June 13, 2007


'Greatly Exaggerated' Income-Gap Claims (David Wessel, 6/12/07, WSJ: Washington Wire)

An economist long allied with centrist Democrats is challenging the now-conventional wisdom among many Democrats that American middle-class workers aren’t getting their fair share of the prosperity generated by rising productivity. Income inequality, he says, is overstated, and the conventional wisdom might discourage Democrats from pursuing policies that promote productivity improvements that are crucial to improving the fortunes of the vast American middle class. [...]

In his 16-page essay, Rose challenges the interpretation of government data used by other scholars to make the case that recent productivity gains have gone mainly to the best-off Americans. Rose writes that “much of the difference in productivity growth and median income growth can be explained largely by demographic change” — the increase in single-person households, especially” — and rising nonwage benefits.

Democrats real argument is with the disintegration of marriage, which they fostered.

Fair to Middling in the Middle Class (Steven Pearlstein, May 30, 2007, Washington Post)

Rose is not your standard-issue conservative market apologist -- far from it. He left medical school to get his PhD in economics, then alternated between teaching and community organizing. He served on the Democratic staff of the Joint Economic Committee and in the economics shop of the Clinton Labor Department. Along the way, he's worked for a couple of think tanks and blue-ribbon commissions.

Back in 1978, Rose and a colleague decided to try to reduce the existing economic topography into a single chart, which they called "Social Stratification in the United States." The resulting illustration was an ingenious synthesis of data on income, wealth, employment and family structure that was meant to highlight what was then a growing and largely unrecognized economic divide. With economists like Barry Bluestone and Bennett Harrison, in fact, Rose was something of a pioneer in the inequality debate.

But while the latest update, recently published by New Press, surely doesn't gloss over the gap between whites and blacks, skilled and unskilled, married and singles, it also challenges the sky-is-falling rhetoric of the Democratic left.

For example, it is often reported that the median household income in the United States is $44,500. Of course, that takes in households of varying size, from singles to the Brady Bunch. It also includes households headed by workers in the prime of their working years (29 to 59), as well as those just beginning or ending their careers, when earnings tend to be lower. So, to get a truer picture of economic well-being, Rose adjusts the data for household size and excludes those headed by people younger than 29 or older than 59. And when he does, it turns out that the median income for the "typical American family" jumps to $63,000, which in most parts of the country buys a pretty comfortable middle-class lifestyle.

This doesn't mean the middle class isn't shrinking. In fact, from 1979 to 2004, Rose calculates, the percentage of households in the "middle class" category -- those with incomes of $30,000 to $90,000 -- fell to 39 from 47 percent. But it would be hard to describe that as bad news when the proportion of well-off households -- those with incomes of more than $90,000 -- rose by nearly nine percentage points. During the same time frame, the percentage of households that were poor or near-poor remained about the same.

One of the favorite liberal story lines is that the only way middle class families have been able to maintain their standard of living is by forcing mom to work more hours. But that, too, turns out to be an exaggeration. By looking just at married couples at various points in the income ladder, Rose found that for all but the poorest households, inflation-adjusted income was higher in 2004 than in 1979 even after factoring out any increase in spousal work hours.

It is also a myth that the Great American Jobs Machine is producing mostly lousy, low-paying service jobs. Rose simplifies the government data by putting all jobs in three categories: "elite" jobs, encompassing managers and professionals; "good jobs," such as those held by supervisors, skilled blue-collar workers, craft workers, police, firefighters and clerical workers; and "less skilled" jobs, such as those held by unskilled machine operators, laborers, sales clerks and waiters. Looking at it that way, it turns out that the number of lousy, low-skilled jobs has been on a long, steady decline since 1979, while the number of "elite" jobs has been growing steadily. The number of "good" jobs has declined marginally as skilled office work has replaced skilled factory work.

Posted by Orrin Judd at June 13, 2007 9:12 AM
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