A recent comment by an anonymous contributer on an earlier thread asserted that there was no middle class in the USA. "There are only two ways to be in the US. Rich or dirt poor." LTG responded that the middle class is being "sorely squeezed and impoverished." I think LTG was mainly referring to the increasing cost of living and stagnant incomes of the middle income brackets here in the US. He refereed to things like the cost of housing and education (which are especially problematic in overpopulated and badly governed California). While he exaggerates (rather dramatically) the amount of debt when he says it takes $100,000 of debt to get through state university, the average amount of debt for college graduates is about $20,000 which is bad enough! Of course, $100,000 is closer to what the debt levels are for professional school graduates - and this may be what LTG was thinking of. This all got me thinking about what the situation with income disparities is in the US. It is fairly clear to anyone who observes US society these days that income disparities are getting worse. But there are several ways for income disparity to get worse and which way it's getting worse matters.
Tuesday, May 19, 2009
Let's divide the country into two groups: Rich and everyone else. And let's say that both groups can either see their incomes rise, stagnate or drop. There are 9 different trends in socioeconomic changes in this model. Here is my first attempt at a preference ordering of these 9 combinations (rich first, everyone else second):
1) Rise, Rise 2) Stagnate, Rise 3) Rise, Stagnate 4) Stagnate, Stagnate 5) Drop, Rise 6) Drop, Stagnate 7) Rise, Drop 8) Stagnate, Drop 9) Drop, Drop
You'll notice that I have an overall preference for pareto improving scenarios (scenarios in which someone is benefitting without anyone being worse off). There are some on the left who have a punitive preference ordering in which they actually prefer to see the rich have dropping incomes for no other reason than to see the rich punished. This preference ordering is mocked by the Ten Years After song, "I'd Love to Change the World" in which Alvin Lee sings, "Tax the rich, feed the poor, 'til there are no rich no more." The point this guitar legend is trying to make is that this preference of course misses the point about income redistribution. The goal is not the destruction of wealth but the destruction of poverty.
So what are we seeing in the US? I found this on wikipedia. It shows the type of rising inequality we have in the US. In nominal terms we are either in a state of Rise, Stagnate or Rise, Rise depending on how much credibility you give the increases shown for the income groups at or below the median in the graph. In real terms however, and this is where LTG's points about the rising costs of education and housing come into play, we are probably in either Rise, Stagnate or Rise, drop - depending on how much faster you think costs of living are rising than nominal incomes.
Regardless of how you interpret these numbers, the situation for the middle classes is far from apocalyptic. Indeed, if you look at the graph linked above you'll notice that the people in the income bracket just above the median are doing rather well and they could arguably be called "middle class."
In the US, those income brackets above the median are rising reasonably quickly. Those at and below the median are either stagnant or rising extremely slowly. This is a problem. But, as I said in my comment earlier, it's not the end of the middle class. Neither is this close to the worst situation we could be facing.
Posted by Raised By Republicans at 9:45 AM