Feb 5, 2015 0
Economist Mark Perry writes in his blog, Carpe Diem, US middle class has disappeared into higher-income groups; recent stagnation explained by changing household demographics?
Here’s another way to understand the dynamic income shift over the last half century that elevated millions of American households into a higher income category. Whereas “middle class” US households were so numerous in 1967 that they outnumbered “upper class” US households by a ratio of almost 7-to-1, so many American “middle class” households had moved to the “upper class” by 2013 that the ratio of middle-income to upper-income households had fallen to less than 2-to-1. Stated differently, in 1969 there were almost 700 “middle class” US households to every 100 “upper-income” household; but by 2013 there were fewer than 200 “middle class” households per 100 “upper-income” households reflecting the movement of millions of US households who had climbed up the economic ladder to a higher income group. It was an amazing period of increased prosperity, upward mobility and an unprecedented increase in the number and share of American households going from “middle class” to “upper class.” The NY Times does acknowledge that many Americans were rising into higher income brackets through the last part of the last century, but focuses mostly on the recent stall in that rise since the turn of the century.
In other words, important demographic changes that have taken place over the last decade or longer might account for stagnating household income because the average US household today, compared to a household even a decade ago, is: a) smaller, b) has fewer earners on average and is more likely to have no earners, c) is more likely to be a retiree household on a fixed income, d) contributes fewer average weekly work hours, and e) receives a greater share of their compensation in the form of non-taxable fringe benefits.
Therefore, isn’t is possible that the “social upheaval” that has taken place over the last decade is really an “upheaval” in the size, composition and characteristics of a typical US “household” and not necessarily an era of reduced economic opportunities and less upward mobility for the middle class? At the very least, in any discussion about the “middle class” and “household income” we have to recognize that an “American household” is a dynamic concept that is constantly evolving and changing over time, and therefore distorts any comparisons between household incomes today to those of a decade or a generation ago.