Some Economics Of The Middle Class

There are two things that "everyone knows" about the US middle class: it's shrinking in size and the government isn't helping. However, when one digs into the data, the evidence for these claims and some implications of that evidence are considerably more nuanced. 

Here, I draw upon a collection of essays called Securing Our Economic Future, edited by Melissa S. Kearney and Amy Ganz, and published by the Aspen Institute Economic Strategy Group late last year. In h first essay, Bruce Sacerdote asks, "Is the Decline of the Middle Class Greatly Exaggerated?" In the second essay, Adam Looney, Jeff Larrimore, David Splinter look at "Middle-Class Redistribution: Tax and Transfer Policy for Most Americans."

For a flavor of Sacerdote's argument, define the middle class as those with between 75% and 200% of the median income. Then over time, the share of household incomes going to this group does decline. However, a closer look shows that the reason for the decline in the share of household incomes in the "middle class" category is not because the share in the below-75-percent-of-median group has rise, but rather because the share going to the above-200-percent-of-median group has risen.

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