Good news for Christmas. There are more jobs in the economy, and earnings are rising. Friday's employment report showed an increase of 132,000 jobs in November, as well as an extra 42,000 jobs from revisions to prior months. More Americans joined the labor force. And average hourly earnings increased by 4.1% over the past year, well above inflation.
Lou Dobbs may have to adjust his rhetoric. Last month he wrote, "The new Congressional leadership understands that, at least in part, their majority was won as a result of growing middle-class concerns over job insecurity, stagnant wages and disgust at a class of elites that has subordinated the well-being of our middle class to the dictates of corporate masters."
Mr. Dobbs is not alone. Peter Orszag, a senior fellow at the Brookings Institution, in the Boston Globe of December 3 said, "For the past three decades, macroeconomic growth has not made American families feel sufficiently secure. Median real wages have stagnated, and families now face substantial new risks."
But the truth is that median wages haven't been stagnating for decades. They've been rising. Not only is the median American family — the one right in the middle of the income distribution — doing better than ever, but poor families are doing better also.
We can see indications of prosperity all around us. The boom in self-storage facilities, catering to middle-class America, has come about because our possessions have outgrown the capacity of our homes.
Yard services, which used to be a luxury of millionaires, are no longer uncommon in middle-class neighborhoods. Once, families used to get together and rake up the leaves and Dad or the kids used to mow the lawn. Now workers with large flat-bed trucks with immigrants go door to door and do it for them.
For many, eating out used to be just for birthdays, anniversaries, and Mother's Day (sorry, Dad), but these days going out to dinner isn't so special. A special occasion will call for a special restaurant, but there are plenty of everyday restaurants to cater to everyday occasions. And the number of restaurants that deliver to the home has skyrocketed.
These changes are happening because, over the past 25 years, more families have moved to upper-income brackets. In 2004, the latest year for which we have comparable information, 34% of families made over $75,000. But in 1979, only 21% did so, after adjusting for inflation. And we now have fewer families in lower-income brackets. Only 46% of families made less than $50,000 in 2004, compared with 54% of families in 1979. The stagnant real median family income that is supposedly the reason for last month's Democratic victory is not so sluggish after all. Real median family income was $54,000 in 2004. After inflation, that's 11% higher than in 1994, 18% higher than in 1984, 25% higher than in 1974, and 59% higher than in 1964.
The American family has shrunk due to changes in society, such as more divorces, longer life-expectancy for women, and fewer children. So family income in 2004 cannot correctly be compared to family income in 1964 — today's family income is spread around fewer people.
Adjusting for decreasing family size, real median family income is 13% higher than in 1994, 22% higher than in 1984, 37% higher than in 1974, and 88% higher than in 1964. That's a significant increase.
These numbers represent income before tax. So they don't include subtractions for federal, state, and payroll taxes, which reduce income. Nor do they include additions to income such as employer-provided health insurance and pensions, and government benefits such as Medicare, Medicaid, food stamps, school lunch programs, and tax credits.
When all these are taken into account, real median household income adjusted for household size (the numbers aren't available for family income) has risen by 34% over the past 20 years. A substantial increase, yes. Stagnant real incomes, no.
Other income data show the same trends. Over the past 30 years, real average hourly compensation, a measure that includes wages and benefits, has risen by 41%. And real income per person has increased by 62%. This cannot be described as tepid growth.
Households below the poverty level have also fared better over the past decades. The number of such households has increased from 13 million to 15 million over the past 20 years, but for many of these households material conditions have improved.
Look at housing, one benchmark of living standards. In 1985, 38% of poor households owned a home — by 2005 it was 43%. And these homes were of better quality than the 1985 homes. In 1985, 17% of these homes had central air conditioning, and in 2005, 50% did. Fifty-six percent of homes owned by poor households had washing machines in 1985, and in 2005, it was 64%.
Of course, glimpses of income and assets of particular income groups don't tell us much about progress over time, because Americans change income groups as they progress in their careers. Lifecycle job mobility, with its ups and downs, is the most significant form of economic progress. The teenage minimum wage workers of today are the engineers, lawyers, nurses, and teachers of the next decade.
The myth of stagnating real median incomes over the past 30 years is one of the most enduring in the popular press. But, with apologies to the esteemed Mr. Dobbs, it just doesn't hold up. The holidays are almost here, and for most Americans the gifts will be more munificent than ever.
This article originally appeared in the December 11, 2006, New York Sun.