Here is the key quote that is embedded in the post: "Economist Stephen Rose, defining the middle class as households with annual incomes between $30,000 and $100,000, says a smaller percentage of Americans are in that category than in 1979—because the percentage of Americans earning more than $100,000 has doubled from 12 to 24, while the percentage earning less than $30,000 is unchanged. “So,” Rose says, “the entire ‘decline’ of the middle class came from people moving up the income ladder.” Even as housing values declined in 2007, the net worth of households increased."
However, the comments associated with the link go back and forth on whether the definition of middle class is adjusted for inflation. I would suspect that a competent economist would not make such a basic error, but let's run some simple numbers anyway:
The 1979 range of $30k to $100k adjusted for inflation for 2006 is $86k to $298k (according to US CPI data run through an on-line inflation calculator at http://www.westegg.com/inflation). Then, looking at 2006 data from Wikipedia I find that about 20% of households are between $85k and $250k in income. It also says that about 50% of households are between $30k and $100k, and 17% over $100k. The numbers don't quite match the post, but this could be an issue of 2006 vs. 2007 data. The number of $300k isn't quoted, but it is small. . .this would seem to support the case of the populists.
Other data shows household income increasing slightly from 1990 to 2006 in constant dollars, with median income increasing from $44,603 (in 2006 adjusted dollars) to $48,201 (about 8%). This would be contrary to the populists. . .at a minimum, income is increasing.
Also, two other factors matter - one is household size, which has declined over time. So the better measure is probably income per person. Here's data I was able to find on average household size (http://www.census.gov/statab/hist/HS-12.pdf):
1979: 2.78
2006: 2.61
so let's take the 1979 household income range of $30k to $100k and divide by 2.78, to get a definition of the per capita income of a middle class person: $10.8k to $36k. People making above $36k would still be 12% of the poplutation. Let's adust that $36k for inflation to 2006, and we get about $107k. Looking at 2006 data on income per person, I get about 13% with over $100k, which is probably about 12% for $107k plus - in other words no change.
Again, these are pretty rough numbers, and several factors are still at issue here:
1) Are Stephen Rose's original numbers adjusted for inflation? You would think so, but we need to verify one way or the other by going back to the original work.
2) Economic growth is a fact. Likewise, CPI is hard to measure over time. For example, what kind of computing power could you buy in 1979 for $1000 versus today? Defining wealth is not necessarily a trivial problem (particularly if you include non-financial factors, such as "free time" or "happiness".)
3) None of this considers household net assets. It considers only income. Wealth is a combination of income and assets.
4) How about income after taxes? In the same period tax rates have dropped, allowing individuals to keep more in their pockets (at least on average. . .would need to analyse for just the middle class). As far as I'm concerned, the money in my pocket after tax is far more interesting than the gross income (adjusted or otherwise!)
5) Also, where does the spending go? it would be interesting to break this down into cost per basic requirement (housing, food, transport, vs. discretionary items - although CPI baskets attempt to do that in part). I suspect a much smaller portion goes to basic needs now than was the case in 1979.
6) Classes are not static. People can and do move between income quintiles, in both directions, as a result of a variety of factors. Millions of people come to America (legally and illegally) on the basis that they expect to move up the income ladder through hard work and access to opportunity.
At a minimum, it isn't possible to boil this down into simple sound bytes. What is needed is a hard look at the actual data. My best advice would be to take whatever the main-stream press says with a grain of salt, and first look at your own situation, the choices that you made that affect the situation, and then get behind the headlines and throw-away lines through your own look at the numbers.
