Why the Middle Class is Better Off Than You Think


We are looking at an economy in which
the rich get richer and the poor get poorer. Middle class is declining. That trend doesn’t seem
to be slowing down. America’s middle class is getting hollowed out and opportunity for too many of our young people is shrinking. A lot of people think the middle class is dead, dying, hollowed out. And that’s a view that’s held now increasingly by not just the left where it was common 10, 20 years ago, but by conservatives, Republicans, economists across the spectrum. Russ Roberts is an economist, author and research fellow at Stanford University’s Hoover institution. I think it’s just a misreading of the data, at least an incomplete reading of the data, it’s ignoring the pieces of the story that that I think tell a much fuller story of opportunity and progress. Robert says that the findings of several of the leading studies are determined in part by the index that the authors use to adjust for rising prices over time. Turns out the measure inflation you choose makes a big difference. In one study, they found that one measure of progress for the middle class went down 7% over a 30, 40 year period. Wow, that’s a terrible thing because the economy as a whole group grew quite a bit, but if researchers had used a more comprehensive measure of inflation published by the Bureau of Economic Analysis, they would have found a 17% improvement. But Roberts points out that even that 17% growth doesn’t accurately portray the extent to which the middle-class standard of living has improved since the 1970s. What’s not captured by either index is the dramatic improvement in the quality of consumer goods. In the 1970s for example, TV’s were heavy boxes with 12 inch screens, rabbit ears, attenae, and a fuzzy picture. Today for the same dollar amount as in 1977 you can buy a computer with about one and a half million times the hard drive space and about 2 million times the RAM. The quality of groceries, healthcare, and cars, are incomparable to what was sold in the 1970s. And the list goes on and on. Yet because technological advances are difficult to quantify, they’re generally ignored. Lets take the following thought experiment. I’m gonna give you your income today and
I’m gonna let you shop at 1973 prices, but you can only buy goods available and services available in 1973, so they’re going to be really cheap. You’re going to have a ton of money
to spend. Is that a good deal? So most of us would say, I don’t want to live in that 1970s world. Not only am I not five times better off, I might be actually worse off. Which tells you that the ways we correct for inflation are really flawed. A 2017 study by Thomas Piketty, Emmanuel Saez, and Gabriel Zucman contained a widely cited chart that was written up in the New York Times, Vox, and other news outlets. It allegedly showed that the real incomes of the bottom 50% stagnated between 1979 and 2014. Roberts points out that by taking a snapshot of the income levels at one point in the past and comparing it to a snapshot of income levels in 2014, studies of this sort make a common methodological error. What this approach misses is that these are not the same people. Nothing in the data says that those who made up the middle class in the 70s weren’t doing significantly better in 2014. It’s misleading to use the kinds of data found in this study to support the claim that all the gains from economic growth go to the rich. A lot of the people are getting those gains today or getting those high salaries or people who are poor or, or in the middle 10, 20, 30 years ago but have entered the top. And the top is higher today than it used to be. So it’s gonna look like the rich got richer, but it isn’t true if they’re not the same people. So how do you correct for that? Well, there’s a handful of studies that look at the same people over time. So instead of saying, let’s see what’s happening, people in 1975 and let’s see what’s happening, people in say 2015. Let’s instead take people in 1975 and let’s follow them through time and let’s see how they did. And did the rich get all the gains or, was it the poor? You find out that the people at the bottom have the largest percentage gains and often the largest absolute gains over time. Now, what are the people who are pessimistic? What do they do with that, those, those studies, how do they interpret those studies? They typically ignore them. This fuller picture shows that the American middle-class hasn’t done as poorly as politicians and journalists would have us believe, but there’s still room for improvement. And there are many things I don’t like about economic policy in the United States. There’s a lot of cronyism we should get rid of. There are a lot of barriers for the poor. We give them a horrible, the poor, a horrible education through the public school system. So there’s a lot of things to fix. It’s not like everything’s, you know, great. But we don’t want to say, oh well the whole system’s rigged cause it’s not. The average person can make a lot of progress and has, and to ignore that? We shouldn’t romanticize stuff. It doesn’t make us gloriously happier. But we also don’t want to conclude that the system is rigged simply because the measurements we have of economic progress are flawed.

