Matt Yglesias points to a new Pew survey of middle class America which finds a record number feel they are economically worse off than they were five years ago.
A majority of survey respondents say that in the past five years, they either haven’t moved forward in life (25%) or have fallen backwards (31%). This is the most downbeat short-term assessment of personal progress in nearly half a century of polling by the Pew Research Center and the Gallup organization.
The Politics of Economic Discontent
Matt observes that,
Politically, it’s a bit tricky since the salient trend is the dramatic narrowing of the better/worse gap, but the betters still outnumber the worses. You want to tap into the sentiments of the growing “worse” bloc, but still can’t let that kind of sentiment dominate what you’re saying since there are all these “betters” out there still.
But, as a commenter retorts, “[W]hen Reagan used that line to such (apparent) great effect, the split was 52-25. With 31% saying they’re worse off, many more than that will have friends or family who are part of the 31%. I don’t think it’s tricky politically at all.” I tend to agree.
The bizarre thing, as I’ve noted before, is that it’s obvious to anyone who lived through both eras that the economy is much better now than it was then. In 1980, we were in a recession that stretched for the better part of a decade, experiencing double digit inflation and interest rates, high unemployment, and a Dow that was well under 1000.
Jimmy Carter used the Misery Index, which added inflation and unemployment, to great effect against Gerald Ford in 1976. Ronald Reagan returned the favor in 1980. Here’s where it was:
Here’s where it’s been for the last year (February’s numbers are the latest I have available):
The Rich Get Richer — And So Do Everyone Else (But Not as Fast)
The poll’s Executive Summary does a good job of analyzing the data and giving some clues as to why people are so miserable in both their short-term assessments and their predictions for the future. Essentially, it’s a classic case of relative deprivation. We’re living in bigger houses, on average, than ever before. We’ve got technological luxuries that were unobtainable five or ten years ago. But the upper classes are growing at a faster rate than the lower and middle classes so, despite the absolute gains in living standards, they feel like they’re falling further behind even while their lives are improving. Additionally, the “middle class anchors” of housing, education, and health care are getting rapidly more expensive, belying the relative lack of inflation.
The New Economy – Winners and Losers
Two charts from the survey also provide useful insights.
Winners include seniors (ages 65 and older), blacks, native-born Hispanics and married adults. The income status of all of these groups improved from 1970 to 2006. Losers include young adults (ages 18 to 29), the never-married, foreign-born Hispanics and people with a high school diploma or less. All of these groups have seen their relative income positions decline.
This is actually pretty good news. The classes who were the object of concern a generation ago, the elderly and minorities, are doing much better. And so are those who make good choices: Getting an education, getting married, and postponing giving birth the children until they get married.
This also underscores a point demonstrated by a second chart:
A 2007 study by the U.S. Treasury Department found that about half of all taxpayers are in a different income quintile from the one they had been in a decade earlier. It also found that the highest levels of churn occur in the middle income brackets. The chart below illustrates, for two consecutive nine-year periods, where taxpayers who were in the middle income quintile at one point in time wound up nine years later. It shows that, in each time period, roughly two-thirds of the middle quintile taxpayers were in a different quintile after nine years.
To be sure, much of this is owing to “life cycle effect,” the propensity for people to earn higher incomes as they advance in their careers. But that, too, is a good thing. It belies the notions of a static economy that discussions of social class and comparisons of wealth gaps reinforce. People who make good choices have an excellent shot at moving up the ladder. That’s as it should be.
Politically, of course, little of this matters. Similarly, As Jimmy Carter discovered, once to his advantage, once not, people will give the president (or his party) way too much credit or blame for the state of the economy. Similarly, if people think they’re falling behind or think they’re trapped in place, they’re going to vote that way regardless of the reality. But ignorance and irrationality doesn’t change the underlying facts.
