Here’s the headline: “The American middle class loses ground nationally.” And Hillary and Trump couldn’t wait to get their hands on that one. Hillary kept saying something vague about reining in Wall Street, El Shlump-o promised to “bring all the jobs back.” But there’s only one little problem, namely, the way in which Pew defines middle class says a lot more about their number-crunching methodology than what the crunching really shows. And the purpose of this Chapter will be to cast doubt on the way in which data has been used to promote the idea that the middle class is falling further and further behind.
This middle-class collapse argument used to be monopolized by the Left and found its most public expression in Thomas Piketty’s book, Capital, which then was lionized by Nobel prize-winner, Paul Krugman (he called the book a ‘masterly diagnosis’ and Krugman rarely pats anyone on the back other than himself) and then became a political campaign slogan for Senator Liz Warren who rode the ‘income gap’ train right up to an office on Capitol Hill.
But all of a sudden what had been a liberal response to the clamor over the stratospheric salaries of the one percent become a defining battle cry to energize the lumpen at Trump rallies because nothing sold better at his Klan meetings than the idea that the middle class was getting screwed. After all, isn’t that what ‘make America great again’ was supposed to mean — stop getting screwed?
But I have a little problem with this narrative because when I look at the numbers used to determine just how ‘good’ or ‘bad’ things really are, they don’t add up. If the middle class is falling ‘behind,’ then this should be reflected in what people spend to maintain their life-style from year to year. In fact, according to the U.S.Bureau of Economic Analysis, which happens to be part of the Commerce Department, consumer spending since the recovery started in 2009 has gone up every quarter and between 2010 and 2015 increased in aggregate by $993 billion per quarter to $11,383. That ain’t chopped liver baby, that’s an increase of nearly 15%. Meanwhile, while consumers are spending more than 40 billion each year, consumer debt, according to the New York Fed, has been basically unchanged since 2010.
So if the middle class is falling behind, if their income is continuing to fall, how is it that they are spending more money on whatever crap they are buying without going into greater debt? I don’t have an answer to that question but I don’t notice it being asked by anyone else. And what I said above about casting doubt on the way in which data is being used to promote the disappearing middle class thesis is exemplified by the lack of an answer to the question I just asked.
Let me give you another example. Pew Research has issued a report in a series of reports which claim to prove that the economic fortunes of the middle class are heading South. The report, “America’s shrinking middle class,” uses data from the Census Bureau’s Metropolitan Statistical Area (MSA) data bank which, take it from me, is about as good and comprehensive a data set as you’ll find for anything you want to know about anything at all. And the very first chunk of data presented in the report is a list of the ten MSAs that gained or lost in economic status since 2004. The number one MSA that registered the greatest gain, (defined as the share of upper-income adults minus the share of lower-income adults, or vice-versa) was Odessa TX, with a net increase in upper-income adult residents of 26 percent. The MSA which registered the greatest loss of upper-income versus lower-income adults was Springfield, OH, which lost 16%.
There’s only one little problem with the way in which Pew presented the data however, because we have no idea how many people are represented on either list, which is the only real way to determine whether this list is representative of anything at all. And in fact, if you take the trouble to look up the population of these 20 MSAs, you will discover that the total population of the 10 MSAs that lost the largest number of high-income residents (6,237,330) is almost twice as high as the total population of the 10 MSAs that gained the largest number of high-income folks (3,432,867). Now with numbers like that, how could anyone doubt that, in general, losses of income will exceed gains of income in just about any place that we look?
I’ll tell you how we can doubt it. It turns out that more than two-thirds of the entire population of all ten losing MSAs comes from one MSA alone, which happens to be Detroit. This one city and its environs is such an outlier in respect to virtually every demographic measurement of any kind that to lump it into a list that is going to be used to build a comparative analysis between two different geographic areas is to build an analysis that has no relationship to reality at all. In fact, if we take the average size of the nine other losing MSAs, we end up with a total population for the ten worst MSAs of 2,156,354, which is almost 40% less than the total population of the ten high-income MSAs.
Now I’m not accusing Pew of trying to fudge the numbers in their report. What I am saying is that if you want to make people believe that the last ten years have seen a marked shift downward for the middle class, looking at this data by analyzing MSA total population doesn’t prove that argument at all. But Pew didn’t want you to know that of the people living in the most well-off and least well-off MSAs, nearly two-thirds of them were living in communities that were better off, not worse. Because if you knew that, then the ‘disappearing’ middle class narrative might begin to disappear as well.