Monday, July 23, 2012

Comment To Leonhardt's New York Times Article On Middle Class Decline

My comment to David Leonhardt's misleading article, "A Closer Look at Middle-Class Decline" in The New York Times:
When you look at inflation adjusted US GDP per capita, there has been a continued growth from the 1870s on with occasional dips during recessions, which were surpassed during the following recoveries.

The recent recession set per capita GDP back to 2005 levels.

Using per family and per household income data is misleading as Leonhardt knows.

Family and household size are not constant over time. Anything that shrinks the size of the family or household, such as divorce, tendency for single and married adults to want their own place, and delayed marriage age will increase the number of families and households and shrink the income per family and household without any change in their economic well being.

Likewise, the tendency for women to work and be in two wage earner families means that there will be more marriages with two high earning spouses.

The household and family income data showing a decline in income is a product of social changes over the last 50 years. There are more divorces, more setting out on one's own, and more two high wage earner families.

It is not a reflection of the failure of the US economic engine and that engine does not need more government intervention to fix it.

The lower family and household numbers are a symptom of the success of the US, in that economic growth allows more people to live on their own, to seek divorce and not be dependent on their spouse and more people can be married to someone of either sex who earns a high income.
See the chart in my earlier post, "Per Capita Real GDP At 2005 Levels" which shows inflation adjusted per capita GDP from the 1950s until the recent recession.

Also see the following chart from VisualizingEconomics Blog, which shows inflation adjusted US per capita GDP since the 1870s.

Source: VisualizingEconomics

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