I’m being facetious in positing such a banality, of course. As a public policy writer with precisely one shtick—being from Peoria—I’ve laid a foundation for its specialness in myriad ways, mentioning it in over a dozen articles in 2014 alone. Subtle I’m not.
What I’ve been wondering the last few months is whether Peoria is somehow economically special. I’ve been trying to reconcile my knowledge of the town and the people who live there with the research of Thomas Piketty, Emmanuel Saez, and various other top-drawer academics purporting to show that the plight of the middle class—the folks who people Peoria—has been getting worse over the last three decades.
It’s now conventional wisdom that any economic growth we’ve seen in the last 30 to 40 years has gone mainly to the wealthy. Piketty’s recent book, Capital in the 21st Century (see review, Fall 2014), attributes over 90 percent of all income gains from improvements in productivity to the top 10 percent of income-earners, leaving the rest of us to fight over scraps. Esteemed Brookings Institute scholar Isabell Sawhill has written that the plight of the working class hasn’t improved since the 1960s. When Greg Mankiw suggested that their situation might not be as morose as it’s being made out to be, he was heckled and shouted down—at an academic conference. It’s now become politically incorrect to dare contradict the notion that life’s getting more precarious for people who aren’t at the top of the income ladder.
The suggestion that living standards for most households are worse today than in the 1970s is absurd to anyone who remembers that era of unreliable Country Squire station wagons, music on AM radio, a broadcast universe of precisely three television stations that signed off at midnight, and a narrow offering of movies, music, restaurants, literature, and culture that represent a minute fraction of what any American with access to the Internet can find today. There are childhood cancers that few survived 40 years ago that are now easily curable—an improvement for both rich and poor households that’s not quantified in most articles about living standards.
But the other experience that makes me question whether things are getting worse for the middle class is that my friends who have chosen to remain in Peoria—largely blue-collar workers without college degrees—seem to have the world on a string.
Steve Rose is the rare economist willing to question the conventional wisdom. In two recent monographs he methodically lays out the postwar income and spending patterns, and by doing so systematically destroys the axiom that the greater income dispersion since 1980 implies that the lower and middle classes are worse off.
Rose is in a unique position to question the accepted wisdom: He is the author of Social Stratification in the United States, a fact book and poster he has been updating since 1978. Few would dare question either his liberal credentials or his empirical chops, which have of late led him to places where other Democrats would rather he didn’t go.
Small-town living / Last summer I took leave of my wife and children and spent a few weeks with my parents back home. With a lot of free time and no familial obligations, I managed to catch up with a host of old friends and classmates who never left town. What I found was that most of them—many of whom are in their 40s, married, with kids at or approaching college age—have a lifestyle I cannot afford in my big-city neighborhood and with an income several times higher than theirs.
One friend—who’s now my hero—has a motorboat, a Harley, a country club membership, and two kids in college that he’s paying for—all of which he’s doing on a family income of $110,000. Over several nights of beers at a cozy bar on the Illinois River in nearby Mossville, we bought drinks for a number of former classmates, neighbors, and friends while chatting about their careers and financial situation.
The career path for blue-collar workers in my hometown is almost formulaic: the guys who went on to get some post–high school training end up being welders or pipefitters or in some other occupation that pays somewhere around $75,000. A few do better than that—more than one of my friends spoke enviously of our friend known about town as the “Picasso of the backhoe,” who commands a premium and is never without a job because of his speed and deftness with his implement. People assumed he cleared $100,000. There are a few who are commercial truckers and earn a bit below $75,000 as well as a few guys who started businesses and are a good step above this, but the distribution is bunched.
What’s more, these guys almost all had spouses working and earning decent pay. A number of the spouses were nurses, making around $50,000 a year themselves, and those without any college tended to be receptionists and earned about half of that. It adds up to an average household income for my blue-collar friends of roughly $100,000 a year in a community where nice homes cost $150,000 and public schools are fine. That makes for a very nice life.
I assumed that my town or group of friends was anomalous. Not so, says Rose, who reports a median household income for married families of ages 48–59 to be nearly $90,000, a number so out of line with the implied blue-collar poverty of Piketty and Saez as to be unbelievable.
Part of what’s going on, of course, is that there remain significant life-cycle differences in earnings, and there is a very real fear that today’s struggling twentysomethings will never be able to get a solid hold onto the career track anywhere.
It’s a fear my friends shared when they were starting out. Few of them made much money in their 20s. The 1980s were a trying time for Caterpillar, which is by far the area’s largest employer, and the burgeoning baby boomer generation entering the job market conspired to create high unemployment rates in Peoria throughout that decade. Few in my crowd who remained in Peoria got married before the age of 30 simply because they didn’t earn enough to support a family. But a decade of gaining skills and building connections in the job market and an improving economy eventually opened up opportunities that my friends were able to exploit.
Dicing the data / That my central Illinois friends are doing well and are not so different than other blue-collar workers in their cohort is comforting, but also a mystery. How does Rose get such a different result than Piketty? Rose begins by pointing out that the bottom quintile of “earners” that Piketty spends so much time worrying about in his work represent, in fact, not households at all but rather the children of other earners, living at home. There’s a big difference between the median income of Piketty’s bottom 20 percent of earners, at a mere $2,000, and that of the 2014 Congressional Budget Office report on U.S. income, which reckoned their income in the five-figures, or an order of magnitude higher.
