We keep hearing from politicians how the "average American" is doing more poorly than at any time other, and how "unfair" it is that the wealthy are doing great - but nobody else is.
Is it true?
In a word, no.
Let's examine some facts, comparing today's average family with 1967 - when I was all of four years old. While I do not remember being four, I do remember being 10, and what life was like then.
Ok, so here we go!
The median income this year is $46,325, which is some 32% more than in the mid 60s, after adjusting for inflation. It is also 13% more than the median during the economic boom of 1985, again, after adjusting for inflation.
The typical American Household has a net worth of $465,970, up 93% from 1965, 60% from 1985 and 35% from 1995. Most of this has been fueled by the rise in home values.
Throw in low inflation for the last 20 years, advances in technology and cheap travel (VERY cheap if one is comparing airline travel!) and you have a middle class that is living what amounts to a MIDAS lifestyle compared to 1967. For example, in the 1970s most homes had one telephone, and it had a rotary dial. It was
illegal to connect your own answering machine to the telephone network, there was no call waiting, and many people still had party lines (including my Grandmother.) Cell phones weren't even dreamed of, nor were personal computers. In the mid 1970s my father (he was a CPA) purchased an electronic calculator. It performed 4 function math plus percentages, weighed about the same as an ordinary household brick and ran for a couple of hours on a charge. It also cost $500.00. Today a basic four-function calculator can be had for $2.00 at WalMart and it runs on solar energy gained from an ordinary kitchen light bulb so long as its turned on!
Our (single) television was black and white. The neighbors across the street had a color console, but we did not - they were far more wealthy than we were. There was no cable - we had rabbit ears and got
six channels - 2, 4, 7, 9, 50 and 56. One (9) was in Canada, one (56) was PBS. 50 was the only "independent"; the others were all major networks. Neither CNN or FOX existed at all. On a good day we could also receive 11 and 13 from a city almost 100 miles away, but they were usually so snowy as to be unwatchable. None of these televisions - not even the color ones - had screens larger than 21-23" diagonally. Remote controls were unheard of, as were VCRs.
Records were played on a big console stereo and rotated at 33-1/3 or 45 RPM, with a few 78s still around. MP3 and CD players were the stuff of dreams; they hadn't even made the science fiction books yet.
Our home was approximately 1100 square feet; we were decidedly middle class. It had no air conditioning and was heated with an oil-fired furnace. In the summer it was hotter than hell and you went outside and played in the sprinkler to cool off. At night the best you could do was to run a fan, or sleep on a bed with no covers over you in an attempt to stay reasonably comfortable. Today, the median home is 2330 square feet (as of 2004), more than double the size of the home I grew up in, and nearly double the median from 1970 (1400 square feet.) It has air conditioning to keep the inside cool even on the hottest days in August.
Yet 66% of people say "The Good Old Days" were better.
Statistics say otherwise.
So where's the disparity?
I believe we can find it in a number of places, specifically:
- The media LOVES to play off the difference between the "average worker" and the "high paid executive." And indeed, it is true that a CEO makes far more (as a percentage of an average worker's income) than he did in 1970. However, consider this - as a percentage of an average workers income, The President of the United States makes far LESS today than HE did in 1970!
- There is a "permanent wealth effect". That is, we tend to consider ourselves "poor" if we see other people who are richer near us. When we see a lot of $60,000 cars on the road, if we don't have one we feel "poor." Yet we are still driving a car that gets 2x the fuel mileage of the one we had in 1970, has power locks and windows (neither of which were on the 1970 model) and also has air conditioning and an entertainment system (again, missing on the '70s car). By any rational measure we're far better off in terms of automobiles - but the fact that our neighbor has a Porsche and we don't still bugs us.
The fact is, The Medians are doing great. Family Median makes 25% more than his father did 25 years ago, after adjusting for inflation. He enjoys a house nearly double the size of the one he grew up in and has creature comforts that he could only dream of as a child. Ms. Median is far more likely to be professionally employed than her mother, and is paid three times as much as her Mom was. While she still only earns 77% of the Median Man, adjusted for specific jobs her salary is nearly equal, and in any event her mother only made 33% of the Median Male in '65 - that's a hell of a lot of progress forward! The Medians still have two children, but they waited longer to have them, until both parents had careers underway.
They both pay less tax to the federal government (as a percentage of income) and have eight percent more real purchasing power, even after their far more lavish lifestyles are accounted for, than their parents in 1965.
The Democrats would have you believe that The Medians have a horrible life, and that things were better back when they were in control of the country - in the 1960s and 70s.
To be blunt - they're lying.