100 thoughts on “Why the Middle Class is Better Off Than You Think

  1. Let me tell you about the middle class. I paid over 40k in just income taxes this year, and the year isn’t even done with. The only thing hurting the middle class is the government.

  2. Inflation steals our wealth, prices in college and medicine exploding, birth rates declining rapidly, epidemic of drug overdose and suicide…
    ReasonTV: "The middle class is doing great!"

  3. I don't know what they're talking about. I'm drowning in credit card debt, and the costs of living have gone up. In Texas I'm getting about 10% yearly inflation and my wallet can feel it. And the banks, and their buddies have gotten richer. The left is right about the middle class, just not the solution… Get rid of banks and politicians.

  4. SINGLE PARENT HOUSEHOLDS….that is the growing divide between rich and poor that no one talks about.

    In the 1960s the rich and poor made very similar family planning choices. Not today. The outcomes of kids from these households creates huge income inequality later.

  5. Omfg so the dude proposes that one needs to follow a pop to see actually how poor/wealthy fare vs each other. Well news flash of course if you get born with 0$ vs 1mm$ you will see higher growth, but that's only b/c you start from nothing. AGAIN NO REASON TV FAIL!

  6. What a bunch of horseshit. 70% of Americans living paycheck to paycheck and can't afford a $500 emergency is better off than, say, living in Syria or Venezuela or being marooned on a desert island. Kinda a low bar. With consumer debt at record levels, with housing, healthcare, and education costs soaring past official inflation levels, this insistence on how "well off" the Middle and Lower classes are is indeed just vapid noise.

  7. Where did they drudge this guy up from? A families main source of wealth is it home..

    Avg cost of (median) housing in 1970: $23,600
    Income:$9,800
    Health insurance:$119 per capita

    2014: Median housing $269,000
    Income:$53,000
    Health Insurance $1,124 (per capita)

    So income ^roughly 5x
    Housing ^11×
    Insurance ^10x
    And we're not even adjusting for inflation/daily costs

    But middle class is..better?? "Derrrr well if ya walked around buying stuff in the 70's…hyukhyuk our tech is so much more convenient" What in the wide world of f_ _ _ does that have to do with tangible quality of life?? Lol just WoW, I don't know how this channel ended up in my subs but this is 2nd 5min vid of horse poo in a row ive watched, its gone now.

  8. Inflation keeps increasing, cost of living keeps increasing and wages remain stagnant. There definitely is inevitable crisis ahead! Libertarian btw

  9. Democrats want to get ride of middle class who pay the MOST TAX that just STUIP. .And the rich don't pat there share of taxs

  10. Half of all Americans make less than $32k you insufferable Cuckservative cunts.

    https://howmuch.net/articles/how-much-americans-make-in-wages

  11. Nobody mentions the fact that we've been enjoying cheaper goods made in China that alone should account for a lot.

  12. One thing Reason will never talk about are increases in housing prices and decreases in the wages of low-skill workers. My Dad is a painter, and despite being a higher-quality and more efficient painter now than what he was fifteen years ago, he makes the same money, and we can't afford to live in the same part of town anymore.

