Data show U.S. families now better off financially

AMONG some sectors of the political left, a popular economic narrative is one of doom and gloom in which a rapacious upper class is seizing more and more of the nation’s income straight from the pockets of the middle class. But this is undermined by long-term trends, as Mark J. Perry, a scholar at the American Enterprise Institute and a professor of economics and finance at the University of Michigan, makes clear in a recent blog post.

Put simply, the typical household is far better off today than its peers in decades past.

Perry notes the annual median income of families headed by married couples with both spouses working was $34,800 in 1949 (and that’s in inflationadjusted 2017 dollars). According to newly released Census data, that figure reached “an all-time high” of $111,000 in 2017.

Since 1949, he points out, the real inflation-adjusted median income for married couples with two earners has more than tripled. Since 1963 it has doubled.

But isn’t the middle class disappearing? Yes, Perry writes, but not in the way some activists think.

The percentage of U.S. households with middleclass income of $35,000 to $100,000 (in constant 2017 dollars) has declined from 53.8 percent in 1967 to 41.3 percent in 2017. But the share of households with income greater than $100,000 has surged from just 9 percent in 1967 to 29.2 percent in 2017. The share with incomes below $35,000 has also declined significantly over that same time period, falling from 37.2 percent to 29.5 percent.

“Yes, the ‘middle-class is disappearing’ as we hear all the time,” Perry writes, “but it’s because middleincome households in the U.S. are gradually moving up to higher income groups, and not down into lowerincome groups.”

Data on household income even understates the true gain due to changing demographics. Census figures show that “the average size of U.S. households has been falling steadily for the last 70 years (or more),” Perry writes. In 1947, the average U.S. household had 3.56 persons on average. In 2017, that figure had declined to 2.54 persons.

This means that not only is average household income steadily increasing over time, but the average income per household member is increasing by an even greater amount. Since 1975, median household income has increased 25 percent. But when you adjust for average household size, the increase surges to 45 percent.

And, in many important ways, citizens get more bang for their buck today. Perry points out that “the cost of most manufactured goods and many services including clothing, footwear, appliances, electronics, TVs, household furnishings, sporting goods, airline travel, telephone service, computers, and automobiles have become cheaper and more affordable over time …”

As a result, the increase in real household income experienced since 1975 “translates into a much higher standard of living for the average American today compared to a generation ago.”

There are good reasons to look back at the past with nostalgia, but it’s a mistake to act as though prior generations enjoyed greater widespread economic prosperity than today’s families. And it’s an even bigger mistake to base political policies on that false assumption.