(cross-posted at ProgressiveFix.com and FrumForum)
*added note: Mike informs me that I missed the joke in his title, a Scott-Pilgrim-Versus-The-World nod. I like to think I'm clever and witty, but clearly my lack of sleep from parenting a newborn has left me not so quick on the uptake...)
Mike returned from vacation and promptly put up a post criticizing my take-down of Edward Luce's horrible Financial Times piece on "the crisis of the middle class". It's become apparent to me over the past few years that I've been in D.C. that you can't refute a specific empirical question about the situation of the poor or middle class (e.g., is it in crisis? as in much worse off than in the past?) without being attacked on much broader grounds than you staked out and being called an opponent of these groups or an insensitive jerk. I actually don't disagree with much that Mike writes "against" my "views".
What I do disagree with is the contention that the middle class is in crisis. And I think that it's bad to believe (and assert for mass audiences) that that's true because it hurts consumer sentiment, prolonging high unemployment, and diverts attention from the truly disadvantaged who really are in crisis. Mike can say that that pits me against the middle class (his post was titled, "Scott Winship versus the Middle Class"), but then let me ask Mike and others who would disagree with me a simple question: Why do you think Americans are deluded about their economic conditions, since in June, 7 in 10 American adults said their "current household financial situation" is better than "most" Americans' (Q.25, disclosure: the poll was commissioned by my old employer)? Why are you against the middle class?
Mike says that when I say some problem affects a tiny fraction of the population, that's like a hit man saying that he doesn't kill that many people as a fraction of the population--the "Marty Blank gambit" as he calls it. But look, that's not an apt analogy. If I were saying that we shouldn't give a rat's ass about the tiny share of the population that experiences a bankruptcy, that would be using the Marty Blank gambit. I never said that, and I wouldn't. But if you convince everyone in the middle class that they are just one bad break away from bankruptcy, then you shouldn't be surprised when they don't spend their money and the recovery continues to stall. It's important to convey the facts correctly. Mike is stalling the recovery! Why are you against the middle class, Mike??
Finally, I think the best chart I've seen that puts all of this into perspective (which I made myself) is the following showing health insurance trends:
Anyone who wants the data can email me at email@example.com.
And contrary to Mike's assertion, the fraction of under-insured has not increased. You can read the conclusion of my dissertation if you want to see what the facts show.I'll keep being concerned about the people who are in crisis, but I'm not going to buy in to the conventional wisdom among progressives that the middle class is in crisis.
Kevin notes my last post and then wonders, “What I'm more curious about is what this looked like in the 50s, 60s, and 70s. Was optimism about our kids' futures substantially higher then?”
The results I showed were mostly from a fantastic database of polling questions called “Polling the Nations”, which I recommend to everyone (though it’s not free, it’s not that expensive relative to other resources). That’s why they only start in the mid-80s, and there’s a gap between the mid-00s and the two or three polls I cite from this year and last (my look at this question was a few years ago).
Anyway, Kevin’s query reminded me that there’s another compilation of polling questions that is also amazing—the book, What’s Wrong, by public opinion giants Everett Carll Ladd and Karlyn Bowman. And it’s a free pdf.
So, let me add some results to those I posted before. I’m focusing, to the extent possible, on questions that ask parents about their own children. When people are asked about “kids today” instead of their own kids, they are much more likely to be Debbie Downers—a phenomenon that journalist David Whitman dubbed the “I’m OK, They’re Not” syndrome, which is much more general than questions about children’s future living standards. Also, let’s be careful to distinguish between levels and trends.
First, let’s look at the confidence parents have that life for their children will be better.