The difference isn’t perplexing: the CBO—correctly, in most people’s eyes—excluded the millions of tax filers who are school-age dependents or else are retirees collecting Social Security. The former are not who we typically think of as “the poor,” and retirees—who depend on pensions, saving, and Social Security—are not nearly as poor as their reported income would lead us to believe. By excluding such households, the CBO’s universe consists of 118 million U.S. households versus Piketty’s 157 million.
The other important difference in the two data sets has to do with defining income. Piketty chooses to use pre-tax income and ignore all transfer payments, both of which have the effect of narrowing the income distribution. The CBO, on the other hand, is more focused on actual living standards and thus includes those in the mix. The result is, again, a vast difference between the incomes of the bottom quintile and those at the top.
Rose agrees with the CBO, arguing forcefully in his recent studies—Was JFK Wrong? and The Economy Goes to College—that living standards need to be the focus of the debate. The former study, which is to some degree an updating of his forceful 2010 book Rebound, shows that, when measured properly, living standards for the poor and middle class have risen steadily over the past 40 years and that trend shows no signs of dissipating, even after the financial crisis and accompanying recession. Rose’s data show that real median household income went up 33 percent from 1979 to 2007.
Other research has called into account the very notion of a growing gap between the rich and poor. For instance, the difference in consumption patterns between the top quintile and bottom quintile is much narrower than the income data would suggest. Gene Steuerle, an economist at the Urban Institute, has pointed out that even the widening of the income gap depends on how both income and dispersion are measured, observing that the gap between the person at the precise 20th percentile and the precise 80th percentile (which is different than the mean of the bottom and top quintile, as is typically presented) has not changed over the last few decades.
Every piece that dares question the claim that life is growing more onerous for everyone who’s not at the top of the income pyramid conditions such heresy with various caveats, averring that we still need to do more about the scourge of income inequality and the plight of the poor and whatever else might suffice as a bone to the attack dogs on the left. To his everlasting credit, Rose—a man who arguably has thought longer and harder than anyone else about this issue—largely dispenses with such banalities.
The difference between the rich and poor is the wrong metric for discerning the plight of the poor. If we look at their living standards from a historical basis, it’s clear that their life is much better today than 20 or 30 years ago. We live in a society where many poor households have cell phones and computers that are far better than any that existed a decade ago and that can be had for less than $100. To be clear, Rose isn’t a fan of rising income inequality, but he argues that the living standards of the poor, not their relative income, needs to be the focus of our public policy machinations.
In The Economy Goes to College, Rose marshals up a wealth of evidence to support the claim that living standards are improving. For this, he uses data from the Commerce Department’s Input–Output Accounts to measure the proportion of consumer expenditures that go to various categories. The biggest change the data reveal is that food and clothing—two necessities that took almost half of all consumer spending in 1947—today require just 18 percent. So what do people spend money on today? Recreation (which went from 8 percent of spending to 14 percent) and health care (which quadrupled to 20 percent in 2007). And while the reflexive response of many to this latter statistic is to lament that “rising cost,” it’s helpful to remember how much better health care became over this period—we spend more for health care, but we also get more from that spending. In 1947 the typical doctor’s advice to the survivor of a heart attack was to get one’s affairs in order.
Too good to fact-check / Despite Rose’s pedigree and his meticulous, thoughtful studies pointing out that the supposed stasis in living standards for the poor and middle class doesn’t hold up, a contrary narrative has taken root in the media and few dare to contradict it. Nobel-winning economist Joseph Stiglitz, who followed Rose on a panel at an academic conference devoted to inequality in January, remarked that he had no idea that people found flaws with Piketty’s data. When someone widely regarded (by himself and others) as the smartest economist in the profession can’t be bothered to read anything contrary to what he declares to be the most important issue of our time, it’s clear that an intellectual battle is over, and those who want to continue it can’t expect to be treated politely.
Journalist Rod Dreher garnered much attention with his 2013 book The Little Way of Ruthie Lemming, a moving portrait about his hometown’s embrace of his sister as she fought cancer. The warmth he felt for the town led him to reject the big-city rat race and move back to the town later in life to raise his family. It’s a story that those of us who’ve abandoned our hometowns can empathize with from time to time.
But my fleeting pangs of longing for home aren’t because I’m trapped in some big-city rat race. The notion that it’s harder to make friends and be a part of one’s community or that we all work harder in a big city is nonsense. Rather, I’m jealous of the lifestyle my blue-collar friends back home have achieved.
My friends who stayed married and aren’t afraid of hard work have created good lives for themselves in our blue-collar hometown. The march of progress hasn’t cost any of them their jobs, either; rather, it’s made living in a pleasant community even better than it was a generation ago. Their televisions, pickup trucks, and telephones are miles ahead of anything the richest of the rich could have obtained just 20 years ago, let alone in the halcyon days of our youth.
Peoria and Mossville are not unique, Rose has shown. While blue-collar jobs these days may require more training and experience than they did a generation ago, the notion that people who don’t finish college are doomed to penury is greatly overstated. If we’re going to begin the debate over how to raise living standards with an empirical story in which the data used bear little resemblance to the real conditions and that cannot be questioned, the prospects of reaching some sort of agreement are slim.
And that’s probably for the best. Piketty’s prescription of greater income redistribution isn’t going to do much for my blue-collar friends back home, let alone the rest of us.