  13. Funny thing about the study "new perspective on income mobility and inequality", it shows that among the people in lowest income quintile in 1987 , those who still stay in bottom quintile in 2007 are way more than those who successfully move to top quintile. Besides, I think comparing living standards of present age with 1970s is a pretty low bar…

  14. Funny thing about the study "new perspective on income mobility and inequality", it shows that among the people in lowest income quintile in 1987 , those who still stay in bottom quintile in 2007 are way more than those who successfully move to top quintile. Besides, I think comparing living standards of present age with 1970s is a pretty low bar…

  15. Funny thing about the study "new perspective on income mobility and inequality", it shows that among the people in lowest income quintile in 1987 , those who still stay in bottom quintile in 2007 are way more than those who successfully move to top quintile. Besides, I think comparing living standards of present age with 1970s is a pretty low bar…

  16. Libertarians love the taste of corporate cock. Swallow that salty propaganda and be happy with your pittance, wage slave. Praise be the super rich!

  17. What bunch of BOLOGNA! Right out of the Fox News playbook — "oh look, people have refrigerators these days, therefore they are not poor like in the old days!"… seriously? Because products have advanced technologically that means the middle class is not stagnating economically? Talk about a non sequitur logical fallacy!

  18. Tell that to people who are working multiple jobs struggling to survive.

    Sorry, we care more about healthcare than your second yacht. Get fucked.

  19. Oh, yes, things are great.
    I buy an appliance now, and it lasts for maybe 5 years. Used to last 20. Ask all the college students with the student loan debt how well they're doing. One of my kids with a high school diploma cant get a job paying more than 12,50 an hour. 45 years ago, this wasn't the case. Real unemployment is near 20%. Many people have given up and live on Gov't programs. Go to some of the rust belt city's and see all the abandoned buildings and slums. Yeah, they're all doing great. The only reason the collapse hasn't happened is due to all the government programs. Look at California, largest homeless population, and went from 3rd to 47th in education. Kids cant read or write anymore. I see them all the time applying for work. Government corruption wastes billions every year.
    See what happens when the laws of economics finally catch up.
    20+ trillion in debt, over a hundred trillion in unfunded liabilities.
    The ultimate crash is being predicted by very smart people. It's a matter of when, not if.
    2008 was a walk in the park compared to what's coming.

  20. The real problem the middle class has is when they retire. Pension plans have disapeared except for a few places. Instead of saying "Medicare for all" they need to push Stock Market for All". Instead of putting money into Social Security they should put theat money into plans for the individual that they own but can't get until retirement. This would fix alot of the true middle class and lower class problem

  21. This is horse shit being sold by the people who want you to stay poor. That would be the rich people. The true facts are that income for middle class is actually about 1.4% less than it was in 1984 adjusted for the inflation that this video points too. Also, the number of higher paying middle class jobs is about 60% lower since 1984. So, in conclusion, the rich ARE getting richer and the poor ARE getting much poorer

  22. Every video related to economics, if no mention of the fiat currency fraud of the dollar is made, then that video is propaganda. The economic system is created to steal money which is time and effort from the people to the hands of the few elites. Stealing is the basis of the american empire economics.
    Everyone must watch the series of Mark Maloney – Money and Gold.

  23. Hmm… Another false object??

    The rich is getting richer is false if they are not the same people… Never thought of that before.

  24. The only factors that matter are that Salary – Shelter – Cost of Transportation – Living (Food- Clothes and etc) = poverty for a lot more people today……

  25. With respect to tech, the poor has a modern iphone now. So one can say the poor is much better than a poor person in the 70s and 80s. A poor person in the 70s and 80s could not have a PC at home. Now a poor person has an iphone for their kids, and ipad , and imac at home and 50+ inch TV.

  26. Pre-tax income is totally stagnant. Meanwhile, taxes have increased a LOT. "But no need to be concerned because 60 year olds earn more than they did when they were 20. Also, you seen what these new cellphones can do?!" Get fucked Reason.

  27. "Your suffering isn't real– you simply don't understand the data!"

    As per public data from 2012, the biggest contributors to the Reason Foundation were the Koch Brothers ($1.5 million)
    and the Sarah Scaife Foundation ($2 million dollars), a foundation which concentrates its donations towards donating to advance conservative public policy.

