Over the past three decades, the American economy has grown considerably. Accounting for population growth and price changes, GDP has increased by more than 60 percent. There is a prevailing sentiment, however, that the middle class and the poor have not enjoyed any of the benefits of this sustained growth. A 2007 CBS News poll found that 60 percent of Americans believed that things had gotten worse for the middle class during the past decade. With the financial collapse of 2008 and the recession that followed it, that percentage is surely much higher today. Conventional wisdom holds that things have also gotten worse for those at the bottom, despite efforts to alleviate the living conditions of the poor. As Robert Siegel, of National Public Radio, recently stated, “It is commonplace to say that we have lost the war on poverty.”
Much of this sentiment stems from official measures that paint a bleak picture of the middle class and the poor. Official median household income fell between 1999 and 2004, using the conventional adjustment for inflation. Since then, median income has risen but remains below its 1999 level. Official statistics are even gloomier for the poor: The official poverty rate in 2009 was higher than in 1980.
About the Authors
Bruce D. Meyer is the McCormick professor of public policy at the University of Chicago’s Harris School of Public Policy Studies. James X. Sullivan is an associate professor in the economics department at the University of Notre Dame.