Two pieces have come to my attention suggesting that it is. The first makes a claim that on first glance seems to be correct but is incorporated in the type of thinking that marks Tyler Cowen’s Great Stagnation thesis and the general conversation. The second, I think, simply fails to live up to its billing.

The first is this paper by Burkhauser, et al. The thrust of the paper seems to be that once you account for tax changes, transfer payment and health care premiums there has been more growth in incomes generally and median income in particular.

This more or less matches my reading of the data. The critique that I think some us are making is that

  1. The taxes and transfers were funded in large part by increases in the Federal debt. Now, there is much more to be said about this. In particular are we simply talking about a case where the dollar as reserve currency has made wage growth more difficult and debt expansion easier and thus this is simply a natural and “appropriate” response. In any case, however, there is the recognition that market incomes are not growing.
  2. The second is that health care is largely a waste of resources and so compensation in the form of health care doesn’t represent a real rise in the standard of living.

We can debate either of those points, but they do not go unrecognized by those concerned with a Great Stagnation.

The second is this piece in The American which purports to dispel, “The Myth of Middle Class Stagnation.” Now, the author, Steve Conover, can be forgiven for displaying a bit of showmanship in an effort to draw attention to his work. As regular readers know, I have not been immune to such temptations.

Still, the case he does make is not the case he says that he is making, even in the body of the text. For example, he writes as if this is his key point:

How could the same official database—the March Supplement to the Current Population Survey—lead us to the following two, seemingly polar-opposite, conclusions:

(a) median household income “flatlined,” underperforming the overall economy; and

(b) middle-class income growth outperformed that for the overall economy as well as that for the rich.

Although it seems impossible, both statements are true. The key lies in the difference between the “median household” versus the “middle class.” The median household is a single theoretical household exactly in the middle of the entire income-ranked list of U.S. households. Conversely, the “middle class” has no official definition, but it is certainly tens of millions of households in size and presumably centered around the median household

Conover is focusing on the period from 2000 – 2007 and so that’s the data we’ll look at. However, by any standard I can see the results for the median are not misleading as to what the “middle” class experienced.

To be more specific the Conover has a problem with conclusions that might be drawn from this chart.

Steve Conover RMHI

And, suggests that the median is too narrow a measure of the middle class. However, it looks to me that the median actually indicative of the entire distribution.

Conover points us to this table. But I think this contains just about all that data and more.

image

The issue is based on the census data there was stagnation all up and down the income distribution.

Take the 95 percentile for example. A household at the 95th percentile earned 174,850 in 2000 and 177,000 in 2007. Thus even for the 95th percentile there has been only about 1% growth over the period. Take a step one year back to 1999 and even that 1% disappears.

Now, that is slightly better than the small drop the the median household sustained but not by much. We get similar results looking at the data by quintiles.

Conover does a bit of manipulation seemingly centering around controlling for how much work the household performed. He divides through by FTE (Full Time Equivalents). That seems to be wholly beside the point, as lack of strong job growth is commonly cited as the cause of income stagnation. But, whatever. The principle results don’t change. Here is the chart.

Steve Conover Growth Rates

The growth rate for all households per FTE is 0.2% while the growth rate for the top 5% looks to be –0.7%. Combing that with the data above my preliminary conclusion would be that from 2000 – 2007 the rich had the opportunity to work for less, while the poorest lost the opportunity to work at all.

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