The shrinking middle class

by Ryan Streeter on January 26, 2015. Follow Ryan on Twitter.

The middle class, if defined as households making between $35,000 and $100,000 a year, shrank in the final decades of the 20th century. For a welcome reason, though: More Americans moved up into what might be considered the upper middle class or the affluent. Since 2000, the middle class has been shrinking for a decidedly more alarming reason: Incomes have fallen.

That’s Alicia Parlapiano, Robert Gebeloff, and Shan Carter at The Upshot, in a post with some pretty compelling graphs.  It has a longer companion article in the Times that is also worth reading.

Here’s the main visual on which the rest are based:

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Read the whole thing. I think the following sums up a lot of where the national economic mood is resting these days, though:

Younger households have borne the brunt of the slowdown. Those headed by people aged 30 through 44 are more likely to be lower income — and less likely to be middle income — than in 2000. Older households have done better. With more people working into their late 60s and wages rising for older workers, households headed by people 65 and older are now more likely to be middle or upper income than in the past, though they are still overrepresented in the lower-income group.

America’s job growth since recession comes from Texas

by Ryan Streeter on January 26, 2015. Follow Ryan on Twitter.

Here are some sentences to ponder:

Between the start of the recession in December 2007 and December 2014, the net job increase in America stood at 1.169 million.

During this same period, Texas created 1,444,290 jobs.

The other 49 states and the District of Columbia lost 275,000 jobs when viewed collectively minus Texas.

Therefore, Texas accounts for ALL of the U.S. net employment increase since the Great Recession.

This comes via Mark Perry at AEI, who also provides this graph to help make the point:

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Where are the young entrepreneurs?

by Ryan Streeter on January 3, 2015. Follow Ryan on Twitter.

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Roughly 3.6% of households headed by adults younger than 30 owned stakes in private companies, according to an analysis by The Wall Street Journal of recently released Federal Reserve data from 2013. That compares with 10.6% in 1989—when the central bank began collecting standard data on Americans’ incomes and net worth—and 6.1% in 2010…

The proportion of young adults who start a business each month dropped in 2013 to its lowest level in at least 17 years, according to the Ewing Marion Kauffman Foundation, a Kansas City, Mo., nonprofit that focuses on entrepreneurship. People ages 20 to 34 accounted for 22.7% of new entrepreneurs in 2013, down from 26.4% in 2003, it found.

That’s from this WSJ article.

On the demographics of American aspirations and declining work

by Ryan Streeter on December 16, 2014. Follow Ryan on Twitter.

For most unemployed men, life without work is not easy…They are unhappy to be out of work and eager to find new jobs. They are struggling both with the loss of income and a loss of dignity. Their mental and physical health is suffering. Yet 44 percent of men in the survey said there were jobs in their area they could get but were not willing to take…

Men today may feel less pressure to find jobs because they are less likely than previous generations to be providing for others. Only 28 percent of men without jobs — compared with 58 percent of women — said a child under 18 lived with them…

There is also evidence that working has become more expensive. A recent analysis by the Brookings Institution found that prices since 1990 had climbed most quickly for labor-intensive services like child care, health care and education, increasing what might be described as the cost of working: getting a degree, staying healthy, hiring someone to watch the children.

These are three out of many interesting observations in this NYT Upshot piece on the phenomenon of declining work among men.

It’s part of an equally interesting series on demographics and work that The Upshot is doing. Other good reads are herehere, here, and here.

And here’s a thoughtful Ross Douthat column that springboards off this series.

Surveying the American Dream

by Ryan Streeter on December 16, 2014. Follow Ryan on Twitter.

Americans’ individual judgments about the [American] dream still remain largely positive. But the story doesn’t end here. It is the public’s collective judgment about the American Dream that has undergone worrying changes. We put more weight on what people say about their own experiences, but what people think about the average American’s experiences drives our political conversation. And here, as a result of the 2008 financial crash and its aftermath, pessimism about the present and the future is palpable.

That’s from a useful overview of various surveys about the American Dream by AEI’s Karlyn Bowman, Jennifer Marsico, and Heather Sims.

For instance, “twenty years ago, 63 percent of those surveyed by the National Opinion Research Center said their standard of living was better than that of their parents at the same age. In 2012, 61 percent gave that response.”

On the other hand, “in a 2013 Gallup poll, 43 percent said the average person doesn’t have much chance to really get ahead. Only 8 percent gave that response in 1952.”

