NEET Games with Statistics…

A popular notion across the entirety of the political spectrum is that things are not as good today as they were 40-50 years ago for “middle class” Americans. The causes vary depending on the ideology of the speaker. Progressives believe the “middle class” suffers from attrition due to the actions of the wealthy. Conservative commentators, on the other hand, believe that people are discouraged with the economic situation caused by a bevy of nebulous “socialist policies” ranging from the welfare state to supposed job growth stagnation from excess regulation.

What these two causes célèbres demonstrate, however, is less about economics than it is about messaging and ideology.

Both are fantastic ways to lie through statistics. Take snippets of data that are factually true, remove them from their context, and repackage them as gloom and doom.

True, “middle class” Americans are now only a plurality rather than a majority. Taken alone this sounds terrible. Yet taking a closer look, this obscures a central point: There’s been more growth along the upper end of the income distribution than there has been in the lower end. Or more simply – more people moved upward from the middle class than downward.  It’s worth noting, of course, that how we define “middle class” can be tricky. In this case, we’re using income and wealth that can be compared (relatively) directly between income brackets. It does not reflect self-perception of where you belong. This is, of course, fortunate because a large group of professional class individuals have a tendency to be oblivious to the reality of income distribution. (Basically it’s the people complaining they’re “barely breaking even” at $250k+/year.)

On the flip side, we have arguments about labor force participation. The underlying thesis is that a combination of the welfare state and burdensome regulation have decreased both the desire to keep looking for jobs (potential employees) and an appetite to create new jobs (employers). Alarmingly, from the peak of the LFP rate in 2000, the 2010s is marked by the “lowest” rate of LFP since the 1970s. That, of course, is just half of it.

Rather than being a sign of the end times for American capitalism, however, the decline in LFP rate is perfectly natural. As baby boomers age, a good number of them can simply retire. This results in the first set of exits from the labor market. Indeed, we know that the Great Recession of 2007-2009 actually DELAYED the labor force exit of a fair number of boomer generation workers. The fact that their exit from the labor force seems to have picked up steam in the last couple of years is a GOOD thing. It means they’re now feeling secure enough to quit working.

Secondly, the cohort aged between 16 and 24 also saw a decline in LFP. Onerous regulations such as the minimum wage, the employer mandate in PPACA, workplace regulations, prohibition of letting employees/ Yet again, changes to social norms and cohort age group is a bit of a predicting factor here. While there still is a population of NEET (Not in Education,  Employment, or Training) within that age cohort, the increase was negligible compared to the much larger increases in secondary education (high school) completion and/or attendance. In effect, fewer young people are working or looking for work because they’re busy studying. (Two good articles examining the issue are A Cohort Model of the LFP Rate by Kudlyak and Youth Labor Participation Continues to Fall, but it Might be for a Good Reason by Canon, Kudlyak, and Yiu.)

These two points aren’t meant to put aside the real issues of income inequality or barriers to employment. Unlike the dire predictions tossed around, however, the reality is that the picture isn’t as bleak as folks would like to portray it. Rather than upending the entire system, the actual problems are things where tweaking variables along the margins is the most logical course of action.


Staff Writer
Home Page 

Nob Akimoto is a policy analyst and part-time dungeon master. When not talking endlessly about matters of public policy, he is a dungeon master on the NWN World of Avlis

Please do be so kind as to share this post.
TwitterFacebookRedditEmailPrintFriendlyMore options

26 thoughts on “NEET Games with Statistics…

  1. Do we even have something approaching an objective definition of middle class? Because it seems to be a moving target depending on what is trying to be sold.

    Report

      • I’ve seen the middle class defined by economic lifestyle and I’ve seen it defined by culture and cultural expectation.

        There are probably others.

        Economically, culturally, I’ve seen some argue that it was possible for the man to win bread and the mother to keep the home and that was a lot better while others argue that now it is the current year and the two income trap is a lot more personally empowering than the previous system was.

        It seems obvious that we, as a society, are better off today than we were back then.

        That said, it also seems like something is off. Like we are not measuring everything.

        Report

        • Income inequality. Sure, the pie’s bigger now than it was in 1950. But way more of the pie is in a very small number of hands. (And it’s not the top 1% so much as the top 0.1%).

