Sunday, April 17, 2016

The Middle Class is Shrinking - Hooray!

The discussions in the media about how poor off the middle class is now than it was before typically ignore a variety of factors that imply the opposite conclusion.

One common media "shocker" is that the middle class has shrunk, i.e., that the percentage of households in the middle class has declined.  Here is a snippet from that suggests that you cannot trust the media's statistics.
The Financial Times has a diagram showing that less than 50% of Americans are now viewed as “middle income”. Elsewhere I’ve pointed out that almost 90% of Americans self-identify as middle class, so these stories are highly misleading. Here I’d like to point to another problem with the analysis:

Screen Shot 2016-04-12 at 8.20.55 PM

Do you see the problem? The main reason that the middle income group has shrunk is that more and more Americans have incomes above the (arbitrary) cut-off point, and fewer and fewer are either “middle income” or poor.

The middle class is shrinking because we are becoming better off.

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