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Home Publications Blogs Beat the Press Tracking Middle Class Family Income: Wonkblog versus the President

Tracking Middle Class Family Income: Wonkblog versus the President

Thursday, 25 July 2013 17:02

Dylan Matthews takes President Obama to task over at Wonkblog for saying in his speech on Wednesday that the typical family's income has barely budged over the last three decades. As Dylan points out, median family income increased by 17.7 percent from 1979 to 2007. That's not great, it had increased by 113.2 percent in the prior three decades (State of Working American 2012-2013 [SWA], Table 2.1), but it's not zero.

So we can say that Obama was not exactly right on this front. But there is one other important item to throw into the mix. The typical family was putting in many more hours of work in 2007 than in 1979. This was primarily a story of women entering the paid labor force. The average number of hours worked for families in the middle quintile increased by 10.3 percent between 1997-2007 (SWA, Table 2.17).

So families did have a bit more money in 2007 than they did in 1979, but they had increased their work hours by almost as much. And of course there are work related expenses (e.g. child care, transportation, clothing) that likely ate up a very large share of the increase in money income for these families. Obama's claim may not have been exactly right, but if we look at the larger picture, it was not far from the mark.

Comments (16)Add Comment
written by AlanInAZ, July 25, 2013 5:35
Paul Krugman touched on this topic back in January with much the same view as Dean.

written by ltr, July 25, 2013 6:29

Real Median Household Income, 1979 and 2011


Increase = 5.3%
written by ltr, July 25, 2013 6:34

September 12, 2012

Real Median Family Income, 1979 and 2011


Increase = 7.8%
Barely budged is a reasonable description given the context
written by Robert Salzberg, July 25, 2013 6:59
President Obama:

"In the period after World War II, a growing middle class was the engine of our prosperity. Whether you owned a company, swept its floors, or worked anywhere in between, this country offered you a basic bargain – a sense that your hard work would be rewarded with fair wages and benefits, the chance to buy a home, to save for retirement, and above all, to hand down a better life for your kids.

But over time, that engine began to stall. That bargain began to fray. Technology made some jobs obsolete. Global competition sent others overseas. It became harder for unions to fight for the middle class. Washington doled out bigger tax cuts to the rich and smaller minimum wage increases for the working poor. The link between higher productivity and people’s wages and salaries was severed – the income of the top 1 percent nearly quadrupled from 1979 to 2007, while the typical family’s barely budged."

Compared with the 113.2% of the previous 3 decades, 17% is pretty lousy but compared with the 400% increase for the 1%, yes "barely budged" is a reasonable description.

The report Dr. Dean Baker links to highlights the fact that 90% of the growth in income for families between 1979 and 2007 occurred between 1995 and 2000.

Oh yeah, and things have gotten worse not better since 2007.
written by pete, July 25, 2013 7:55
As Dean likes to point out, the phony growth during the bubble periods should have a strong asterisk. Likely 2007 looked pretty good too, if you include real estate wealth increases in middle class income. All phony. Indeed, the huge deficit spendings during Reagan and early Clinton, and now during Obama, contribute to the growing inequality, rather than helping it. Keeping the poor/lower middle class maintained, or warehoused, seems to be the goal of government policy, with increased food stamps, etc., rather than real jobs. But it works, eh. The wealthy prosper, and there are no riots. This is Keynes prescription. Since stimulus is designed to make business more profitable so they will hire more workers, then those who do not benefit must be bribed to go along.
written by geraldmcgrew, July 25, 2013 8:52
Dean's "one other important item" is crucial. Income comparisons should be based on real HOURLY income. Not doing so is just, forgive me, stupid.

And +1 regarding the bubble asterisk.
written by urban legend, July 26, 2013 12:46
Even apart from the very legitimate point of considering hours worked, 17% over 28 years is "barely budged" in absolute terms -- 0.5% per year -- and really is "barely budged" compared to an increase in mean real income over the same period of 33%. That, of course, is just another way of showing how top-heavy income growth has been, which gives "barely budged" its real and perfectly legitimate meaning.

Not sure why the President's speechwriters chose 2007 without also noting 2011 (with even lower "barely budging"), but Matthews is really being a picky jerk here: paying his dues to the Village, no doubt.
Not sure why Obama chose to compare to 1979
written by Yoram Gat, July 26, 2013 1:20
but when comparing to the peak of 1973, the situation looks even worse. Real median household income has only risen by 14.3% in the period 1973-2007.

Data: Table H-5 at http://www.census.gov/hhes/www...household/
Lol, Yoram beat me
written by Lrellok, July 26, 2013 3:25
Yeah, I think Obama might have said "three" and meant "four".
written by Ryan, July 26, 2013 7:39
You know what, if there is a group of writers that will listen to you, internalize your points, and strive to do better, it'd most likely be located at Wonkblog. I hope that is the case here.
written by skeptonomist, July 26, 2013 9:02
As I have been saying for a long time you have to go back to before the 70's to see what has happened to wage income:


Real wages basically crashed through the 70's, and have stagnated since. As Dean says (and as I have also been saying) this trend is masked by considering family income instead of wages because of the entry of women into the workforce - which was probably at least in part a response to the reduced buying power of a single income.

A lot of the conventional wisdom in economics is inconsistent with what happened in the 70's and 80's. Economists have not really come to grips with the effects of inflation and Fed policy at that time. Will the next Fed chairman have a better understanding of these things and make a real intelligent effort not to do harm to working people?
Wonkblog folks are good
written by Dean, July 26, 2013 9:38

I know most of the Wonkblog crew (they keep adding people, so I'm not sure how many reporters are officially there now). They are smart and responsible reporters/bloggers. I have some issues with them now and then, but i think they are trying hard and generally will take my comments seriously.
written by SteveBreeze, July 26, 2013 3:39
It is worth noting that it is more expensive in many ways to have two income earners in one family. You need additional transportation to work, often a second car. You need daycare for minor children. As Elizabeth Warren pointed out in her book it removes the possible safety net of having trading work and home responsibilities for parents.
Wonkblog folk doing something bad
written by geraldmcgrew, July 26, 2013 8:19
Ezra Klein apparently carrying water for White House on Larry Summers.
Per William Greider: http://www.thenation.com/blog/...ry-summers

written by purple, July 27, 2013 11:21
Don't forget food costs. Eating out is way more expensive than eating in. And two income earner families generally tend to eat out more and also buy more expensive pre- packaged food.

I understand working at a job if it fulfills the second earner, but very few jobs qualify as being 'fulfilling'. Financially and in terms of quality-of-life, it only makes a little sense. A bigger house you never see !
the 70's
written by pjm, July 29, 2013 12:45
@Skepto, I am not sure what your point is. I mean, however bad 70's inflation was on real wage levels it seems to me it is fair characterization that pre-1980 and post-1980 are distinct policy regimes, so I am not sure what conclusions we want to draw by widening the frame
(perhaps something about Phillips Curve based macroeconomic management and Reagan/Thatcher neo-liberalism just being different faces of the working class getting screwed).

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.