I frequently argue that income data is nearly meaningless. Especially if one is interested in looking at the issue of economic inequality. That’s why I rarely get involved in blogger debates over inequality—my views are so out of the mainstream that I’d hardly know where to start.
But let’s say I’m wrong, and that income is an excellent indicator or economic well-being. In that case I’d still argue that median family income is a nearly worthless indicator of how average families are doing. I’ve spent a considerable time in all 5 income quintiles. For instance in college, grad school, and then as an adjunct professor I had a pitifully low income. At the time I was a fully independent adult, not carried on my parents’ tax return. Yet it would make little sense to say I was “poor” in a socioeconomic sense, despite my very low consumption bundle. At the other end of the age spectrum I know old people who pick up some extra money with part-time employment, and yet who aren’t really low income in a socioeconomic sense. Poverty is one of those “I know it when I see it” conditions.
For years progressives have been pointing to the rather low median income data to suggest how poorly the American middle class is doing, as if the typical median income earner were a middle-aged family with two kids. They’re not, as the income data mixes together all sorts of different types of households.
The problem with claiming Americans are doing poorly, is that you end up weakening the case for extensive welfare benefits. For instance, what if the social benefits given to the “poor” exceeded the median income of the entire country? Wouldn’t that create a massive disincentive to work? I don’t know how often that happens in America, but it’s recently become a political issue in Britain:
A few days later, in the House of Lords, a coalition of Labour peers and Church of England bishops cited Charles Dickens and Victorian notions of the deserving and undeserving poor as they attacked government plans to restrict the welfare payments received by any one household to the median income of a working family. The rebels won, with the Lords voting to ease the benefits cap for families with many children. Their rebellion will be overturned: some three-quarters of voters support the cap.
There is a good argument against the cap, but it probably won’t work because it would require progressives to admit that the median income data they always cite is deeply misleading. This is one of the many internal contradictions of progressivism. By the way, even the Labour Party admits that Britain has a problem with welfare dependency:
Debates about capitalism dominate British politics. The Conservative prime minister, David Cameron, his Liberal Democrat deputy Nick Clegg, and the leader of the opposition Labour Party, Ed Miliband, have repeatedly spoken about building a fairer economy. Responding to voter anger, they talk of reining in bankers’ bonuses and pay packages for company bosses. All three agree that there is a need to curb welfare for the work-shy.
[Full disclosure: I once lived in Britain. I shared a flat with a guy in his late 20s who hadn't worked in years, and didn't seem to want to.]
PS. Speaking of the internal contradictions of progressivism, Matt Yglesias points out that many progressives would like to see a significantly larger share of the workforce engaged in services, construction, agriculture and manufacturing. That’s why Yglesias has become the most persuasive blogger on the left. He understands that sectoral employment shares need to add up to 100%.
PPS. Yes, the conservatives have their own internal contradictions, as when they cite data showing that many people are able to move from the bottom 20% to the top 20%. I was one of those Horatio Algers stories. But in my own mind I’ve been middle class my entire life.