          That’s gonna distort things. How can it not?

          If nothing else, it leads to lovely bubbles and pops in the markets. Too much money chasing investments, not enough money chasing purchases.

          Speaking of, I’d like to see the math behind this claims:

          Yet taking a closer look, this obscures a central point: There’s been more growth along the upper end of the income distribution than there has been in the lower end.

          I want to see the numbers. Because the numbers I’m somewhat familiar with show exactly that. Except by “the upper end of the distribution curve” you’re talking the upper 1% and especially their betters, the upper 0.1% and such. Which, if you’re not looking at fine grained enough percentages, could look like the middle class was getting richer.

          Instead it’s the wealthy getting much, much, much wealthier.

          At the moment, it’s a claim with nothing backing it up — and it’s opposed to the numbers I’ve seen in the past. I’m not saying it’s wrong, but I’d really like to know where the data is coming from. Unless I missed a link or two in the post?

          Report

              • If everyone else has more than people a few decades ago (in real dollars, of course) then it seems like we’re no longer complaining about how people are not as well off as they used to be but wandering into some weird Harrison Bergeron discussion.

                Report

                • Umm Harrison Berg…no not seeing that. With tech advances everybody will have some advantages over people four decades ago regardless. That really doesn’t address the issue of whether some people have gamed the system to their advantage. Poor people can get far better health care then people five decades ago because health care has improved, that doesn’t mean they aren’t getting boned by the system.

                  Report

                  • Poor people can get far better health care then people five decades ago because health care has improved, that doesn’t mean they aren’t getting boned by the system.

                    And the evidence that they are?

                    Report

                    • Umm besides the advances in medical care. No i guess not. I mean 50 years ago treatment for cancer was pretty minimal and most were death sentences while nowadays some cancers have 90% survival rates. Or arthroscopic surgery or prosthetics or a range of useful psych meds or a thousand other improvements in medical care since 1965.

                      Report

                        • What flavor of evidence do you want? Liberals, conservatives and libertarians all think the current system has problems and doesn’t favor the those near the bottom.

                          Since i’m a liberal i tend to think the data showing more and more of the gains in society are going to a very small slice of the very rich is strong evidence there is something wrong.

                          Report

                          • Evidence that wages for the poor are significantly below their marginal product, or that the poor pay more in taxes than they consume in government services. Or…I don’t know. What do you have?

                            Report


                        • No, I meant evidence that the poor are getting boned by the system.

                          I think misdirected the conversation a bit there.

                          The question problem isn’t whether or not they’ve being ‘boned’ by the system, the question is the incredibly vague generality of whether or not ‘poor people’ are better off than they used to be, and also are they better off in some relative sense but it’s worse because there are more of them, and are there more of them, and…

                          …and none of this is really answerable, or even *meaningful*. It’s a crazy comparison through time where nothing is constant. SO the actual question is kinda dumb also.

                          But let’s rewind a bit. The claim basically being made here is:’The poor are better now than they used to be, so should not complaining’

                          This…seems to be based in some sort of theory that there is a system that is magically raising the tide for everyone, and people should not complain if they are going upward, even if other people are going upward faster.

                          But this is nonsense. The system is not magical. We know *exactly* why we’ve made technological advances, and we know damn well they don’t appear out of nowhere. And we know that the advancement is inversely proportional to the amount of poor.

                          Society invents time- and labor-saving devices because enough people have less time and labor than money. It’s not the 1% who want a dishwasher invented. It’s not the poor hired to wash dishes for the 1%, either. It’s the middle class that causes them to be invented, because it thinks washing dishes is a waste of time and yet can’t afford to hire someone to do that.

                          Same with, basically, everything. Sometimes, yes, the rich do want things, the rich might *want* trains and television and tablets, but they’re not getting them until the middle class can afford them. No one’s going to invent new stuff that only the 1% can afford.

                          People trapped in filthy, grinding poverty do not advance society. If the argument is ‘Things are getting better’ and that’s supposed to be a positive, than why don’t we attempt to structure things to *speed up* this ‘getting better’?

                          Of course, in reality, this is complete nonsense anyway. Even if a rising tide (Without mysteriously has no cause) lifts all boats, we still need to stop people from, for example, driving their yachts over the people floating on life rafts.

