

  13. I notice there’s no discussions of HOW these people came by their wealth. There’s a huge difference between a middle class formed from bringing goods and services to market and being rewarded and a middle class carved out of the trillions of dollars manufactured out of nowhere and paid to move endless paper around. I don’t find any comfort in a middle class that owes its existence to the ever expanding apparatus. Those who have wealth after twenty years of milking the time clock at bullshit government job A, to retire after getting their pay artificially jacked up so the “three highest years” average is as high as they can get, only to take another bullshit job somewhere else. Yes, they are middle class, or maybe even upper middle class at this point, but they’ve not produced or improved a thing.

    And as for the rich, I have no problem whatsoever with someone becoming rich at market. Those who have gotten rich being the first to use and launder funds resulting from debasement, are parasites.

    And in the end, the fact that we are all so much wealthier ignores the fact that we’ve been eating our seed corn for quite some time. Also we have a vastly over speculated stock exchange, so that a great amount of this wealth is illusory, is another troubling reality.

    In the end, there is STILL the illusion that there are two $70,000,000,000,000 pies out there, and there’s only one. Nothing I read here acknowledges that fact. It is perpetuating the illusion.

    1. Shorter version. Somone that makes tens of millions of dollars by selling government favors (like the Clintons) is entirely a drain on the private sector, whereas someone making the same via free enterprise (like Trump) is a benefit to the private sector and someone that makes the same via arbitraging tax and bankruptcy law (like Romney) is a net negative, although to a much lesser degree than Hillary.

      1. Yeah, Trump didn’t make his money through free enterprise. He’s as crony as the rest of them.
        You don’t get to be a real estate developer in New York without having political connections, and using them.

      2. Uh, Trump knows nothing about free enterprise. He’s made all his money (well, that he didn’t inherit) by being the guy who bribes politicians for favors.

    2. The society that debt built will be the society that debt destroys. I think a lot of the disillusionment among the working and middle classes comes from being in the debt machine and the sense of being enslaved to it with no easy way out.

      1. “…I think a lot of the disillusionment among the working and middle classes comes from being in the debt machine and the sense of being enslaved to it with no easy way out.”

        Oh, there’s an easy way out; pay your debts.

        1. Sure. But our economic and social culture is oriented the other direction. And when the central bank manipulates rates to the lowest of lows, it’s highly disincentivized.

          1. Well, if you fall for the ‘too good to be true’ stories, my sympathies are lacking.

            1. It’s too simple to just write off all of it as just poor judgement, particularly when it’s so ingrained into our culture. Remember when Bush pleaded with everyone to go out and spend money to save the economy?

              Our collective response to every fiscal downturn of the last 20 maybe 50 years has been to spend more. Dotcom bubble bust? Lower interest rates. Mortgage bubble bust? Lower interest rates and buy a car! Bond bubble bust? That will be interesting.

              We (the government et al) send a conflicted message. Save for retirement, but spend! It’s no wonder we’re screwed up.

              1. “It’s too simple to just write off all of it as just poor judgement,”

                Not to me, it isn’t.

    3. Actually I suspect that the vast majority of the “new money” are people who made it producing things of actual value, in software development and internet technology.

      To the extent that the “middle-class” is shrinking it may be that the middle-class of paper-pushers and make-work is indeed falling behind. At least it seems to be that the jealousy is mostly of the apparachniks against the meritocracy. The people who think that a good union/government job should mean job security for life are the ones voting for Trump and Bernie.

  14. “Our central goal should be getting the bottom up, which is more important than pulling the top down. It’s also tougher.”

    Yes, it should. Too bad it’s not.

  15. “…In other words, discontent over rising inequality may stem from envy among the middle class…”

    Proggies look soooo good in green.

    1. A lot of progs hate themselves for being wealthy, it’s like they envy themselves.

  16. BTW – check out the chart at the end of this wiki article.

    There is an absolute correlation, throughout the distribution range of household net income with number of earners per household and household size.

    ie lower income households have fewer people working and a large average household size.