    This is propaganda funded by massive concentrations of wealth to preserve their status and propagate values
    which, conveniently, benefit them. And to quell unrest by the lower castes.

    The system is clearly rigged. We live in a corporatocracy.
    There's a reason Amazon has over 80 lobbyists on capitol hill and paid $0 in taxes last year,
    and the year before.

  28. Jordan Peterson talks a lot about this. The Matthew Principle (to those who have, more will be given…) and the Pareto Principle (20% of the people get 80% of the wealth) are spiritual FACTS that hinder ANY economic system. But DIFFERENT people are the beneficiaries over time.

  29. We borrow billions a day just to pay the interest the service the debt. And we have to borrow more to "keep the middle class better off". While I agree we are better off than the 70's (as of now), when hyperinflation hits, China will stop selling us goods to consume.

  30. This is particularly bad for a libertarian channel. Then again, it's Reason. I say that as a classical liberal/libertarian myself.

    Look, technology has indeed improved many products in our lives. However, who wouldn't want a new car or house at yesterday's prices, even at the old technology? How about land? Who wouldn't want to buy all those items that are essentially unchanged, like food and clothing and plants and furniture, etc.? How about the old cost of a college education?

    In addition, its disingenuous to use technological advances to support the idea that the middle class isn't under economic pressure. One could make the same kind of comparison of any decade that is more technologically sophisticated than its predecessors, that doesn't mean the middle class is stronger.

    In fact, taking technological advances into account, we should have a strong middle class, mostly free of debt, wherein a single breadwinner can easily accommodate a comfortable living for a small family. We do not have that, not even close. In spite of technological advances we are going stagnant and reverting to a third world disparity between a poor population and a small economic elite. Just look at California, more a harbinger of our future than more traditional states like Wyoming or Idaho. California is bankrupt and looks more and more like a degraded central or South American country every day.

    Not only has the value of our currency been diminished by reckless government spending and a willful abuse of the federal reserve, in addition to stagnant wages due to unchecked immigration, but look at our personal debt. The middle class is in a crisis point when considered from the perspective of debt. Most people are living comfortable but financially insecure lives, barely capable of covering emergencies. Yet health care, education, etc., are all becoming increasingly unaffordable to the middle class. Trends are mostly moving the wrong direction, for even Trump's reforms have proved to be a mix of help and hindrance to the economy.

    It's quite obvious that our quality of life is set to take a massive hit if we don't do something soon, and when the reckoning comes it will be the middle class that is gutted. This reality is obvious to anyone who wants to look at the situation honestly, so it is right that people are concerned about it. How to resolve the situation is another matter, for the "economic populism" Elizabeth Warren, for example, would speed us to disaster, whereas the solutions proposed by Ron Paul would heal the nation.

    Here is just one reason out of many that our middle class is under threat, from a more rigorous and honest libertarian source than Reason:
    https://mises.org/library/how-central-banks-fund-our-age-endless-war

  31. The middle class is shrinking, mostly because of people moving into upper middle class brackets and even the top 1% of earners.

  32. This video misses the point. The stagnation from the 70s to today is in the share of productivity gains over that time period. So from 1910 to 1970 as the productivity of each worker increased (due to manufacturing, skills, new methods and materials, ect.) so too did their incomes. Capital owners shared in the productively increase in the form of higher profits and labor had increased wages AND better/cheaper consumer goods.

    After 1970s workers in the middle class stopped participating in the productively gains of their work with increased wages. Capital and the highest levels of wage earners increased their incomes in proportion to productivity gains while the middle class was left to buy the cheaper goods with the same levels of income. Often they closed the gap by going deeper into debt.

    It would be a distraction to focus on individuals through time as life events like promotions, inheritance and capital gains influence a person's weath.

    The point here is that the middle class of today is not receiving their share of the productivity increases the economy is making.

