The March 2006 Washington Post editorial that claimed real median wages had fallen for 25 years also concluded that “the rising tide helped only workers at the top [ 10 percent].” In 2003, a New York Times journalist likewise wrote, “[T]he bottom 80 percent of Americans have seen their incomes stagnate for three decades.” But if all but the top 10-20 percent had experienced no real income gains for 25-30 years, how could real consumption per capita possibly have doubled since 1973?   Although some would have us believe that most U.S. consumers simply got deeper and deeper in debt, year after year, such a claim implies that household net worth fell continually for decades. Yet, as Chapter 7 demonstrates, median household net worth (assets minus debts) has increased steadily and substantially.

Unless the top 10-20 percent could somehow consume unlimited numbers of houses, cars, shirts, and steaks, it is difficult to imagine how each American’s real consumption could have doubled if real wages and salaries had really been unchanged.  The average size of new homes rose from 1,500 square feet in 1970 to 2,349 square feet in 2004, and the national home ownership rate rose from 62.9 percent in 1970 to 69.2  percent by the end of 2004.  How could so many people be living in so much larger houses if only 10-20 percent had significant increases in income?

Could anyone believe that all those shopping malls that have sprung up since 1973, and all the new homes and restaurants, are really catering to just a fortunate few? How many cars and appliances could the top 10-20 percent have purchased?

From Income and Wealth by Alan Reynolds (published in 2006)

HKO comments:

Alan Reynolds’ book is a wealth of information about the statistical misinformation about the distribution of wealth and income in America.  While addressing a lot of statistics and data the book is still readable and incredibly illuminating.

Throughout this last downturn I have observed and noted how many restaurants and some  malls have seemed to remain busy.  I do not believe that all the people I see with shopping bags from high end stores are in the top 10 percent of earners.

Reynolds points out that the data used often compares weekly income rather than hourly, ignores benefits and transfer payments, excludes taxes, farm workers and many self employed.  The data confuses the fact that more people are entering the upper income brackets with the perception that those in the upper brackets are making more.

When you examine the total wages per hour worked or the consumption per capita you find that arguments for middle class income stagnation and the growth in the inequality of income distribution start to vaporize like a mirage.