"you can never go wrong by lamenting the decline of the middle class and the stagnation of wages."

Steven Chapman on Reason has a post about what I've called median wage stagnation. He says it isn't so:

"Terry Fitzgerald, a senior economist at the Federal Reserve Bank of Minneapolis, says the answer is simple. Far from declining, he writes, "the economic compensation for work for middle Americans has risen significantly over the past 30 years."

The mistake made by the School of Gloom is looking only at wages, narrowly defined. According to the Bureau of Labor Statistics, average hourly earnings of production and nonsupervisory workers, adjusted for inflation, fell by 4 percent between 1975 and 2005. But those figures deceive because they omit fringe benefits like health insurance, pensions and paid leave, which make up a bigger share of total compensation than before. The numbers also rely on a mismeasure of inflation.

When those flaws are corrected, a very different trend leaps off the page. Median wages, says Fitzgerald, rose 28 percent between 1975 and 2005. Nor were the gains restricted to Bill Gates and Hannah Montana: Significant gains occurred in the middle as well.

The same pattern holds for households. The figures that suggest families are struggling to stay even overlook some types of income, and they don't account for the fact that households have gotten smaller on average. After accounting for such things, Fitzgerald found that "inflation-adjusted median household income for most household types increased by roughly 44 percent to 62 percent from 1976 to 2006."

So I found the study:

"Conclusion

The claim that the standard of living of middle Americans has stagnated over the past generation is common. An accompanying assertion is that virtually all income growth over the past three decades bypassed middle America and accrued almost entirely to the rich.

The findings reported here—and summarized in Chart 8—refute those claims. Careful analysis shows that the incomes of most types of middle American households have increased substantially over the past three decades. These results are consistent with recent research showing that the largest income increases occurred at the top end of the income distribution. But the outsized gains of the rich do not mean that middle America stagnated.

Why does the debate about middle America matter? Because an accurate assessment of the economic progress of middle America is a crucial input in formulating good public policy. Claims of long-term middle America stagnation—such as those quoted at the beginning of this article—are often part of a broader argument about the adverse impact of globalization, outsourcing and free trade. And middle class stagnation is used as motivation for a specific set of policies. But if middle America has not stagnated—as this analysis has shown—then this motivation for those policies is without merit.

Furthermore, if it is understood that middle America has indeed experienced substantial gains, policy priorities may change. For example, more emphasis might be placed on policies that promote continued economic growth or that target deeply rooted poverty rather than middle class stagnation. But regardless of the specific policy, policymakers and the public should base their decisions on an accurate assessment of how the economy has impacted and continues to impact people’s lives."

I agree with the idea that we should focus government on the needy, and really help them, and not on the middle class. However, we have to have a middle class that feels itself to middle class and not hovering above destitution.

I see a few debatable points in the study:

1) Overstated inflation ( I don't know, take your pick, but don't pick because you like the results )

2) There are fewer persons per household, so more for each person ( This cuts both ways. If households are smaller, it could be because people don't feel as wealthy as they used to and are having less children )

3) Expenses paid by employer, etc. ( This could actually cancel out a bit, if these expenses used to be cheaper and were paid by the employee )

It's a good paper, and Fitzgerald has more on the same subject.

Again, I agree with his emphasis, but not necessarily his conclusion, in the following sense: An emphasis that he and I both want needs to be based on how people actually see their situation. I'm not convinced studies like this can do that, however well argued.

I agree with Chapman about this:

"Thanks to American capitalism, ordinary workers and families are better off today than they were a decade or a generation ago. In the midst of scary economic times, that's a heartening fact to keep in mind. Even if certain Democrats would rather you didn't."

But not for the same reasons. It is still possible that median wage stagnation has occurred. Perhaps a libertarian can never be wrong about things always getting better.