Topical Cream: The Middle Class

Apply directly to your [class warfare theories]:

Here are some links to MSNBC articles in a series they did about how the middle class in the U.S. is being destroyed:

Life is Harder Now, Some Experts Say
A Family Banks on its Human Capital
A Gut Check for the Middle Class
Who or What is the Middle Class?

I've decided to debunk 'em all.

You don't have to read any of those stories, by the way, unless you really want to (I'd recommend it, especially the first one, since that's what this post covers). I'll do most of the explaining...

Story #1:
Life is Harder Now, Some Experts Say
This one's pretty easy to debunk since the entire article is based on this one set of data:

Their point is that, since everything is supposedly more expensive and that "real wages" haven't supposedly gone up since the mid-'70s, a two-earner household is actually poorer than they were 30 years ago. Check out the chart and see if you can spot the problems before I go off...

Problem #1:
The authors of the book that this MSNBC story is based on, (The Two-Income Trap: Why Middle-Class Mothers and Fathers are Going Broke, Elizabeth Warren) specifically chose the 1970s to compare to 2004. Check this Census data:
Note that if they had chosen any year before 1972 or so, a male's average earning would have been much, much higher in 2004. I'm not saying it's not valid to compare 2004 to the 1973-1979 period, it's just that it is slightly misleading. The important thing to note is that full-time working men's wages have stayed within about the same $2,500 band for the past 30 years.

Also note that if the authors had written a book (or a blog post) called The Middle Class is NOT Failing or something like that, they could have compared 2005 wages to 1955 wages, and bragged about how they've increased 61% for men and a whopping 97% for women, after adjusting for inflation. Either way, if you're not publishing a graph (see: My Graph, above), you're misleading people and bending the truth.


Problem #2:
The point of the book, the chart and the MSNBC story is that it now takes two earners in 2004 just to come close to making the same amount of net income that one earner made in the mid-1970s.

Look back at the original chart and check out the expenses. See anything fishy?

Fully 3 of the 6 "Major Fixed Expenses" ($16,855 of $33,350) in the 2004 column are required because the female of the household is working. These:

- Day Care ($5,660)
- Preschool ($6,920)
- Automobile #2 ($4,275)

were all supposedly not necessary in the mid-'70s because the female was staying home. However, If the female were not working in 2004, the family's total income would be $32,100 less (almost the same as it was in the '70s) and the tax rate would be essentially equivalent.

So, if we remove all the charges from the female going to work in 2004, her income and change the tax bracket back, the difference in net income from the 1970s to 2004 (according to the chart) is -$4,496. Check it out:
This means that the wife (and the family) is essentially earning $4,496 per year by going to work (in 2004) . Who the hell chooses to work for $4,500 a year? I could understand if it made life easier somehow, but I don't see it - How is it better to let your children be raised in day care, to work all year instead of staying home for a lousy $4,500?

If a family (the wife, on average) is doing this, then they're doing it because they'd rather work instead of take care of the kids at home. I could understand that, but does it really mean that "Life is Harder Now"?

Problem #3:
The price of a specific home in 2004 is not 76% [$10,250/$5,820] more expensive than it was in the '70s.

From the mid '70s to 2004 (specifically 2004), the average price of the "average house" increased about 55% or so. Check it:

This is from Robert Shiller's adjusted-for-inflation home prices chart. If you look at the whole thing, you'll see that the current boom we're in is massive, but by 2004 was not that excessive...

If they would have used later data, it would have been more accurate. But they didn't, so it doesn't matter.

A greater problem, though, is that the average size of the average home has been increasing for decades. In terms of square footage, the average home was about 1,645 sq. ft. in 1975. In 2004, it was 2,349.

What this means is that the price per square foot of a house in 1975 was roughly $64.43 per square foot. In 2004 it was about $69.39 or thereabouts, after adjusting for inflation. In percentage terms, that's a 7.7% increase in the price of an average home in 1975 by 2004.

That means, literally, that if you bought an average house in 1975, you would have made about an 8% return (after adjusting for inflation) if you sold it in 2004. One could have made far, far more than that by getting a checking account that pays 0.5% annual interest...

And, finally, what this means for our purposes is that the difference in cost to own a home [mortgage] is fairly small. At the most, assuming we use today's data and compare it to the lowest dips of the 1970s (1976), we wouldn't even come close to that 76% increase that the MSNBC story used, especially if you include the fact that any pretty much any home owner from 1997 to 2005 purchased an asset that increased in value very rapidly over that short period of time.

To be fair, though, I'll use an arbitrarily high number to calculate the price of housing (since we for some reason assume a family has to own a house...), let's say a 35% increase in the real, adjusted-for-inflation cost of buying a house from the mid-'70s to 2004.

This means that if we adjust the cost of a mortgage in the original MSNBC chart to be 35% higher (which is substantially more than reality warrants...), we'll get a new number for the difference in the cost of living:
Now it's $2,103.

That means the actual difference, according to the specific expenses and incomes that the authors of the "study" used in that chart, is about $2,100 less in 2004 that it was in the mid-'70s. Again, this means the working wife in 2004 is giving up quality time with the kids for about $8.01 per working day... Let's hope she's not buying Starbucks Lattes...

Which brings me to the last problem I have with this story:

Problem #4:
Fixed expenses have often gone up, but countless other items deemed necessary have become much more affordable.

Things that make life easier, like air conditioning, dishwashers, washers & dryers, computers, cell phones and the lot which are technically necessary according to today's standards were not included in the 1970s numbers in the chart. Do you realize how much a cellular phone and a computer would costs in the 1970s? Trillions, since they didn't really exist...

Sure, the authors think it's necessary to own an "average house," an "average car," and buy health insurance that is, on average, somewhat unnecessarily expensive (another topic altogether...), but if you adjust for the differences in these items over the years, the value you get in 2004 is infinitely more than what they got in the '70s.

For example, cars these days will last years and years longer than they did in the '70s. Health insurance provides unbelievably more advanced health services, and everything else that was considered necessary in the '70s as well as in 2004 that was not included in the chart is, for the most part, much more technologically sophisticated and substantially cheaper, considering what you get/got...

So here's the question: If you were offered $2,100 to time-travel back to the 1970s to raise your family, to use 1970s technology and deal with 1970s standards of living (air conditioning was considered somewhat of a luxury and television was limited and terrible... and no internet, either...), would you do it?

Of course you wouldn't, unless you really loved The Doors or Jimi Hendrix...

So, if the net income we make these days is truly $2,100 less than it was in the 1970s, but we have infinitely "better" lives (depending on what stuff you use...), does that really mean that "Middle Class Mothers and Fathers Are Going Broke", or that the middle class is somehow being "squeezed"?

Also, don't forget that comparing the income of a full time, individual worker in 2004 to the 1970s is as misleading as possible. If we wanted to cancel out that $2,100, all we'd have to do is compare wages in 2004 to 1994 (about a $1,950 increase over that 10 year period).


Long story short: The middle class is not less prosperous or more financially "trapped" than they were at any other point in our history. If anything, we've got indisputable evidence (real and anecdotal) that [financial] life has never, ever been better for the middle class as it has been at least over the past 35 years. And even saying that a family is worse off today than they were 10, 20 or 3o years ago takes a lot of fudging and bending of the numbers, and requires paying attention only to the value of a house and car, instead of all the countless other things we use each day to make our lives easier and better.


[I'll have to take on the rest of the stories later... Maybe next week.... Maybe next year. I didn't realize how long this was going to take - which is why, by the way, this MSNBC series and other class-warfare propagators can get away with it. Anyways, I'll revisit this stuff someday, I'm sure...]