Middle-class Americans are thriving, thanks to capitalism!

Robert Fellner

Candidates in the Democrat presidential primary are united around a single message: middle-class Americans are not benefiting from the enormous gains in wealth and prosperity created by capitalism and, as such, government needs to play a much larger role in the economy.

This narrative is objectively false.

The unemployment rate is currently at 3.6% — the lowest level seen in 50 years. The 11.8 percent overall poverty rate is approaching an all-time low, with the rate for both African Americans and Hispanics having already hit that mark.  

At nearly $66,000, the median household income is up 15 percent since 2012, after adjusting for inflation, and is now at an all-time high:

Job creation is likewise producing record numbers, with the number of job openings having now surpassed the number of those seeking employment, another historical first.

This abundance of job opportunities was recently reflected in the January 2020 Consumer Confidence Survey, which reported a more than 4 to 1 difference between those who say jobs are “plentiful” compared to those who say jobs are “hard to get.”

Those arguing for greater government control of the economy respond to such impressive economic numbers by claiming that these macroeconomic indicators fail to fully capture the plight of the working class, who allegedly have been left behind by this economic boom and are unable to keep up with the cost of living.

So, what does federal wage data have to say for those at the middle and lower end of the income distribution?

Median wages for full-time workers in the second quartile, which comprises the bottom 25-50 percent of the distribution, are up more than 30 percent since 1980, after adjusting for inflation, and are now at an all-time high:

Middle Class Wages are up 30 percent, after adjusting for inflation

But if the good news reflected by the unemployment rate, poverty rate, median household income, and median wages for low- and middle-wage workers still isn’t enough to convey how well things are, why not ask the people themselves?

A record-high 59% of Americans are satisfied with their financial situation and 74% expect to be better off financially next year, according to a just-released poll from Gallup.

When asked to consider their personal life as a whole, not merely their financial situation, 90% of Americans said they were satisfied — the highest number ever recorded by Gallup.

Normally, this would be the end of the story. The data convey a clear narrative that aligns with the findings of reputable polling organizations.

Unfortunately, this hasn’t stopped the steady stream of news reports and analyses claiming that the middle class is being crushed by capitalism — a thesis which is then used to justify massive state intervention. Yet, such claims typically fall apart under further scrutiny.

A recent analysis featured in the Washington Post offers a prime example. The report claims to show median male earnings failing to keep up with the rising cost of necessities like health care, housing and transportation. That analysis, however, erroneously treats employer-paid health insurance costs as an expense borne by the employee, while also operating on the assumption that the used car market simply does not exist, among other errors.

As the great economist Andrew Biggs pointed out recently, if lower and middle class workers were really struggling, we would expect to see reduced spending on purely discretionary items, like entertainment and charitable giving.

Once again, the data sharply contradicts the narrative that Americans are doing worse today than they have in the past. From 1984 to 2018, American households in the second quintile, which are those among the bottom 20-40 percent of the distribution, increased their real spending on charitable contributions and entertainment by 40 percent and 98 percent, respectively:

Both the second and middle quintile family spent over $1,000 last year on charitable gifts, which was much higher than I would have guessed, given the modest average incomes of both units. Moreover, it’s a great reminder of just how charitable our fellow Americans are, regardless of their income levels.

Contrary to the narrative being pushed by advocates of government intervention, capitalism remains the most effective mechanism for producing widespread wealth and prosperity ever discovered — and the evidence is right in front of us.

Robert Fellner

Robert Fellner

Policy Director

Robert Fellner joined the Nevada Policy in December 2013 and currently serves as Policy Director. Robert has written extensively on the issue of transparency in government. He has also developed and directed Nevada Policy’s public-interest litigation strategy, which led to two landmark victories before the Nevada Supreme Court. The first resulted in a decision that expanded the public’s right to access government records, while the second led to expanded taxpayer standing for constitutional challenges in Nevada.

An expert on government compensation and its impact on taxes, Robert has authored multiple studies on public pay and pensions. He has been published in Business Insider, Forbes.com, the Las Vegas Review-Journal, the Los Angeles Times, the Orange County Register, RealClearPolicy.com, the San Diego Union-Tribune, the Wall Street Journal, the Washington Examiner, ZeroHedge.com and elsewhere.

Robert has lived in Las Vegas since 2005 when he moved to Nevada to become a professional poker player. Robert has had a remarkably successfully poker career including two top 10 World Series of Poker finishes and being ranked #1 in the world at 10/20 Pot-Limit Omaha cash games.

Additionally, his economic analysis on the minimum wage won first place in a 2011 George Mason University essay contest. He also independently organized a successful grassroots media and fundraising effort for a 2012 presidential candidate, before joining the campaign in an official capacity.