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NY Times, Oct. 29 2016
Richer but Not Better Off
By EDUARDO PORTER
It has been a long, painful slog out of the Great Recession. More than
seven years into a halting recovery, fewer than 60 percent of
working-age Americans hold a job — not much more than at the trough of
the recession in the spring of 2009.
So it was hardly surprising that the Census Bureau’s report last month
of rising family incomes and declining poverty was received as solid
proof that the United States has finally pulled through.
The White House was quick to trumpet that the income of a typical
middle-class household had increased at the fastest pace on record last
year, while the poverty rate experienced its steepest decline since the
1960s, when Lyndon B. Johnson began his war on poverty.
On the campaign trail, Hillary Clinton mischievously tweeted a comment
made by Donald J. Trump in 2004: “It just seems that the economy does
better under the Democrats than the Republicans.”
Mark Perry of the conservative American Enterprise Institute argued that
the report undercut the woeful conventional wisdom about a shrinking
middle class, because the middle class is actually moving up the income
ladder, not down. Matthew Yglesias of Vox resorted to Dickens’s sunnier
side: “We are currently living through the best of times.”
But the question remains: best for whom? Poorer households did get a
bigger raise, proportionally, than the rich did last year. But that
looks like a bug, not an enduring feature of the American economy. The
data does little to suggest that the American economy has managed to
overcome its perhaps most debilitating weakness: inequality.
Despite last year’s gains, the bottom 60 percent of households took a
smaller share of the income pie than four decades ago. The bottom 20
percent took in only 3.4 percent of all income — compared with 5.6
percent in the mid-1970s. The richest 5 percent of Americans, by
contrast, have done much better for themselves — taking in about 22
percent of the nation’s income, 6 percentage points more than they did
in 1975.
America’s inequities can be sliced in different ways. For instance,
champions of the nuclear family will underscore the report’s finding
that married couples in which both spouses work saw incomes rise by
nearly $4,000 last year — to almost $104,000 at the median, the highest
ever.
The problem is that the two-earner family is not as iconic as it once
was, falling as a share of all families over the past two decades. The
families that have been growing are those headed by a single woman. Last
year their incomes rose sharply — to $34,126. Sure, that was a big jump
on 2014. But they were still making less than they were 15 years before.
How does this count as shared prosperity?
Fans of the American flavor of capitalism will surely argue that such
inequities are irrelevant now that the floor seems to be rising for
everybody. But income isn’t the only way to measure prosperity; by many
other metrics, Americans’ well-being remains pretty low. Whether it is
life expectancy or infant mortality, incarceration or educational
attainment, countless statistics offer a fairly dark picture of the
American experience. It is a picture of prosperity that consistently
leaves large numbers of Americans behind.
The United States suffers the highest obesity rate among the 35
industrialized countries that make up the Organization for Economic
Cooperation and Development. In terms of life expectancy at birth, it
ranks 10th from the bottom. America’s infant mortality rate has dropped
by half since 1980. Still, today Turkey and Mexico are the only
countries in the O.E.C.D. to report a higher share of dead babies.
Infant mortality fell faster in almost every other industrialized country.
It is worth noting that, if you look only at how much money they make,
the citizens of virtually all of these industrialized nations are poorer
than Americans.
Canadians are 19 percent poorer, but Canadian teenagers easily outscore
their American peers in tests of math, reading and science. The French
take home 33 percent less. But a French baby born today will be expected
to live three and a half years more, on average, than an American one.
Income per person in Japan is only two-thirds of what it is in the
United States. But Japan’s infant mortality rate is only one-third of
America’s.
Peter Klenow and Charles Jones of Stanford University have tried to
account for some of these other dimensions, incorporating consumption,
leisure, life expectancy and inequality into one bundle of well-being.
They found that the United States looks substantially less prosperous
than when it is ranked by money alone. Americans may be 50 percent
richer than the French. But by the new metric they are only 9 percent
better off. Income per person in Britain is only 75 percent what it is
in the United States. But using the composite indicator, the British are
in fact almost as prosperous as Americans.
I would argue that even this metric overstates American prosperity. It
misses many dimensions of health and the quality of the environment.
And, to my mind, it falls way short of accounting for how much damage
rampant inequality can inflict on society. Ranked by inequality, the
United States surpasses every other advanced nation. The Klenow-Jones
approach incorporates it by thinking about how much people would pay to
avoid the risk of living in an unequal society, if they might end up on
the wrong side of the divide. But inequality could deeply affect
well-being in other ways.
The United States has perhaps the smallest middle class in the
industrialized world: In 2013, just 70 percent of non-elderly American
households had disposable incomes between one-half and twice the income
of the typical household. In Norway it was 87 percent.
The income of the richest 5 percent of nonelderly American households
grew at nearly the fastest pace in the O.E.C.D. between 1985 and 2010.
By contrast, the income gains of American households in the middle of
the distribution were outpaced by pretty much every other advanced nation.
This kind of polarization is behind the obesity, the shortened life
spans and the dead babies. These are the ills of the Americans left behind.
It is the losers in America’s distribution of prosperity who have the
shortest life expectancies. They are also more likely to be obese. The
babies of white, college-educated American women survive as well as the
babies of women in Europe. It is those born to nonwhite, less educated
mothers who die at disproportionately high rates.
This is not to knock a good year’s worth of income growth. But the
prosperity of the United States can hardly be called such when it leaves
so many behind. America’s rich are richer than the rich almost anywhere
else. Its poor are still poorer than the poor of its peers in the
developed world. Can we claim prosperity without closing these gaps?
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