    1. Now you know why the goalpost of 1979 instead of 1990 was used.

  17. But what dies Tim Egan think?

  18. dies, does- whatever

  19. lots of studies tend to show that purchasing power peaked about 1968~1970 time frame.

    I’m too lazy to look up the inflation-adjusted price of Wonder Bread, but this is a completely meaningless assertion.

    Sure, a Mustang may have cost ~$3500. in the mid ’70s, and $40k now [numbers pulled directly from my ass] but today’s Mustang has a multitude of features unavailable anywhere at any price 40 years ago.

    The phone in my pocket would be indistinguishable from witchery in 1973, when I graduated from high school.

    1. Sure, a Mustang may have cost ~$3500. in the mid ’70s, and $40k now [numbers pulled directly from my ass] but today’s Mustang has a multitude of features unavailable anywhere at any price 40 years ago.

      I’ve wondered how much of the price increase comes from government mandates — the catalytic converter and the airbags being the two biggies — and how much from things that used to be optional.

  20. RE: Myth of the Declining Middle Class
    Since 1979 lots of Americans have moved from the middle-middle class to the upper middle class

    This is what happens when the little people become educated instead of indoctrinated, are given opportunities, sacrifice, save and use their money wisely.
    This rising of the middle class to the upper echelons of society only annoys and frightens our socialist slavers and their cronies who are taking the time and trouble to enslave us all through the beneficent polices of Karl Marx, may his name be blessed.
    The only way we can be a true socialist utopia is through the freedom granted to us be our obvious betters as they make us our slaves.
    Therefore, we must give more money to The State (as Heil Hitlary has promised she would do) in order for our ruling elitist turds that are enslaving us so they can have a better life than ours, and isn’t that what life is all about?
    Isn’t that sacrifice a small price to pay to those who are determined to make our lives miserable?

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  22. I’m not sure if I buy this. Class definitions are arbitrary and inflation numbers are subject to error. IIRC, the CPI depends on a basket of consumer goods.

    What do you think accounts for the perception that the middle class is not doing as well? IMO, there is one major glaring problem – housing prices are way higher than they were. People might spending much less on clothing, food, and entertainment, but spending a lot more on housing, and that one item impacts subjective quality of life much more than the others.

    Home ownership has other benefits as well. It acts as a store of capital and as an investment, which means that people who are able to purchase a home have an easier time moving up. If housing prices are too high for people on the low end of the spectrum to afford, that impacts social mobility. It means that if you start poor, it’s much harder to climb out of poverty than it used to be, even if clothing and food and entertainment is much more affordable to you.

    So while the raw numbers are saying that people are doing better, that is only if you assume that all kinds of consumer goods are equally weighted. But in reality, home ownership matters a lot more to people than clothing or food or entertainment. It matters in terms of raw lifestyle factors, and perhaps more importantly, in terms of perception of social mobility. People who can afford to buy a house, feel like they can move up, feel better about their place in life and their economic prospects.

  23. This entire subject is POINTLESS unless you are talking about after-tax income. And by after-tax, I also mean state and local taxes.

    I can assure you that since 1979, the sales tax RATE in my county has gone up over 100%, property tax RATES have risen more than that, and I’ve been subject to a whole slew of new federal taxation that is disguised as “regulation”.

    And yet here we have Bailey telling us to stop worrying and love the Keynesianism.

    1. If: Here’s some interesting data on those trends between 1979 and 2010 from the Brookings Institution. Keep in mind that this analysis is based on traditional income quintiles, not Rose’s inflation-adjusted income thresholds.

      Basically, after-tax incomes for the bottom 4/5ths (eyeballing the data) went up about 40 percent since 1979. The top quintile’s incomes went up considerably more. Again, most Americans are richer and middle class incomes are NOT declining.

      1. From your link: “Under the CBO’s most comprehensive measure of income?total after-tax and after-transfer income?the median household income fell less than 1% between 2007 and 2010.”

        We already know the inflation rate in that span was over 1%, so a falling income and rising inflation, as small as the rates of both may be, still prove that even the vast gains of the top 1% of earners can’t advance the median income. A positive inflation rate and a falling median income rate means a declining median standard of living.

