A question I frequently ask, only rarely receiving an answer is what kind of a country do we want to be? The graphic at the top of this page from an article by Juliana Kaplan and Madison Hoff at Business Insider on the American middle class illustrates why.
A good place to start the discussion is with the definition used by Pew Research for “middle income”:
Broadly, Pew Research Center defines middle-class households as making two-thirds to double America’s median income. That adds up to an income range of about $30,000 to $90,000 for single Americans in 2020 dollars. But there are other ways out there that the middle class could be defined, as seen in a Brookings analysis of 12 definitions — including Pew’s.
Here’s how the middle class has been faring in America.
A single American making $30,000 to roughly $90,000 every year is middle-income, according to Pew. A household of two would have to earn around $42,000 to $127,000 to qualify.
Now let’s return to the graphic at the top of the page. Here’s the story it tells as I see it. 50 years ago the United States was mostly middle income with a relatively small percentage upper income and a quarter of the people lower income. Over that fifty years the number of those in the upper income tier has grown substantially as has the number of people in the lower income tier while the middle income tier has shrunk considerably.
The way I sometimes describe it is that we’re becoming more like Mexico.
What kind of a country would I like it to be? I would like for the lower income tier to have shrunk, the middle income tier to have grown, and the upper income tier to have grown a little or even stayed the same. I’ve also expressed my belief on how to get there: reindustrialization and less immigration by individuals with few skills and little or no English.
The problem with statics is that they are fantasy. While 4% of households have become poorer, 7% have become richer. That graph is politically meaningful, but otherwise, it is worthless. The actual income levels are somewhat more useful.
If the 2021 poor have a higher standard-of-living than those in 1971, are the 4% better off? If so, would it be better to have 7% with a lower standard-of-living? If so, why?
It is possible that the 4% have a higher standard-of-living but that the remaining 50% have a lower standard-of-living because of the 7%. It is also possible that within the 50% the standard-of-living has changed in lower-, middle-, and upper-middle income levels.
Unfortunately, re-industrialization is a fantasy.
I think it would nice to have fewer in the bottom and more at the top. That would indicate a successful economy (and culture). Also, Tasty’s point is correct that to some extent these numbers arent that meaningful when done this way.
Steve
I was running a post through my mind; it would have been a polemic. But maybe less ambitious.
Tasty is absolutely correct about the statistic. And Steve is on the right path; a sort of rising tide bent.
But the point that I want to make is that it seems so obvious to me that “income inequality” is unavoidable, and not necessarily bad.
If you invest in a great stock/company what do you expect? A great return.
A good stock/company? A good return.
An average Stock; an average return.
A dog? A poor return.
With the obvious observation that people have different intellectual capacities, appeal to market desires, intuition, work ethics, perseverance etc etc, why in the world would we expect income equality; equality of returns to human capital?? It’s ludicrous. And yet it’s almost a matter of faith to left leaning people. And the proposed solutions are almost inevitably suboptimal. Even horribly counterproductive. See; The Great Society.
We of course don’t want a Charles Dickens world. But we don’t have one. Poor people are fed, have TV’s and cell phones. They fritter away resources on alcohol. Give me a break. We truly need a safety net for the mentally impaired, the disabled, and yes, even those who have decided to make poor personal choices – through every fault of their own.
But that’s a red herring. We spend money on green energy, student loan forgiveness, pool laden “inflation reduction acts” , health care maintenance and not insurance an on and on.
No, I don’t want a dystopian world. But we have gone off the rails thinking a night at the Ritz is owed everyone. And using government to do everything BUT provide for the “unfortunate.” It’s a scam. It’s going to break not only the moral character and cohesion of of the country, but the bank.
Pork laden, by the way.
I assume it was obvious, as society has become more complicated and advanced, the returns to people who can do is going to, in sympathy, advance. Unless the earth stands still, simplistic observations that income inequality is increasing are just, well, simplistic. Of course it does. One may not like trickle down, but a strong back ain’t what it used to be, and with stupid redistribution philosophies the cry of the day, there will be nothing to trickle down to those low on the totem pole. Look at what happened to charitable giving once government was viewed as the pigs tit.
Better: realize that everyone who advocates for more government to solve most of our problems also advocates for those who can control/influence government and will inevitably turn things in their favor. It’s an empirical reality. I pity the fools who cannot learn this lesson.
It’s attributed to Abe Lincoln. Who knows. “You cannot help the poor by harming the rich.” Yet, we still try.
To you governmentphiles. When are your philosophies going to bear fruits/
@Drew
I would agree with most of what you wrote, but here is the problem:
The “income inequality” problem is really an excessive wealth inequality problem, but with an excessive trade deficit, it cannot be avoided. In reality, there is no trade deficit. Government debt and financial instruments balance the trade.
(Without a gold standard, trade balances are additive. They do not reset at the end of the year.)
The country could be re-industrialized cleaner and safer, but it cannot be 100% clean and safe. Additionally, schools and neighborhoods cannot be built next to chemical plants and rail lines and expect to be 100% clean and safe.
So, this is the world we live in, and this is the world we have chosen. Maybe not you and I, but enough people. We refuse to manufacture a washing machine, and the Chinese refuse to accept Facebook accounts or Google searches. So, government debt and financial instruments must be manufactured to wash our clothes.
Those able to manufacture financial instruments get richer, but those who cannot do not really get poorer. The pie gets larger, and that increase was created by the rich. Therefore, their percentage gets larger while the poorer’s percentage stagnates.
It must be. There is no mathematical method to alter the situation. Financial balance sheets must be balanced. This does not mean that there are not bad actors, but it is how it must be.
I think it will take a major war to change.
Drew: It’s attributed to Abe Lincoln. Who knows. “You cannot help the poor by harming the rich.”
Not Lincoln. Nor something Lincoln was likely to have said. And it is directly contradicted by Lincoln and emancipation, which took property from the rich (slave owners) and gave it to the poor (enslaved).
The earliest known occurrence of the quote was in 1916 in a pamphlet by Rev. William J. H. Boetcker. I believe it was attributed to Lincoln by Ronald Reagan back in the 1980s. There is no evidence that Lincoln said it. It appears to be original to Rev. Boetcker.