· Roper Starch Worldwide (1973)—26% were very confident, 36% only fairly confident, and 30% not at all confident
· Roper Starch Worldwide (1974)—25% very confident vs. 41% only fairly vs. 28% not at all
· Roper Starch Worldwide (1975)—23% vs. 39% vs. 32%
· Roper Starch Worldwide (1976)—31% vs. 39% vs. 25%
· Roper Starch Worldwide (1979)—25% vs. 41% vs. 29%
· Roper Starch Worldwide (1982)—20% vs. 44% vs. 32%
· Roper Starch Worldwide (1983)—24% vs. 38% vs. 33%
· Roper Starch Worldwide (1988)—20% vs. 45% vs. 28%
· Roper Starch Worldwide (1992)—17% vs. 46% vs. 31%
· Roper Starch Worldwide (1995)—17% vs. 44% vs. 34%
· Washington Post/Kaiser Family Foundation/Harvard (2000)—46% said they were confident that life for their children will be better than it has been for them, vs. 48% saying no
That last one shouldn’t be directly compared with the others—not only did it only offer a yes-or-no response, it was also asked of all adults. More on that in a sec. What we see from the Roper surveys is a fairly steady decline in solid confidence, but not much of a trend in pessimism. The main dynamic is that parents have moved from being “very” confident to “only fairly” confident. It looks like there may have been a small decline in optimism from the late 1980s through the mid-1990s. But it’s interesting that from 1973 to 1995, between 61% and 70% were at least fairly confident that their kids would be better off.
The Washington Post polling result provides a nice opportunity to look at the I’m OK, They’re Not pattern, since all adults were asked the question, even though fewer than half had children under 18 in their household. In a poll my employer* commissioned from Greenberg Quinlan Rosner Research and Public Opinion Strategies, we asked parents about their expectations for their children’s living standards. We asked people who had no children under 18 at home about “kids today”. Pooling everyone together, 47% of adults said kids would have higher living standards. But the parents were much more optimistic about their own children, with 62 percent saying their kids’ living standards would improve. So the Washington Post result might have been right in the range of the Roper results had the question been asked only of parents.
Other polls have asked whether parents think their children will be better off when they are the same age:
· ABC News/Washington Post (1981)—47% said better off vs. 43% not better off (non-parents told to imagine they had children)
· ABC News/Washington Post (1982)—43% vs. 41%
· ABC News/Washington Post (1983)—44% vs. 45%
· ABC News/Washington Post (1985)—62% vs. 29%
· ABC News/Washington Post (1986)—74% vs. 19%
· ABC News/Washington Post (1991)—66% vs. 25%
· Newsweek (1994)—47% vs. 39% worse off (question uses “better off” rather than “better off financially”, asked only of adults with children under 18 in the household)
· ABC News/Washington Post (1995)—54% vs. 39%
· ABC News/Washington Post (1996)—52% vs. 39%
· Pew Research Center (1996)—51% said their children will be better off than them when they grow up (question uses “better off” rather than “better off financially”, asked only of adults with children under 18 in the household)
· Pew Research Center (1997)—51%
· Pew Research Center (1999)—67%
So optimism declined between the mid-1980s and early-1990s, recovered starting in the mid-1990s, and generally remained above early 1980s levels (when the economy was in recession). Except for 1983 majorities or pluralities hold the optimistic position.
Another series of polls asked parents whether their children will have a better life than they have had. They also indicate a decline in optimism from the late 1980s to the early 1990s and a subsequent rebound:
· BusinessWeek (1989)—59% said their children will have a better life than they had (and 25% said about as good)
· BusinessWeek (1992)—34% said their children will have a better life than they had (and 33% said about as good)
· BusinessWeek (1995)—46% said their children will have a better life than they have had (and 27% said about as good)
· BusinessWeek (1996)—50% expected their children would have a better life than they have had (and 26% said about as good)
· Harris Poll (2002)—41% expected children will have a better life than they have had (and 29% said about as good)
Strong majorities thought the children would have as good a life as them or better, and while more people thought their kids would have a better life than thought they would have a worse life, optimism failed to win a majority of parents in a number of years. The trends appear to reveal a decline in optimism from the mid- or late-1990s to the early 2000s. Considering all of these trends thus far, a fairly clear cyclical pattern is emerging, as Kevin observed in his post.
