Where Did the Middle Class Go?
Why into the upper class, at least that is what Stephen Rose is arguing.
What’s the matter with the middle class? Democrats like to pin their defeats on national security and culture issues alone, but the progressive economic message is also to blame. What progressives generally say about the economy is unrelentingly pessimistic — stagnant wages, rising costs, overwhelming burdens of debt. It’s a message that doesn’t resonate with the middle class — not only because it’s overly negative (by itself political poison), but because it’s simply flat out wrong.
Don’t believe me? Believe the numbers:
- $63,300. That’s the 2004 median household income of people in their prime working years, ages 25-59 (it’s $70,000 for married households and nearly $80,000 for two-earner households).
- $248,700. That’s the median net worth of pre-retirement Americans, ages 55-64.
- Zero. That’s the median credit card debt for all American households.
Drowning in debt? Squeezed to the gills? Living paycheck to paycheck? I don’t think so.
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.
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.
Of course, the policy prescriptions he suggests are somewhat dubious.
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.
There is a potential problem with causality here. While I don’t doubt it is true that having a college degree and being in a two-earner household are key characteristics of those who are in the top quintile, the idea that increasing the number of college graduates is the solution is dubious. Think of it this way, why not pass a law that simply grants all adults who don’t have a college degree a college degree. Would this change anything? No. Employers and future employees would find another means by which to seperate themselves. It might be advanced degrees or some other method. Or more simply put, highly motivated people are also likely to be successful. Highly motivated people are also likely to go to and finish college. So while being highly motivated and going to and finishing college are correlated, attaining the latter does not necessarily imply the former.
Via Greg Mankiw.
UPDATE (James Joyner): Not to mention the fact that the upper quintile is, by definition, limited to twenty percent of the population. Just as half of all doctors were below the median in their med school class, eighty percent of people will fall below the upper quintile.