Can We Bury the Middle Class Income Myths?

by: Mark J. Perry

The graph above was created using inflation-adjusted median household income data and average household size data (both from the Census Bureau), and was inspired by an article in today's WSJ - "The Inequality Myth," (see previous CD post here).

Economist Brad Schiller wrote:
The Census data originate from an annual survey of households. The data don't track individual households from year to year, but instead just take a snapshot of the households in existence in March of each year. From these annual snapshots, we try to infer what's happening to the typical household over time.

The "typical" household, however, keeps changing. Since 1970 there has been a dramatic rise in divorced, never-married and single-person households. Back in 1970, 71% of all U.S. households were two-parent families. Now the ratio is only 51%. In the process of this social revolution, the average household size has shrunk from 3.14 to 2.57 persons -- a drop of 18%.
The meaning? Even a "stagnant" average household income implies a higher standard of living for the average household member.

Bottom Line: As the graph above shows, the average household size has declined by 21% from 1967 to 2006, while real, median household income increased by 31% over the same period. Result? A significantly, much, much higher standard of living for the average household member, i.e. the typical member of the middle class!

Isn't it time that we bury many of the myths forever about the "middle-class squeeze," "the war on the middle-class," "the American middle-class is fighting for its life," "Two Americas," etc.