The poor are getting poorer and the rich are getting richer is common meme these days. The middle class is sinking into poverty as the top 1% just gets wealthier. Is that true?
Economist Mark Perry posted the graph below last week. It has been creating a buzz. (I included it in last Saturday's Saturday Links but I've decided to highlight it here.) He divides family income into low, middle, and high income categories and then charts what percentage of families are in each category over the last forty-five years, using constant (inflation-adjusted) dollars. The chart shows that the percentage in low-income families has modestly decreased, the percentage of middle-income families has dropped by a third, but the percentage of high-income families has become 2.5 times larger.
This chart may actually understate things a bit. I suspect the data is pre-taxes and pre-transfers, in which case I think we would see the low-income family percentage decreasing a little more and modest corresponding changes in the other two groups.
Also, I suspect a significant factor in the change has been the entry of women into the workforce. Few families were two income families in 1967. Families with two full-time wage earners are going to have much higher income. Families left the middle class by becoming two-wage families, not because of constant increases in the real value of individual wages.
Here is Mark Perry's analysis.