Don Boudreaux and Mark Perry have an excellent piece in the Wall Street Journal today, "The Myth of the Stagnant Middle Class." They cover a lot of interesting ground on how standards of living are rising even in the last few decades when Robert Reich and others have claimed that they are stagnating.
Boudreaux and Perry point out three things:
(1) The CPI has overstated inflation for a number of decades and, therefore, incomes that appear stagnant are not.
(2) A higher percent of pay today is not counted as pay in the statistics on hourly pay because it is in the form of benefits.
(3) I'll quote this one: "The average hourly wage is held down by the great increase of women and immigrants into the workforce over the past three decades. Precisely because the U.S. economy was flexible and strong, it created millions of jobs for the influx of many often lesser-skilled workers who sought employment during these years.
Since almost all lesser-skilled workers entering the workforce in any given year are paid wages lower than the average, the measured statistic, "average hourly wage," remained stagnant over the years--even while the real wages of actual flesh-and-blood workers employed in any given year rose over time as they gained more experience and skills."
But wait; there's more. They also note that life expectancy has improved and that the gap between black and white life expectancy has shrunk. Also, they address the issue of income inequality, which, of course, is not the same as the issue of a stagnating middle class. One excerpt:
Today, the quantities and qualities of what ordinary Americans consume are closer to that of rich Americans than they were in decades past. Consider the electronic products that every middle-class teenager can now afford--iPhones, iPads, iPods and laptop computers. They aren't much inferior to the electronic gadgets now used by the top 1% of American income earners, and often they are exactly the same.
Finally, they point out that the quality of most things is improving. (That's a major part of why the CPI overstates inflation.) I addressed some of these same issues in "The Joy of Capitalism," Chapter 8 of my book, The Joy of Freedom: An Economist's Odyssey. After going through similar data and stories about quality in the United States circa 2000, I wrote:
The quality of almost everything we get is higher than it was 30 or 40 years ago. The only things I can think of that have gotten worse are our protection from crime and the quality of education our children receive in schools. Each of these, interestingly, is provided by the government.