The early 2000s dip also shows up in Harris Poll questions asking whether parents feel good about their children’s future:
· Harris Poll (1997)—48% felt good about their children’s future
· Harris Poll (1998)—65%
· Harris Poll (1999)—60%
· Harris Poll (2000)—63% \
· Harris Poll (2001)—56%
· Harris Poll (2002)—59%
· Harris Poll (2003)—59%
· Harris Poll (2004)—63%
The dip is revealed to be related to the 2001 recession, as optimism rebounded thereafter, again following the business cycle. Again, solid majorities generally take the optimistic position.
The longest time series available asks parents whether their children’s standard of living will be higher than theirs. Unfortunately, it appears that most of these polls ask the question of adults without children too:
· Cambridge Reports/Research International (1989)—52% said their children’s standard of living will be higher vs. 12% lower
· Cambridge Reports/Research International (1992)—47% vs. 15%
· Cambridge Reports/Research International (1993)—49% vs. 17% lower
· Cambridge Reports/Research International (1994)—43% vs. 22% lower
· General Social Survey (1994)—45% said their children’s standard of living will be better vs. 20% worse
· Cambridge Reports/Research International (1995)—46% vs. 17% lower
· General Social Survey (1996)—47%
· General Social Survey (1998)—55%
· General Social Survey (2000)—59%
· General Social Survey (2002)—61%
· General Social Survey (2004)—53%
· General Social Survey (2006)—57%
· General Social Survey (2008)—53%
· Economic Mobility Project (2009)—47% said their children’s standard of living will be better (62% among those with kids under 18)
· Pew Research Center (2010)—45% said their children’s standard of living will be better vs. 26% worse
Once again the cyclical pattern emerges, though it is not quite as clear in the mid-2000s. Optimism is far more prevalent than pessimism in every year, reaching majorities from the late 1990s until the current recession. Even today, optimism is no lower than in the mid-1990s, and the EMP poll implies that when looking just at parents with children under 18 living at home, solid majorities continue to believe their kids will have a higher living standard.
Taken together, there is very little evidence that a supposed stagnation in living standards is reflected in Americans’ concerns about how their children will do. The survey patterns show that parental optimism follows a cyclical pattern, generally is more prevalent than pessimism, and did not decline over time. In fact, we can compare beliefs in 1946 to 1997 for one question—whether “opportunities to succeed” (1946) or the “chance of succeeding” (1997) will be higher or lower than a same-sex parent’s has been:
· Roper Starch Worldwide (1946)—64% of men said their sons’ opportunities to succeed will be better than theirs (vs. 13% worse); 61% of women said their daughters’ opportunities to succeed will be better than theirs (vs. 20% worse)
· Princeton Religion Research Center (1997)—62% of men said their sons will have a better chance of succeeding than they did (vs. 21% worse); 85% of women said their daughters will have a better chance (vs. 7% worse)
As one would expect, mothers in 1946 believed their daughters would have more opportunity, but surprisingly that view was even more prominent in 1997. And among men, there was very little change. Notably, unemployment was slightly lower in 1946 than in 1997, so this isn’t a matter of apples to oranges.
Or even more strikingly, consider two polls asking the following question: Do you think your children’s opportunities to succeed will be better than, or not as good as, those you have? (If no children:) Assume that you did have children. · Roper Starch Worldwide (1939)—61% better vs. 20% not as good vs. 10% same (question asked about opportunities of sons compared with fathers)
· Roper Starch Worldwide (1990)—61% better vs. 21% not as good vs. 12% same
While the 1939 question only refers to males, given the relatively low labor force participation of women at the time, it is perhaps still comparable to the 1990 question. However, the unemployment rate was 17.2% in 1939 compared with 5.6% in 1990. Still, the two are remarkably close.
OK, can we put this question to bed? Americans believe their children will do as well or better than they have done, and this belief hasn’t weakened over time. Now let’s get back to arguing about objective living standards rather than subjective fears about them.