The following chart puts a bit of a dent in the authors’ second claim, though. The 2000s negatively affected people’s predictions about their own future, not merely that of the average American’s, a drop that started before the crisis but which was obviously accelerated by it:

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Happiness, work and aging

by Ryan Streeter on December 8, 2014. Follow Ryan on Twitter.

We all want to be happy, don’t we? Well, if you’re dissatisfied, frustrated or downright miserable, cheer up. There’s apparently a cure for you. Even better, it will materialize automatically. Just sit and wait; the very anticipation of its arrival might improve your spirits. The remedy: getting older.

Robert Samuelson writes in the Post today about the universal life cycle: we’re happier when younger, unhappiest in middle age, and then get happy again as we get older despite the fact that aging should – one would think – make you unhappy.

Carol Graham at Brookings was always very good on this topic when I got to know her while working on the Prosperity Index at Legatum Institute, and Samuelson cites her work showing that a majority of countries demonstrate this U-shaped “happiness curve.

This will be an interesting body of research to track over the coming generation as the population skews older like this:

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Will a greater proportion of “happy elders” matter for societies? I suppose that depends on what types of economic and social goods happy people produce.

Carol has some recent work on this in fact here.

USA has 2nd largest social welfare state after France

by Ryan Streeter on November 27, 2014. Follow Ryan on Twitter.

When you combine direct welfare payments to individuals with indirect government subsidies provided through businesses, you find that:

France remains at the top, but the United States vaults into second position with roughly 30 percent of its GDP spent on social services, including health care. We have a hybrid welfare state, partly run by the government and partly outsourced to private markets.

These conclusions come from a recent OECD report on social welfare spending.

Robert Samuelson comments:

The OECD report brims with insights about welfare systems. Did you know, for example, that China — heir to a communist social system — has a puny welfare state compared with most wealthy nations? In 2009, its social spending equaled 7 percent of GDP. Or did you realize that, despite all the talk of “austerity,” government social spending has hardly been reduced in most countries. The OECD reports cuts in a few nations (Greece, Germany and Canada, among them) but also finds that “in most countries social spending remains at historically high levels.”

The main message that Americans can take from this report is that we need a higher level of candor. The very complexity of our hybrid system seems intended to disguise the reality that we have a welfare state. We have created a new vocabulary to validate our denial. From our “safety net,” we distribute “entitlements” that are not “handouts” and don’t qualify as “welfare” payments. We pretend (or some of us do) that our Social Security taxes have been “saved” to provide for our retiree payments, when today’s Social Security checks are mainly financed by the payroll taxes of today’s workers, just as yesterday’s checks were financed by the taxes of yesterday’s workers.

David vs. Goliath: Craft brew version

by Ryan Streeter on November 27, 2014. Follow Ryan on Twitter.

The chart below, from this WSJ article, has a lot of commentary embedded in it. I’ll save that for later. For now, suffice it to say that it’s a great example of how the little guy can still shake up the big guy’s world.

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Bill Frey on demography and future elections

by Ryan Streeter on November 19, 2014. Follow Ryan on Twitter.

Bill Frey is always interesting. This new Politico article has some important and interesting maps on America’s changing racial demography.

This graph provides a nice summary of the trend that the subsequent maps illustrate:

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Sanandaji on Piketty’s missing entrepreneurs

by Ryan Streeter on November 19, 2014. Follow Ryan on Twitter.

I always enjoy reading Tino Sanandaji. This NRO piece offers an interesting analysis of Piketty’s omission of self-employed business owners and entrepreneurs in his conclusions about earnings and wealth in America. Main takeaways:

  • An influential study by Cagetti and De Nardi used Federal Reserve data in 1989 to estimate the wealth share of self-employed business owners. Self-employed business owners constituted 8 percent of the population, but owned one-third of national wealth and more than half the wealth of the top 1 percent.
  • In 2010, self-employed business owners account for an astonishing 70 percent of the wealth of the top 0.1 percent. If we look at top earnings rather than top wealth, self-employed business owners accounted for around 50 percent of the total earnings of the top 0.1 percent. These facts are never mentioned in Piketty’s book.
  • Last year, the 500 CEOs of the Fortune 500 collectively earned $5 billion. By comparison, the best-performing hedge-fund manager alone earned $4 billion. The total earnings of the 0.1 percent are somewhere around $800 billion per year.