American Affairs, Spring 2020: The Cost of Thriving
It sounds like an absurd riddle, or perhaps a kindergarten-level math problem: the median male full-time worker earned $314 per week in 1979, while his counterpart at the median in 2018 earned $1,026;1 who was better off? In fact, the question proves fiendishly difficult, even as its answer lies at the heart of understanding America’s economic progress and challenges.
The easiest answer is that $1,026 is 227 percent larger than $314, case closed. People lacking even rudimentary training in economics know that’s not right, however. Inflation reduces the value of money over time, so $1 in 2018 is not the same as $1 in 1979. But how much inflation has occurred? Economists have numerous methodologies and indices for making estimates, and they have engaged in long-running battles over which are most appropriate in which circumstances.
The COTI shows a declining capacity of a worker to meet the major costs of a typical middle-class household. As the COTI basket has become unaffordable, families have found workarounds, like having more household members work more hours, making do without, borrowing, and relying on government support. Each of these comes with its own costs, undermines the stability of families and the rationale for their formation, and creates high levels of stress and uncertainty. While some may celebrate the increased role played by government in filling these gaps, the continued drift in this direction threatens to strip from the middle class the pride of earned success and self-sufficiency and to reorient society around dependence on the beneficence of public programs. An economy in which even the middle class is largely dependent on redistribution is also likely to be one with badly distorted incentives that steer both individuals and the broader culture away from the behaviors and norms necessary to maintaining a true middle class at all.
