CNBC comes to conclusion that shrinking middle class is awesome

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The Huffington Post
By: Mark Gongloff
August 23, 2012

CNBC comes to conclusion that shrinking middle class is awesome

There is an imaginary world, let's call it CNBC world, where the rich get richer but the poor never get poorer. Unfortunately, this is not the real world.

See, for example, CNBC's take on the seemingly depressing news Wednesday from the Pew Research Center that America's middle class has been shrinking steadily for decades, particularly the most recent decade. To most of us this sounded like horrible news, but at least one person at CNBC saw reason to cheer.

Reporter Robert Frank, whose specialty is cataloguing the lifestyles of the very wealthy (and, full disclosure, is a very nice guy and a former colleague of mine at the Wall Street Journal), took a look at Pew's horrible cocktail of awful data and declared it to be just right:

But here is an equally important fact: many of those middle class Americans became upper-income Americans. The rich did get richer, but they also became more numerous.
According to Frank, then, there is not much to worry about in this report. The middle class is shrinking, sure, but only because we're all becoming rich.

Well, maybe not all of us, Frank admits:

Granted, some of the middle class also fell lower on the ladder. But the majority of those who disappeared from the middle wound up at the top.
Granted, yes -- granted, you can't make a wealthy-nation omelette without cracking a few more poors.

But the real problem with Frank's analysis is not that it's insensitive. The real problem is that it's just wrong on the facts. The Pew report does not show at all that "the majority" of people who disappeared from the middle class simply graduated to the upper class.

Frank points out that, while the percentage of American adults in Pew's middle-income bracket has fallen to 51 percent from 61 percent in 1971, the percentage in the upper-income bracket has risen to 20 percent from 14 percent. Hooray.

But Frank fails to point out that the percentage of Americans in the lower-income bracket has risen, too, from 25 percent to 29 percent.

And the sheer numbers of people in the lower-income bracket are bigger than those in the upper-income bracket. Since 1971, the ranks of the upper crust have grown by 27.9 million, but the ranks of the lower-income group have grown by 34.5 million. The largest group by far, the middle class, has grown by the smallest percentage, adding just 27 million people since 1971.

Or, as Pew puts it, there have been "virtually equal parts movements up and down the income ladder. In other words, there has been both progress and regression in the economic status of American families."

So, no, "the majority" of people disappearing from the middle class have not gone to the upper class.

The majority of the income has certainly gone in that direction, however: The percentage of total national income going to the upper class has risen to 46 percent from 29 percent 40 years ago, while the percentage of income going to the middle class has fallen to 45 percent from 62 percent. The percentage of income going to the lower class has shrunk to 9 percent from 10 percent. This is the first time in at least 40 years that the upper bracket has taken a bigger chunk of the national income than the middle class.

Another way of putting it: The rich have been getting much, much richer while the poor have been getting poorer.

In Frank's defense, he seems to have mis-read a passage in the Pew report that explains the upper crust's large and growing share of the income pie:

These shifts result from two trends: larger income gains for upper-income households than for others and a decline in the share of adults who live in middle-income households.
Instead of applying this analysis only to the share of national income, as Pew intended, Frank turns around and uses it to explain the numbers of people leaving the middle class. That's not what Pew meant.

It would be great if our middle class was shrinking because we were all getting rich, but that's not what's happening. Instead, we are becoming increasingly polarized.

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This page contains a single entry by CFED published on August 24, 2012 4:32 PM.

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