Source: Every time a Political scientist/economist mentions this period in an interview.
I am a foreigner btw.
as is so often the case, the truth is much more complicated that the intuitive beliefs of a lot of people.
i think a lot of this perception is due to the rise of the famous super-rich people in the world, & how they've become a sort of celebrity in ways they mostly weren't in the past. certainly rich people became famous in the past, but i'm not sure that we ever had this sort of cult of billionaires, where you have musk fanboys, people who bow to lord bezos.
& of course you have all the class warriors who vilify them or just look at their money as something to be taken away from them to fund their utopian dreams through government expansion.
what is the case is that the middle class has disappeared. but not because they've become poor. it's because they've become rich.
in the 60s, about 54% of households were in the middle income. 11% were upper income, & 35% were lower income.
(low income being less than $35k, high income greater than $100k)
in 2020 40.3% of households were in that middle income category. down 14% from 54%. but they didn't drop down. they moved up.
33.6% of people are now in that high income category, from only 11% in the sixties.
& the low income category has declined to 26% from 35%.
those are 2020 dollars.
https://www.aei.org/carpe-diem/animated-chart-of-the-day-americas-middle-class-is-disappearing-but-its-because-theyre-moving-up-not-down-2/
good points by russ roberts here:
https://russroberts.medium.com/do-the-rich-capture-all-the-gains-from-economic-growth-c96d93101f9c
But the biggest problem with the pessimistic studies is that they rarely follow the same people to see how they do over time. Instead, they rely on a snapshot at two points in time. So for example, researchers look at the median income of the middle quintile in 1975 and compare that to the median income of the median quintile in 2014, say. When they find little or no change, they conclude that the average American is making no progress.
But the people in the snapshots are not the same people. You can’t use two snapshots to conclude that only the rich have made progress. It’s possible that everyone from the earlier snapshot has actually gotten richer and then been replaced by different people whose incomes will also rise. This is especially true when there is immigration. If new immigrants are disproportionately less skilled than Americans already here, measured incomes can fall even when those who are already here have steadily improving economic prospects.
And when marriage rates are falling and people are increasingly living on their own, household income can fall while every individual is doing better. Estimate of economic progress based on household income are distorted by these effects.
What the snapshots show is that the rich today are richer than the rich of yesterday. If the rich people are the same people as yesterday, then one’s class determines one’s fate. But if they are not the same people, the snapshots tell you that the dispersion of income has increased. That may or may not bother you, but it doesn’t necessarily mean that there is a distinct group called “the rich” who are capturing all the gains while the rest of us tread water.
How important are these issues? One way to find out is to follow the same people over time.
When you follow the same people over time, you get a very different story from the standard on.
When you follow the same people over time, the largest gains over time often go to the poorest workers; the richest workers often make no progress.
The most dramatic claims by the pessimists that no one is making progress other than the rich are wrong.
A study by Leonard Lopoo and Thomas DeLeire for the Pew Charitable Trusts uses the Panel Study of Income Dynamics (PSID) and compares the family incomes of children to the income of their parents.⁴ Parents income is taken from a series of years in the 1960s. Children’s income is taken from a series of years in the early 2000s. As shown in Figure 1, 84% earned more than their parents, corrected for inflation. But 93% of the children in the poorest households — those in the bottom 20% — surpassed their parents. Only 70% of those raised in the top quintile exceeded their parent’s income.
The poor may find it easier to do better than their parents. But how much better off do they end up? Julia Isaacs’s study for the Pew Charitable Trusts looking at the late 1960’s up to 2002 finds that children raised in the poorest families made the largest gains as adults relative to children born into richer families.⁵
The children from the poorest families ended up twice as well-off as their parents when they became adults. The children from the poorest families had the largest absolute gains as well. Children raised in the top quintile did no better or worse than their parents once those children became adults.
One explanation of these findings is there is regression to the mean — if your parents are particularly unlucky, they may find themselves at the bottom of the economy. You, on the other hand, can expect to have average luck and will find it easier to do better than your parents. At the other end of the income distribution, one reason you might have very rich parents is that they have especially good luck. You are unlikely to repeat their good fortune, so you will struggle to do better than they did.
But that doesn’t change what actually happened in the last three decades of the 20th century in the Isaacs study: the children from the poorest families added more to their income than children from the richest families. The pessimistic claims I mentioned at the beginning of this essay deny there is any regression to the mean. They argue that only the richest Americans have benefited from economic growth over the last 30–40 years. Or that only the richest Americans have gotten raises. The pessimistic story based on comparing snapshots of the economy at two different points in time misses the underlying dynamism of the American economy and does not accurately measure how workers at different places in the income distribution are doing over time.