Income Versus Living Standard Inequality
Kevin Drum leads off an otherwise interesting post on the shifting risk burden in our economy with a rather misleading statement:
On a per-person basis, our economy has nearly doubled over the past 30 years, but that growth has been wildly uneven. Instead of everyone seeing their incomes double, the poor and the middle class have seen almost no growth, while the rich and the super-rich have seen their incomes skyrocket.
It’s undeniable that, in real terms, there has been an explosion in the amount of wealth at the top of the economic chain. Still, two caveats should be noted.
First, we need to be careful of the ecological fallacy. Just because the income levels of “the poor” or “the middle class” have not risen substantially does not mean that the income of many who were poor and middle class, or the children of many more who were poor and middle class, have not. While Bill Gates had the advantages of moderately rich parents, many if not most of today’s mega-billionaire dot.com boys rose out of mundane financial circumstances.
Second–and more importantly– “income” is not the same as “standard of living.” In every meaningful sense, “the poor” and “the middle class” are wealthier than they were thirty years ago. Whether we’re talking about the rate of home ownership, size of our homes, the ability to eat at restaurants, the luxury level of their automobiles, the quality of medical care, access to exotic foodstuffs, gadgets from personal computers to VCRs to DVD players, or whatever, the “middle class” of today arguably live better than the “rich” of 1976 and the “poor” better than their bicentennial forebearers, too.
Indeed, while I have no idea how one would measure this, it’s quite possible that the standard of living gap between “poor,” “middle class,” and “rich” has tightened over the last thirty years, even as income equality has grown. As the cost of creature comforts has fallen, the number of things that the rich can afford that the poor can not has, too. For example, there are now more people who can afford to buy their own Lear jets. Yet, thanks to deregulation and the appearance of low frills carriers let JetBlue and Southwest, commercial air travel is now available to all but the very poorest. That wasn’t the case in 1976.
Yes, Oprah Winfrey can afford a private chef. But even low wage workmen routinely take their families to any number of moderate priced chain restaurants. Thirty years ago, dining out was a special event for folks in the middle class.