September 20 2011

The Myth of Middle-Class Stagnation, Redux

Libby Jacobson

Last month, I wrote about the popular notion that middle class’s share of the economic pie is shrinking (recap: it isn’t). Just last week, Steve Conover at The American tackled the same issue, arguing that the way we define “middle class” makes a huge difference:

First, let’s say a poker dealer deals two five-card hands face down in front of her, looks at them, then flips the middle-ranking card face up in each hand: the seven of spades and the seven of clubs, respectively. Do I now have enough information to conclude that both hands have identical value in a poker game? Of course not; I need to see all ten cards, not just two.

Conover’s research compared the growth rates of all US households from 2000-2007 with the growth rates for the middle 20%, 40%, 60%, and 80& of households, as well as the top 20%, 10%, and 5% of households. His conclusion? While the top 5% of households actually saw negative income growth, the middle class’s growth in income matched or even surpassed the average rate of household income growth.

Although the recession/recovery during that period resulted in unimpressive aggregate income growth, the observations in the chart above nonetheless contradict conventional wisdom because three of the four chosen definitions of “middle class” outperformed the overall economy. In other words, the middle class got at least its fair share of overall growth, and arguably more. Moreover, all four versions of “middle class” outperformed every definition of “rich”; in short, the gap between the rich and the middle class got smaller, not larger.

In an ideal world, research like this would raise questions as to the value of government programs for constituents who haven’t demonstrated any real need (student loans, government retirement programs, Obamacare, the list goes on). But this is politics, so don’t expect the class warfare rhetoric to end anytime soon.

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