* For the love of God, nothing you’ll ever read on my blog has anything to do with my job—there are people at Pew whose ulcers flare at employees’ side hustles like mine.
(Cross-posted at ProgressiveFix and Frum Forum)
Everyone’s approvingly linking to this Edward Luce piece on “the crisis of middle-class America”.I want to set myself on fire.
Seriously, it’s discouraging to see so many people who should know better (because they’ve argued these points with me before) promoting this article.I can’t think of another piece in the doomsday genre—and there are many—that gets it so consistently wrong. I'll stipulate that none of the criticisms below are intended to minimize the struggles that many people are facing. But it's important to get this stuff right. Let me dive in, with Luce’s words in italics and my responses following:
Yet somehow things don’t feel so good any more. Last year the bank tried to repossess the Freemans’ home even though they were only three months in arrears.
The share of mortgages either in foreclosure or 3 or more months delinquent is 11.4 percent, which, because 30 percent of homeowners have paid off their mortgage, translates into 8 percent of homes.So the Freemans’ situation is typical of about one in twelve homeowners, or just over 5 percent of households (since one-third rent).*Their son, Andy, was recently knocked off his mother’s health insurance and only painfully reinstated for a large fee.
Luce is arguing that there’s a new crisis facing the current generation.About 30 percent of those age 18 to 24 were uninsured in 2008 when the National Health Interview Survey contacted them.I don’t have trends for that age group, but the share of Americans under age 65 without health insurance coverage was 14.7 percent in 2008, up from….14.5 percent in 1984.
And, much like the boarded-up houses that signal America’s epidemic of foreclosures, the drug dealings and shootings that were once remote from their neighbourhood are edging ever closer, a block at a time.
Well, the violent crime rate in 2008 was 19.3 per 1,000 people age 12 and up, down from 27.4 in 2000 and 45.2 in 1985.
Once upon a time this was called the American Dream. Nowadays it might be called America’s Fitful Reverie. Indeed, Mark spends large monthly sums renting a machine to treat his sleep apnea, which gives him insomnia. “If we lost our jobs, we would have about three weeks of savings to draw on before we hit the bone,” says Mark, who is sitting on his patio keeping an eye on the street and swigging from a bottle of Miller Lite. “We work day and night and try to save for our retirement. But we are never more than a pay check or two from the streets.”
The key question is, again, Is this worse than in the past?The risk of a large drop in household income has risen modestly, but people experiencing a drop end up much better off than in the past.For example, the risk of a 25 percent drop in income over 2 years has risen from 7 percent among married couples in the late 1960s to 14 percent in the mid-2000s (based on my computations from Panel Study of Income Dynamics data).But if you look at the average income of married-couple families after their 25 percent drop, it rose from $40,000 to $63,000 (in constant 2009 dollars).
Solid Democratic voters, the Freemans are evidently phlegmatic in their outlook. The visitor’s gaze is drawn to their fridge door, which is festooned with humorous magnets. One says: “I am sorry I missed Church, I was busy practicing witchcraft and becoming a lesbian.” Another says: “I would tell you to go to Hell but I work there and I don’t want to see you every day.” A third, “Jesus loves you but I think you’re an asshole.” Mark chuckles: “Laughter is the best medicine.”
Hmmm….just a typical American household…..
The slow economic strangulation of the Freemans and millions of other middle-class Americans started long before the Great Recession, which merely exacerbated the “personal recession” that ordinary Americans had been suffering for years. Dubbed “median wage stagnation” by economists, the annual incomes of the bottom 90 per cent of US families have been essentially flat since 1973 – having risen by only 10 per cent in real terms over the past 37 years. That means most Americans have been treading water for more than a generation. Over the same period the incomes of the top 1 per cent have tripled. In 1973, chief executives were on average paid 26 times the median income. Now the multiple is above 300.