    It is not enough to say "well they are better off today than back then". If the middle class was paid what productivity gains say they should be paid they would be even better off…

  33. It's all gravy until you want a college education or get hit with a medical bill that prevents you from working , than that middle class is gone for good

  34. Half of Americans are making less than $35,000 every year. The only argument Reason is giving is that technological advancement has made people wealthier. Sure, it makes things a lot more convenient, but Americans are being forced to live in poor, high crime areas now, and to move out of nicer areas that they used to be able to afford to live in, due to immigration and increases in housing prices.

  35. And people like this idiot wants to sucker the poor and the middle class to believe they are a billionaires. And some people eat it up. Haha. Let them rot.

  36. UBER IS THE REAL REFLECTION OF THE FINANCIAL COLLAPSE OF THE MIDDLE CLASS IN AMERICA. WHEN YOU ALLOW STRANGERS VOMIT IN YOUR CAR FOR A LIVING, THERE IS NOT BETTERING OFF, THAT'S A FICTION.

  37. This might be nit picking but, the average TV in the 70's was 19 inch not 12. The old CRT screens produced an excellent picture and were only fuzzy due to a lack of reception which was usually easy to correct. By the way, that TV in the video looked like it came out of the 50's or 60's.

  38. Capitalist driven Tech doesn't just trickle down to the benefit of its citizens…it spreads around the world and helps all people in the future…in perpetuity. Norway has great public healthcare that our "for profit" system invented. The MRI, Cat scan, defibrillator, prosthetic heart, electro cardiogram, rituxin, robotic surgery…and on and on and on.

  39. They followed the same people as they went through their life and careers… and found out they made more over time… what a surprise! I guess middle class is all good, you just have to tweak a thing or two in your model…

  40. I think this is a bit one sided, since debt plays a huge role in all of this, so we might live a bit better today at negative intrest rates then we did back in 1980 wen interest rates were above 6%. but as a society we have been living on our savings more extensively. though lot of good technologies have been invented.

  41. This is an apologetic discourse to give arguments to the left to shut up the critics. The middle class can be kept a float in the statistics by changing the metrics and the dividing lines. But the true of it is that the left pushes for more taxes and less opportunity for the middle class. This just for to make the low class and high class a parasite of the the middle class. That is what the criticism is about. Not that the middle class is shrinking. And give me a brake!! saying that you are not poor because you have a flat TV and a PC is ridiculous, you can put me on the middle class because i have one but that does not mean that I have the house I want or the car I want and the savings I want. just because I pay so much tax and so much on mortgage that I have nothing left.

  42. How come in the 70s a single working parent could afford to raise a family of four whereas today two working parents struggle to raise one or two children?

  43. I was born in 1978 and my family was poor immigrants from Mexico. Now Everyone of my parents 4 children own thier own homes, drive nice cars, and are well off. For me I was unemployed and close to being homeless but now own my home. This economy and country does give people opportunities but one must know what to do with them. Heck 20 yrs ago I could not afford a computer and in the last 4 yrs I have build 4 to 5 of them. The poor are getting richer but not crazy rich.

  44. UBI and fire all the social administrative staff with all these bullshit departments.

    Let apple and ibm continue to tip toe into medicine.

    Done. No more begging homeless and a parachute to help all the transport jobs were about to lose.

  45. The clarity of my TV is not a measure of how well I'm doing. The middle class is drowning in debt and guess what it's their own fault

  46. Astounding Work, I totally liked it!, See this New Album 'Monish Jasbird – Death Blow', channel link www.youtube.com/channel/UCv_x5rlxirO-WKjLIyk6okQ?sub_confirmation=1 , you can try 🙂

  47. When I took my Research Methods course in University it became very clear that numbers can be fudged to push an agenda on a constant basis.

  48. What % if Americans can afford a single income household so the other can raise kids? Less than 10% I imagine. End immigration.

