Ideomythology and Stagnation

It's a favorite argument of some of the antagonists 'round here to insist that household incomes have remained stagnant. The unions only look like they're raking it in, you see, because they're advancing at the rate that should be universal.

Now, we can (and often do) argue that the benchmark relies on impossible mandates, but over in the Corner, David Freddoso points out that the stagnation assertion is a myth:

I want to condense Brad Schiller's argument into three main points:

1) Yes, the income share of the bottom 20 percent of households shrank from 4.1% in 1970 to 3.4% in 2006. But so what? That is 3.4 percent of a pie three times as large as the pie of 1970. If you adjust that for growth in the number of households, the average income of households in the bottom 20 percent has risen by 36% since 1970.

Translation: the poorest Americans are richer than they used to be, in addition to being among the richest poor people in the world.

2) Household income is a terrible measure for comparing 1970 with today — one major reason being that the average household has shrunk since then by one-fifth. Also, 27 percent of households today are one-person households — up from 17 percent in 1970. One-person households are the most likely to be in the bottom quintile. Consonant with this fact, Thomas Sowell explained in a recent NROTV interview with Peter Robinsonthat the top 20 percent household bracket contains nearly twice as many actual people as that bottom 20 percent bracket:

Households are of different sizes...There are 39 million people in the bottom 20 percent of households, and 64 million in the top 20 percent.

That's not merely to say that more people equals more money. The households in the top-earning quintile contain more people because more of them represent intact traditional families — the stable social environment in which economic success is statistically most likely.

3) Nor are all of those in the bottom quintile (under $18,500 per year) economic hard-cases. The bottom 20 percent includes millions of young people starting their first jobs, who will earn more as they grow older. It includes some retirees with assets but little income, and millions of new immigrants just stepping up to the bottom rung of the economic ladder. And yes, millions of chronically unemployed householders, too.