The poor are getting poorer, and the rich are getting richer is a common meme these days. The middle class is sinking into poverty as the top 1% just gets wealthier. Is that true?
Economist Mark Perry posted the graph below last week. It has been creating a buzz. (I included it in last Saturday's Saturday Links, but I've decided to highlight it here.) He divides family income into low, middle, and high-income categories and then charts the percentage of families in each category over the last forty-five years, using constant (inflation-adjusted) dollars. The chart shows that the percentage of low-income families has modestly decreased, the percentage of middle-income families has dropped by a third, but the percentage of high-income families has become 2.5 times larger.
This chart may actually understate things a bit. I suspect the data is pre-taxes and pre-transfers, in which case I think we would see the low-income family percentage decreasing a little more and modest corresponding changes in the other two groups.
Also, I suspect a significant factor in the change has been the entry of women into the workforce. Fewer families were two-income families in 1967. Families with two full-time wage earners are going to have much higher incomes. Families left the middle class by becoming two-wage families, not because of constant increases in the real value of individual wages.
Here is Mark Perry's analysis.
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