                          Report

                          • Oh, and I want to make it clear, this is less a reply to anything being discussed than a sort of ‘People are arguing over something a bit meaningless. Whether the poor are ‘better off’ is not something that can ever be decided, and is mostly irrelevant.’

                            Report

          • That’s gonna distort things. How can it not?

            If nothing else, it leads to lovely bubbles and pops in the markets. Too much money chasing investments, not enough money chasing purchases.

            I am not clear as to how you think that an investment is not a purchase. An investment is a purchase of financial assets and, ultimately, financial assets get used to buy things in the real economy.

            The “how can it not?” is not a particularly convincing argument. There are lots of ways in which growth at the far tail of the income/wealth spectrum can not be causing all the deleterious effects that some claim. In general, the burden is on the person making the causal claim; not the other way around.

            I will go on record and say that my view is that we are in the middle of some very significant social and economic changes that can be characterized as transitioning from the industrial age to the information age (something very similar to what happened when we moved from the agricultural age to the industrial). Part of this transition involves an increase in the gains from certain kinds of specialized knowledge and a decrease in the gains from certain kinds of unskilled and semi-skilled labor. So, it is true that this two things are correlated, but not that one is causing the other. Rather, it is that both things are being caused by the same set of factors.

            Report

            • How do you square that tangible capital formation is going downward?

              The other thing I don’t see (and this is completely subjective) is why does the velocity of money (at the base level) decrease in highly financialized economies versus those in capitalism(1) type economies?

              Report

    • “Do we even have something approaching an objective definition of middle class?”

      To grab from Burt Likko’s eternal “Three Classes” post, I’d say that the American middle class is those people who are at the lower end of the wealth and income scale, but believe that money is obtained through personal effort (as opposed to being a government handout or derived from trust funds and investments.)

      Report

  2. Life is much harder these days. 50 years ago, I was able to live a comfortable middle-class existence without having to work.

    Report

  3. I was with you up until the last sentence. Then you made a declaration about the nature of the solution to the problems of income inequality and barriers to employment. It may be true that the most logical solutions lie in small changes of policy, but you certainly haven’t demonstrated that. It left me with a bad taste in my mouth. Taking it further: how much, exactly, do the two errors discussed in this article distort the conversation? Enough to debunk the policy positions taken by those who commit them? There’s a logical fallacy called the argument from moderation, in which a statement is given undue credence because it doesn’t fall in either extreme. That seems to be what’s happening here.

    Report

    • There’s a couple things here that I probably didn’t adequate explain in the post, but are (I suppose) embedded into my posting history.

      First, I would argue that rhetorically, these two statistics of omission are used to ratchet up the argument in ways that are completely antithetical to good policy solutions. Both LFP and middle class “size” are measures that appeal more to emotional appeals against what is perceived to as generically “wrong” indicators in the economy. The fact that they’re statistics by omission is meant to rile up and stoke resentment.

      This is actually a broader point I’ve tried to address in the past, with the inadequacy and misleading nature of economic statistics when used to make arguments for pretty severe changes to economic policy writ large. ( http://ordinary-gentlemen.com/blog/2012/10/31/value-added-trade-pt1/ is an example.)

      Second, I don’t deny that, at least in this case, I haven’t demonstrated that there are policy solutions that should and could “nibble at the margins” that would be more effective at relieving some of the more negative trends that actually DO exist. I believe these to be things like the ACA, tweaks to the EITC, and the like.

      I loathe arguing from moderation. I’m more inclined to argue from a position of feasibility and immediate impact of a given policy change. Certainly, I would argue that my posts as a whole try to balance the need for lofty moral ideals with pragmatic policy solutions.

      But you’re right that I should tackle actual policy prescriptions soon.

      Report

  4. Now, I might agree that if your baseline of middle class is some sort of level of trust/collaboration and cooperation and that people today have less of that despite having iPhones, advanced medical care, and other various technological advances then we have definitely lost something.

    But we haven’t defined the middle class in terms of that.

    Report

  5. Nibbling at the margins is great when you have decent skills and the opportunity to get ahead.
    Not so good when you have an o’erweaning sense of self importance, no skills that anyone needs, and the unshakeable confidence that you should be getting your ass kicked.

    Care to bet on the percentages?

    Report

Comments are closed.