Class warfare rhetoric is being flung about by Hillary Clinton and Barack Obama, the two senators fighting tooth and nail for the Democratic presidential nomination to oppose Arizona Sen. John McCain, the Republican nominee, who voted against the Bush tax cuts because they supposedly favored the rich.
If these three candidates essentially agree on this “Two Americas” theme, it must be true that the rich are getting richer and the poor are getting poorer, right? And what about that related claim that is also becoming a fixture of political rhetoric, the idea that the disappearance of the Middle Class is happening because of the growing disparity of wealth and income in American society?
As usual, there is far more to these issues than routinely is reported by the Mainstream Media. In fact, it is no exaggeration to say the poor in America are richer than they’ve ever been before, which tells us a lot about why millions of poor people in places like Mexico routinely risk life and limb to get to America.
American University professor Brad Schiller has a superb piece in today’s edition of The Wall Street Journal that demolishes the rich get richer rhetoric that is accepted gospel throughout the ranks of conventional wisdom in the media and other intellectual circles. He points to the U.S. Census Bureau’s annual report on household incomes:
“The annual release of census data on household incomes provides the foundation for the ‘two Americas’ thesis. The latest figures tracked changes in incomes all the way back to 1967. Two observations grabbed the headlines. First, the data indicate that the top-earning 20% of households get half of all the income generated in the country, while the lowest-earning 20% of households get a meager 3.4%. That disparity has widened over time: In 1970, their respective shares were 43.3% and 4.1%. These income-share numbers buttress the popular notion that the ‘rich are getting richer while the poor are getting poorer.’
“The second observation in the Census reports relates to the well-being of the middle class. The median household income in 2006 was $48,201, just a trifle ahead of its 1998 level ($48,034). That seems to confirm middle-class stagnation.”
But as is so often the case with economic statistics, the Census data here doesn’t begin to tell the whole story, and it the rest of the story that typically doesn’t get reported by The Washington Post, CBS News, The New York Times and the rest of the Mainstream Media.
First, Schiller notes that income levels have risen significantly across the board. That means that while those who are poor have less than those who are rich, those who are poor have significantly more today than they did in previous years:
“All the Census Bureau tells us is that the share of the pie consumed by the poor has been shrinking (to 3.4% in 2006 from 4.1% in 1970). But the ‘pie’ has grown enormously. This year’s real GDP of $14 trillion is three times that of 1970. So the absolute size of the slice received by the bottom 20% has increased to $476 billion from $181 billion. Allowing for population growth shows that the average income of people at the bottom of the income distribution has risen 36%.”
Clearly, something is working rather effectively to bolster the living standards of those at the bottom of the American rung if their incomes have increased by a third since 1970.
Schiller also notes what is likely to be an even more significant factor, the changing composition of the typical U.S. household. In brief, there are lot more Americans living alone:
“A closer look at household trends reveals that the percentage of one-person households has jumped to 27% from 17%. That’s right: More than one out of four U.S. households now has only one occupant. Who are these people? Overwhelmingly, they are Generation Xers whose good jobs and high pay have permitted them to move out of their parental homes and establish their own residences. The rest are largely seniors who have enough savings and income to escape from their grandchildren and enjoy the serenity of an independent household. Both transitions are evidence of rising affluence, not increasing hardship.”
As it happens, thanks in great part to the much wider dissemination of economic data via the Internet and the growth of independent sources of analyses, it is much easier these days to find that there is a growing body of evidence that the traditional portrait of income inequality in America painted by the Mainstream Media and politicians speaking the language of class warfare is full of fundamental flaws.
The basic problem is the tendency of conventional widom proponents to look only at income. As The Heritage Foundation’s Paul Winfree argued in a study published by the think tank last year, the picture of rich and poor in America looks very different when viewed through the trifocal lenses of income, earnings and wealth:
“The average age of those in the bottom 20 percent of the earnings distribution (or bottom quintile) is 66.4 years, suggesting that many in this quintile are retired. Similarly, in the bottom quintile of income, the average age is 52.8 years, old enough to indicate that many are retired, which affects the quintile’s average income and hours worked per person.
“The average age of people in the bottom quintile of wealth, however, is 39.5 years, an age when individuals are typically still acquiring assets. Further supporting the argument that age is an important contributor to inequality, the average ages of those in the top quintiles of earnings, income, and wealth are 45.3, 48, and 56.3, respectively. Average earnings and income tend to peak while people are in their forties, while people accumulate wealth throughout their lives.”
Winfree points to this chart as evidence of the importance of measuring all three factors, plus a fourth, which is the amount of mobility people have in moving up and down the ladder of economic well-being:
Note that all three measures are on the increase moving from the bottom quintile (20 percent) to the higher quintiles, while the measures slope downward on the highest quintile. The average age in the first quintile is the lowest, while the average age in the highest quintile is the oldest. That is a very different and much more complex portrait than is typically conveyed by Mainstream Media journalists or class warfare politicos.
And another way at looking at these issues is how much time is required to make a living. A second study published by Heritage, this one authored by James Sherk, looks at an analysis by a couple of economists, Mark Aquiar of the Boston Federal Reserve, and Erik Hurst of the University of Chicago, found that Americans have a lot more time to recreate and pursue the activities of family life:
“As Americans have had to spend less time working to earn a living, they have had more time to spend doing things they enjoy. Aguiar and Hurst also examined changes in the amount of time Americans spend at leisure. Looking at the amount of time Americans spend on entertainment, social activities, relaxing, napping, eating, and playing with children, Americans enjoy about 7 hours per week more leisure than in 1965.”
Wouldn’t it be great if politicians took a broader, more informed view of these issues before pronouncing on them on the campaign trail? And wouldn’t it be wonderful if journalists covering the politicians took the time to educate themselves more fully on these issues so they could start asking tougher questions of the politicians?
Politics
Democrats
GOP
Conservatives
Liberals
Congress
McCain
Obama