Adjusting for household size and using the PCE deflator to adjust for inflation, median household income in the Current Population Survey rose from $29,800 in 1973 to $40,500 in 2008 (in 2009 dollars, again based on my compuatations).Factoring in employer and government noncash benefits would show even more impressive growth.In the last expansion, which started in January 2002 and ended in December 2007, the median US household income dropped by $2,000 – the first ever instance where most Americans were worse off at the end of a cycle than at the start.
This is entirely a function of changes in the population composition (more Latinos) and in the share of employee compensation going to health insurance and retirement plans.
Worse is that the long era of stagnating incomes has been accompanied by something profoundly un-American: declining income mobility.
Nope.The evidence is ambiguous, but the best studies imply that intergenerational economic mobility hasn’t changed that much in the past few decades.Intra-generational earnings mobility has increased since the 1950s, though it has declined among men.
Alexis de Tocqueville, the great French chronicler of early America, was once misquoted as having said: “America is the best country in the world to be poor.” That is no longer the case. Nowadays in America, you have a smaller chance of swapping your lower income bracket for a higher one than in almost any other developed economy – even Britain on some measures. To invert the classic Horatio Alger stories, in today’s America if you are born in rags, you are likelier to stay in rags than in almost any corner of old Europe.
Tim Smeeding’s research based on the Luxembourg Income Study shows that in general Americans have higher incomes than their European counterparts as long as they are in the top 80 to 90 percent of the income distribution.Below that, incomes are more comparable across countries, and the living standards of Americans look less impressive.The US has comparable intergenerational earnings mobility to Europe, according to Markus Jantti’s research, except among men (but not women) who start out at the bottom.In terms of occupational mobility, David Grusky’s research shows we're as good or better as anywhere else, but this doesn't translate into earnings mobility because we let people get rich or poor to a greater extent than other countries do.Jantti and Anders Bjorklund have estimated that Sweden would have the same mobility as the U.S. if the return to skill was as high there as it is here.Finally, employer benefits further complicate how "bad" we look.
Combine those two deep-seated trends with a third – steeply rising inequality – and you get the slow-burning crisis of American capitalism. It is one thing to suffer grinding income stagnation. It is another to realise that you have a diminishing likelihood of escaping it – particularly when the fortunate few living across the proverbial tracks seem more pampered each time you catch a glimpse. “Who killed the American Dream?” say the banners at leftwing protest marches. “Take America back,” shout the rightwing Tea Party demonstrators.
The rise in income inequality is mostly about the top 5% of the top 1% pulling away from everyone else, and existing estimates overstate inequality and its growth by ignoring employer and government noncash benefits and possibly by ignoring different rates of inflation in different parts of the income distribution.
Unsurprisingly, a growing majority of Americans have been telling pollsters that they expect their children to be worse off than they are.
Totally wrong.The key here is to only look at polling questions that ask people about their own kids, not kids in general.Here are the relevant survey results I could find:
General Social Survey (1994)—45% said their children’s standard of living will be better (vs. 20% worse)
General Social Survey (1996)—47%
General Social Survey (1998)—55%
General Social Survey (2000)—59%
General Social Survey (2002)—61% said their children’s standard of living will be better (vs. 10% worse)
General Social Survey (2004)—53%
General Social Survey (2006)—57%
General Social Survey (2008)—53%
Economic Mobility Project (2009)—62% said their children’s standard of living will be better (vs. 10% worse)(unlike GSS and PRC, asked only of those with kids under 18)
Pew Research Center (2010)—45% said their children’s standard of living will be better (vs. 26% worse)
BusinessWeek (1989)—59% said their children will have a better life than they had (and 25% said about as good)
BusinessWeek (1992)—34% said their children will have a better life than they had (and 33% said about as good)
BusinessWeek (1995)—46% said their children will have a better life than they have had (and 27% said about as good)
BusinessWeek (1996)—50% expected their children would have a better life than they have had (and 26% said about as good)
Harris Poll (2002)—41% expected children will have a better life than they have had (and 29% said about as good)
Harris Poll (1997)—48% felt good about their children’s future
Harris Poll (1998)—65% felt good about their children’s future (17% N.A.)