        Do I need to coin a phrase about chocolate rations?

      2. The after-tax income is after federal income tax, it ignores local taxes.

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  25. What the fuck ever. I don’t give a fuck what the numbers say. My father was a high school drop out in the late 1960’s. He became a sheet metal worker. By the time he was 25ish (circa 1974), he owned a house, had two kids, a wife, a truck, and a boat. A 25 year old today is still living with his parents, single, has $50,000.00 in student loans, and has a part time no insurance job at Starbucks, no car, no boat.

    I get the sense that most libertarians, who are smarter than the average joe, are doing very well. But for some reason, they just can’t or wont’ comprehend that for most people, things suck..like really suck. So I don’t know if you guys are stupid, confirmation bias, lack of empathy.

    I am glad I finally grew up and out of libertarianism. Let the ad homenim commence. Because, you know, you guys are all about reason.

    1. Hi Troy, I also grew up in the 70s and had friends whose parents worked in factories and some hadn’t even graduated high school but could afford to live in what is now a very shi-shi Boston suburb-some even had vacation homes… You can thank globalization and automation for the loss of manufacturing jobs and there is nothing that can be done to stop it. Libertarians at least will be honest about this-not so the other parties. Higher education and housing have become so expensive because the government makes loans and mortgages easily available which grossly inflates the price. Add to that barriers that the political class creates in the form of regulations to help its friends and you are left with a system where those who are not connected get screwed over.

    2. You know what the funny thing about your father’s life story is? It’s basically the same today… Except too many young folks aren’t “smart” enough to do it! I have a few buddies from high school who basically lived your dads life story in the last few years. I am only 30. One is a proper friend of mine who got into construction at 18. He is a smart guy, and after a few years was running crews for a decent sized company. He’s been promoted several times, now runs whole construction projects, and makes good money. Bought his house at maybe 23 or 24. He’s the kind of guy who could become a builder himself if he ever decides to become that ambitious. Another is a friends little brother I know. Got into running construction equipment right after HS after taking some BS couple month long classes at some trade school I think. The gear he operated got bigger and bigger, and so has his paycheck. Has been making over 100K a year since his early 20s. Another guy I know is a welder, and also makes a shit ton of money. Those are just people I know from growing up. I know plenty more people who make decent money doing “lowly” jobs too. Mechanics, people in boring sales jobs (selling appliances to apartment complexes! YAY!), various trades etc.

      1. Part 2
        The funny thing is that everybody goes into the college system, takes on a ton of debt, and then lives that life plan out… When in fact there are quite a few “dirty jobs” that pay awesome money that you can get into right out of high school. First few years won’t be too amazing, but once you start knowing your stuff you can make solid money.

        I’m self employed and never did the college thing, but I think it can be a decent choice for people who do it sensibly. As in study something that actually has a direct career attached to it. Chemical engineering (like my cousin that works for big oil studied), tons of programming related classes, other specialized stuff. The generic arts degrees and that kind of nonsense are where the real waste occurs. I don’t get it. Even as a kid I knew you’d be an idiot to try to study art in college and expect anything out of it… Yet somehow millions of people think those worthless degrees are worth 10s of thousands in debt.

        So the truth is that it’s not sooooo much that people can’t do what your dad did, as it is that they stupidly choose not to. People seem to either resign themselves to doing the college thing, or they shoot for working at McDonalds and then complain they don’t make any money… If they tried to shoot for learning an actual skill, but still skipping college, a lot of people could do just fine.

  26. Aggregate income to middle class in 70’s was 62% dropping drastically to 43% in 2014. The rich however it went up. The welfare, snap and Medicaid quadrupled pretty much, unemployed is estimated to be more like 30%.

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  32. One thing that would make this “argument” more compelling is if it were based on individuals and individual income. From what I can see, this is a form of household income (Note: All these thresholds apply to three-person households; income levels are adjusted for differences in household size.)

    How many households in 1979 were two and three income households versus today?

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