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Despite Economic Growth, Middle-Income Americans Have Less Than They Did 40 Years Ago

Thursday, June 02, 2016 By Mark Paul and Emily Stephens, Truthout | News Analysis
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(Image: Jared Rodriguez / Truthout; Adapted: Kristin and Adam; Didmyself)(Image: Jared Rodriguez / Truthout; Adapted: Adam; Daniel Kulinski)Over the past 40 years, the US economy has boomed. But what does that mean for the "American dream"? While the top 1% has had enormous gains, average US households aren't any better off today. In fact, they're falling further behind.

We crunched numbers from the US Bureau of Labor Statistics, adjusting them for inflation, and found that during the past 40 years, middle-income households have seen their income decrease 13 percent, and the number that really matters -- discretionary income -- has decreased even more, by almost 30 percent. This was true for all households, not just married households.

Hard-working US households can't catch a break. While corporate profits grow, middle-class Americans are sliding backwards.

While pre-tax income is an interesting metric, the number that really matters for Americans' well-being is discretionary income -- the money left over after taking out income taxes and paying for necessary expenses such as food, clothing, shelter, housing, transportation and health care. We factored these expenditures into our calculation, and the data is clear: Middle income Americans are worse off than they were 40 years ago.

How can this be? While popular rhetoric looks to blame taxes for burdening the middle class, the opposite is true. According to data from the Bureau of Labor Statistics, middle-income households pay significantly less -- more than 65 percent less in fact -- in income taxes than they did 40 years ago. Other studies back this up. The Center on Budget and Policy Priorities and the Congressional Budget Office agree that middle-income households are paying near historic lows in terms of income taxes.

A study by the Tax Policy Center shows that a four-person family in 2015 paid 59 percent less in income taxes than the same family would have in 1955. If taxes aren't to blame, why is the middle class falling behind?

Maybe Americans are working less? Nope, adults employed full time in the US are working an average of 47 hours a week, adding up to more hours worked per year than generations past. Any gains households have achieved are largely due to longer hours worked, not higher wages.

Over the past 40 years, the number of women working outside the home has boomed. With the increase in women's participation in the workforce, the number of children living in households where both parents work full-time has increased roughly 50 percent since 1970. This means more day care, which is getting more expensive every year.

The American pie is growing, but it's being gobbled up by those that already have more than enough.

Hard-working US households can't catch a break. While corporate profits grow, providing income gains for the rich, middle-class Americans are sliding backwards. It has been decades since the middle class received a significant raise, as broad-based wage stagnation is the norm for most working Americans. Economists used to argue that productivity growth in the economy raised all boats -- but the data doesn't support these claims. Shared prosperity simply isn't part of the US landscape anymore.

Middle-income Americans are working more than ever and spending more on necessities, but haven't seen gains in income to compensate, leaving them with the lowest discretionary income in more than 40 years. The American pie is growing, but it's being gobbled up by those that already have more than enough.

Copyright, Truthout. May not be reprinted without permission.

Emily Stephens

Emily Stephens is CEO of Gravity Switch and an independent researcher. She studied economics and international women's health at the University of Massachusetts Amherst.

Mark Paul

Mark Paul is a postdoctoral associate at the Samuel DuBois Cook Center on Social Equity at Duke University and holds a Ph.D. in economics from the University of Massachusetts Amherst. Follow Mark on Twitter: @MarkVinPaul.


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Despite Economic Growth, Middle-Income Americans Have Less Than They Did 40 Years Ago

Thursday, June 02, 2016 By Mark Paul and Emily Stephens, Truthout | News Analysis
  • font size decrease font size decrease font size increase font size increase font size
  • Print

(Image: Jared Rodriguez / Truthout; Adapted: Kristin and Adam; Didmyself)(Image: Jared Rodriguez / Truthout; Adapted: Adam; Daniel Kulinski)Over the past 40 years, the US economy has boomed. But what does that mean for the "American dream"? While the top 1% has had enormous gains, average US households aren't any better off today. In fact, they're falling further behind.

We crunched numbers from the US Bureau of Labor Statistics, adjusting them for inflation, and found that during the past 40 years, middle-income households have seen their income decrease 13 percent, and the number that really matters -- discretionary income -- has decreased even more, by almost 30 percent. This was true for all households, not just married households.

Hard-working US households can't catch a break. While corporate profits grow, middle-class Americans are sliding backwards.

While pre-tax income is an interesting metric, the number that really matters for Americans' well-being is discretionary income -- the money left over after taking out income taxes and paying for necessary expenses such as food, clothing, shelter, housing, transportation and health care. We factored these expenditures into our calculation, and the data is clear: Middle income Americans are worse off than they were 40 years ago.

How can this be? While popular rhetoric looks to blame taxes for burdening the middle class, the opposite is true. According to data from the Bureau of Labor Statistics, middle-income households pay significantly less -- more than 65 percent less in fact -- in income taxes than they did 40 years ago. Other studies back this up. The Center on Budget and Policy Priorities and the Congressional Budget Office agree that middle-income households are paying near historic lows in terms of income taxes.

A study by the Tax Policy Center shows that a four-person family in 2015 paid 59 percent less in income taxes than the same family would have in 1955. If taxes aren't to blame, why is the middle class falling behind?

Maybe Americans are working less? Nope, adults employed full time in the US are working an average of 47 hours a week, adding up to more hours worked per year than generations past. Any gains households have achieved are largely due to longer hours worked, not higher wages.

Over the past 40 years, the number of women working outside the home has boomed. With the increase in women's participation in the workforce, the number of children living in households where both parents work full-time has increased roughly 50 percent since 1970. This means more day care, which is getting more expensive every year.

The American pie is growing, but it's being gobbled up by those that already have more than enough.

Hard-working US households can't catch a break. While corporate profits grow, providing income gains for the rich, middle-class Americans are sliding backwards. It has been decades since the middle class received a significant raise, as broad-based wage stagnation is the norm for most working Americans. Economists used to argue that productivity growth in the economy raised all boats -- but the data doesn't support these claims. Shared prosperity simply isn't part of the US landscape anymore.

Middle-income Americans are working more than ever and spending more on necessities, but haven't seen gains in income to compensate, leaving them with the lowest discretionary income in more than 40 years. The American pie is growing, but it's being gobbled up by those that already have more than enough.

Copyright, Truthout. May not be reprinted without permission.

Emily Stephens

Emily Stephens is CEO of Gravity Switch and an independent researcher. She studied economics and international women's health at the University of Massachusetts Amherst.

Mark Paul

Mark Paul is a postdoctoral associate at the Samuel DuBois Cook Center on Social Equity at Duke University and holds a Ph.D. in economics from the University of Massachusetts Amherst. Follow Mark on Twitter: @MarkVinPaul.


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