There is a report out over at the AEI Blog, it's a 57 page paper, if you want to download and read it. The basic premise is sure to outrage many on the left who piss and moan all day long about income inequality and the middle class being destroyed. Well, maybe it ain't as bad as some suggest.
snippet:
This grim picture is inaccurate for several reasons. First, most analyses of economic well-being rely almost exclusively on narrow income measures that do not reflect the resources available to the household for consumption. These measures ignore taxes and in-kind transfers such as food stamps and often rely on underreported measures of income. For example, the official measures, which ignore taxes, fail to capture the benefits of falling marginal tax rates or expanded tax credits. Second, official statistics account for inflation using a price index that is biased upward. This bias implies that official statistics significantly understate improvements in economic well-being over time. Finally, even improved income measures fail to capture important components of economic well-being such as consumed wealth, the ownership of durables such as houses or cars, or the insurance value of government programs. For example, consider the case of a retired couple who own their home outright and who live off of savings. Clearly, their income will not reflect their material well-being.
In this paper, we provide a more accurate assessment of how the material circumstances of the middle class and the poor have changed over the past three decades. We consider several different measures of material well-being. We examine how improved measures of income, which better reflect the resources families have to consume, have changed between 1980 and 2009 for the middle class and the poor, accounting for the overstatement of inflation in standard price indices. Similarly, we analyze patterns of family consumption, which our research suggests is a better indicator of economic well-being than family income. For both middle-class and poor families, we also examine independent indicators of well-being such as housing and car characteristics.
Our results show evidence of considerable improvement in material well-being for both the middle class and the poor over the past three decades. Median income and consumption both rose by more than 50 percent in real terms between 1980 and 2009. In addition, the middle 20 percent of the income distribution experienced noticeable improvements in housing characteristics: living units became bigger and much more likely to have air conditioning and other features. The quality of the cars these families own also improved considerably. Similarly, we find strong evidence of improvement in the material well-being of poor families. After incorporating taxes and noncash benefits and adjusting for bias in standard price indices, we show that the tenth percentile of the income distribution grew by 44 percent between 1980 and 2009. Even this measure, however, understates improvements at the bottom. The tenth percentile of the consumption distribution grew by 54 percent during this period. In addition, for those in the bottom income quintile, living units became bigger, and the fraction with any air conditioning doubled. The share of households with amenities such as a dishwasher or clothes dryer also rose noticeably.
AEI - Papers
snippet:
This grim picture is inaccurate for several reasons. First, most analyses of economic well-being rely almost exclusively on narrow income measures that do not reflect the resources available to the household for consumption. These measures ignore taxes and in-kind transfers such as food stamps and often rely on underreported measures of income. For example, the official measures, which ignore taxes, fail to capture the benefits of falling marginal tax rates or expanded tax credits. Second, official statistics account for inflation using a price index that is biased upward. This bias implies that official statistics significantly understate improvements in economic well-being over time. Finally, even improved income measures fail to capture important components of economic well-being such as consumed wealth, the ownership of durables such as houses or cars, or the insurance value of government programs. For example, consider the case of a retired couple who own their home outright and who live off of savings. Clearly, their income will not reflect their material well-being.
In this paper, we provide a more accurate assessment of how the material circumstances of the middle class and the poor have changed over the past three decades. We consider several different measures of material well-being. We examine how improved measures of income, which better reflect the resources families have to consume, have changed between 1980 and 2009 for the middle class and the poor, accounting for the overstatement of inflation in standard price indices. Similarly, we analyze patterns of family consumption, which our research suggests is a better indicator of economic well-being than family income. For both middle-class and poor families, we also examine independent indicators of well-being such as housing and car characteristics.
Our results show evidence of considerable improvement in material well-being for both the middle class and the poor over the past three decades. Median income and consumption both rose by more than 50 percent in real terms between 1980 and 2009. In addition, the middle 20 percent of the income distribution experienced noticeable improvements in housing characteristics: living units became bigger and much more likely to have air conditioning and other features. The quality of the cars these families own also improved considerably. Similarly, we find strong evidence of improvement in the material well-being of poor families. After incorporating taxes and noncash benefits and adjusting for bias in standard price indices, we show that the tenth percentile of the income distribution grew by 44 percent between 1980 and 2009. Even this measure, however, understates improvements at the bottom. The tenth percentile of the consumption distribution grew by 54 percent during this period. In addition, for those in the bottom income quintile, living units became bigger, and the fraction with any air conditioning doubled. The share of households with amenities such as a dishwasher or clothes dryer also rose noticeably.
AEI - Papers