  49. Socialism and Marxism are opposed to the Middle Class which they call the bourgeoisie*. This is because they won't even share the wealth that far, much less with the lower class. Western political science since the ancient Greeks knows the importance of a strong middle class.

    n.
    The middle class.
    n.
    In Marxist theory, the social group opposed to the proletariat in the class struggle.
    n.
    Properly, the French middle classes, but often applied to the middle classes of any country, especially those depending on trade.

  50. The ones on the right are not saying it is bad of as you think it is just due to feminists who want a job that causes labour to go down for all. Along with the government.

  51. For me, to have a good living standard is not having a great technology – flat screens are great, cell phones are great etc., but they are not as important as having sound securities – a solid, well paid job, some social benefits (including paid maternity leave), good health insurance, reasonable housing, good infrastructure, good schools for affordable taxes. And this is either unavailable, or shrinking. You do not need much stuff anyway…

  52. Cheap Electronic toys to keep the people entertained to stop them rioting because they are being shafted. Wages are being held down with mass immigration while their jobs were being off shored.

  53. The argument isn't income mobility or who makes what at any given time (though still important). (2:47)
    The original argument pertains to the size of the middle class and their purchasing power. If the middle class is shrinking and the people that are left purchase fewer things, this would be critically important information to know (recession).

  54. If the middle class is disappearing, it is because they choose to make bad decisions. They buy a whole lot of useless stuff, rather than save for retirement. They keep themselves in debt instead of paying off their debt. They buy 500 dollar phones every year. Buy new cars every few years. Where in the past people would keep thier car far after it was paid off. They also did not eat out everyday. They made better choices with their money.

  55. It’s not about material wealth, it’s about emotional well-being. And there, our society has plummeted in the last fifty years.

  56. I had the honor of being invited to Mr. Roberts for dinner in college on numerous occasions. Im honored to know this amazing thinker!

  57. The only sustainable measure of inflation is the cost of replacement reproduction of the middle class. Since women have entered into the workplace during their fertile years, this is most reasonably measured as a bidding war between the economy and the family for young women (their most-fertile years).

    Eliding the demographic hole that has been blown in the West while advocating virtually unlimited replacement migration and virtually unlimited power to censor communication in network effect companies places the Reason Foundation among the top agents destroying Western Civilization. Are they doing this out of mere unenlightened self-interest or are we permitted to ask, "Cui Bono?"

  58. This is why they say "there are lies, damn lies and statistics".

    In the 50s you had a 1 in 25 chance of starting on the loading dock and then becoming the CEO.
    Now that same chance is almost impossible. So upward mobility is down by a great deal.

  59. anachronistic bullshit. you compare healthcare and everything else to the 1970's and make the case the middle class are not worse off.

    Why is the past your metric? why not US ranking in the world? A "shithole" country that is ranked #6 in the world for healthcare and the US, ranked #30 in the world for healthcare is more accurate comparison.

    How about comparing retirement or longevity or available jobs to other countries' middle class? There are much better places to live with far greater opportunities. The middle class sure as fuk couldn't say that in the 70's.

    anachronistic fallacy:
    Definition: When an inference is made resulting from the misappropriation of concepts and ideas in time, the resulting fallacy is known as an anachronistic fallacy.

  60. The way I understand it, hes ddirectly comparing the 1970s middle class to 2014s middle class. But that misses the point.

    Yeah, the lives of the middle class has improved, in a large part due to new technology. But people in a society compare themselves with each other in the same time period . So when comparing the gaps between the rich/middle class/poor within 1970s and within 2014…..we see a massive increase in economic disparity. Which makes sense. You don't compare yourself to some middle class or rich guy from 1976. But you compare your standard of living to the rich guy down the street.
    (Or at least thats what I'm assuming what these politicians are talking about. I'm no economist).

    Even right wing politicians don't seem to generally dispute this fact.

  61. A lot of unconvincing double talk. Wage stagnation is a real and ongoing problem. I give this guy points, though, for noting that the rich is not the same group of people over time.

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