Is the Middle Class Really Falling Behind?
From the hits, you would think it is a slam-dunk that the middle class is falling behind.
Are there any voices offering a counter narrative to what is taken as a blatantly obvious truth?
One can count on Cato to have a contrary opinion which is one of the reasons why I like to check their web page now and then to get a different spin on what is the "conventional wisdom" offered by the media.
I am not an economist nor play one in the movies but here is what I think are the key points from the Reynolds' article.
1. The White House Council of Economic Advisors used the average household income of the bottom 90% to define middle class. Reynolds' argues that this may not be a good measure of how the middle class is doing. If one uses that number, the middle class has been stuck since 1968 an assertion almost no one would make.
2. He argues that if one uses after-tax median income, the middle class is making progress. However, those gains have stalled from 2007 to 2013 with a slight pull back.
3. He also points out these measurements do not take into account wealth in tax-free savings accounts. I presume those are retirement accounts.
The key question is the definition of middle class.
Is the bottom 90% "the middle class?" Or is it a narrower slice of the population? Perhaps the 20th to 80th percentile?
And by what criteria? Average of annual income? Median of annual income? After-tax income? All assets (cash, investments, homes, cars, etc)?
I suspect one can cherry pick the criteria to get the result one wants. As my old primary care doctor used to say, liars figure and figures lie.