Harris Poll (1999)—60% felt good about their children’s future (15% N.A.)
Harris Poll (2000)—63% felt good about their children’s future (17% N.A.)
Harris Poll (2001)—56% felt good about their children’s future
Harris Poll (2002)—59% felt good about their children’s future
Harris Poll (2003)—59% felt good about their children’s future
Harris Poll (2004)—63% felt good about their children’s future
Pew Research Center (1997)—51% said their children will be better off than them when they grow up
Pew Research Center (1999)—67% said their children will be better off than them when they grow up
Bendixen & Schroth (1989)—68% said their children will be better off than they are
Princeton Religion Research Center (1997)—62% of men said their sons will have a better chance of succeeding than they did; 85% of women said their daughters will have a better chance
Angus Reid Group (1998)—78% said children will be better off than them
Washington Post/Kaiser Family Foundation/Harvard (2000)—46% said they were confident that life for their children will be better than it has been for them
Economic Mobility Project (2009)—43% said it would be easier for their children to move up the income ladder
Economic Mobility Project (2009)—45% said it would be easier for their children to attain the American Dream
Also, polls consistently show that Americans say they have higher living standards than their parents.
And although the golden years were driven by the rise of mass higher education, you did not need to have graduated from high school to make ends meet. Like her husband, Connie Freeman was raised in a “working-class” home in the Iron Range of northern Minnesota near the Canadian border. Her father, who left school aged 14 following the Great Depression of the 1930s, worked in the iron mines all his life. Towards the end of his working life he was earning $15 an hour – more than $40 in today’s prices.
Thirty years later, Connie, who is far better qualified than her father, having graduated from high school and done one year of further education, makes $17 an hour.
It’s not valid to compare her pay mid-career to her father’s at the end of his career—and also, how much work experience does she have relative to him?Did she take time off to raise kids?
The pace of life has also changed: “We used to sit around the dinner table every evening when I was growing up,” says Connie, who speaks with prolonged vowels of the Midwest. “Nowadays that’s sooooo rare.”
Time-use surveys show that while parents spend more time working (because of mothers) than in the past, they do not spend less time with children.They spend less time doing things by themselves.
Then there are those, such as Paul Krugman, The New York Times columnist and Nobel prize winner, who blame it on politics, notably the conservative backlash which began when Ronald Reagan came to power in 1980, and which sped up the decline of unions and reversed the most progressive features of the US tax system.
Fewer than a tenth of American private sector workers now belong to a union. People in Europe and Canada are subjected to the same forces of globalisation and technology. But they belong to unions in larger numbers and their healthcare is publicly funded.
Though unionization has declined markedly in most of these countries, and their healthcare policies are increasingly becoming too costly.Also, most of the decline in unionization in the U.S. occurred before Reagan took office.
More than half of household bankruptcies in the US are caused by a serious illness or accident.
This is bad Elizabeth Warren research—she counts a bankruptcy as being “caused” by illness or accident if one was reported, but the household could have been in serious debt before these occurred.At any rate, bankruptcies are exceedingly rare (under 1 percent of households—see Figure 13).
Pride of place in Shareen Miller’s home goes to a grainy photograph of her chatting with Barack Obama at a White House ceremony last year to inaugurate a new law that mandates equal pay for women.
As an organiser for Virginia’s 8,000 personal care assistants – people who look after the old and disabled in their own homes – Shareen, 42, was invited along with several dozen others to witness the signing.
Ah…another representative household…..
More and more young Americans are put off by the thought of long-term debt.
Had enough? I have speculated that to the extent economic insecurity has increased, it reflects the impact of a negativistic media (amplified by gloom-and-doom liberalism).
Pieces like Luce’s—and the blog posts it generates—affect consumer sentiment.Ben Bernanke and Tim Geithner aren’t the only people who can inadvertently talk down the economy.
*Originally said "just under 3 percent", which was incorrect. -srw