By the numbers, America’s economy is strong. The economy has expanded 3.5 percent over the past 12 months, above the average historical rate of growth, while unemployment has fallen to 4.6 percent. Except for the technology bubble of the late 1990s, unemployment has not been this low since the early 1970s. The stock market too has recovered from the collapse of the tech bubble, improving the retirement prospects of tens of millions of Americans.
The gains from America’s economic growth have been widely shared throughout society. Low- and middle-income families, not just the wealthy, have seen their standards of living improve dramatically. Family incomes have risen well above where they were a generation ago, and most Americans now enjoy luxuries that in the past only the well-off could afford. Almost all Americans now have better health, education, housing, and consumer goods than they did even a decade ago.
Despite these facts, some claim that middle-class Americans are falling behind. They look at the data and see evidence that few Americans have benefited from the growing economy. Only the wealthiest Americans have seen their lot improve in recent years, they argue, while middle- and low-income families’ finances have stagnated. This analysis is based on four specific claims:
- The share of income earned by the wealthiest Americans has risen, and these are the only Americans whose standards of living have improved;
- Inflation-adjusted wages have not risen for most Americans;
- Wages have not kept pace with rising productivity; and
- Wages and salaries, as a share of the economy, have fallen in recent years, while corporate profits have risen.
To these critics, America has all but returned to a new era of corporate Robber Barons, with entrenched inequality and opportunity only for a fortunate few.
The only problem with this seemingly compelling argument is that it is not true. The critics’ statistics, while usually accurate, are also incomplete and out of context, and so give a misleading impression of the state of the economy. A comprehensive look at the data reveals that most Americans have shared in the United States’ rising prosperity and that America remains the land of opportunity.
Read the whole thing here.