Middle Class Steven Pressman Monmouth University and Colorado State University pressmanmonmouthedu 2 MOLLIE ORSHANSKY BA Hunter College 1935 in math amp statistics graduate work at American University in economics amp statistics ID: 579826
Download Presentation The PPT/PDF document "Defining & Measuring the" is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
Slide1
Defining & Measuring the Middle Class
Steven Pressman
Monmouth University and Colorado State University
pressman@monmouth.eduSlide2
2Slide3
MOLLIE ORSHANSKYB.A., Hunter College, 1935, in math & statistics; graduate work at American University in economics & statistics1939, research assistant at US Children’s Bureau, worked on children’s health & nutrition1942, statistician for NYC Department of Health
1945, U.S. Department of Agriculture, working on family consumption & living standards. She soon became their Senior Food Economist, collecting & analyzing data on food consumption
1958, Social Security Administration expert on income adequacy
Dec. 1962, President Kennedy asked Walter Heller, chair of CEA to get poverty statistics.
1963, developed US definition of poverty
1965, OEO adopted her measure
1969, Bureau of Budget directed all Federal agencies to use this measure to determine eligibility for federal programs
3Slide4
SOME APPROACHES TO DEFINING THE MIDDLE CLASSPercentage around median incomeMiddle Three Income Quintiles- look at what % of total income they getRobert Putnam, Our Kids
- households where no parent has a college degree but some education beyond high school
Thomas Piketty,
Capital in the Twenty-First Century
—look at wealth distribution
Ask people if they are middle class & use average income of those who say they are middle class (Pew)
4Slide5
HOW ORSHANSKY MEASURED POVERTYRecognized importance of family sizeUsed food budgets for families of different sizes (first used by DuBois in the US in the late 19th century)Costed out food budgets for familiesDept. of Agriculture surveys found that households spend around 1/3 their income on food, she multiplied food budgets (for each household) by
3
.
US poverty rate=#poor households/#households
Thresholds rise every year with inflation (CPI)
5
2015 POVERTY GUIDELINES FOR THE 48 CONTIGUOUS STATES AND THE DISTRICT OF COLUMBIA
Persons in family/household
Poverty guideline
1
$11,770
2
15,930
3
20,090
4
24,250
5
28,410
6
32,570
7
36,730
8
40,890
Note: For families/households with more than 8 persons, add $4,160 for each additional person.
Source: 2015 Poverty Guidelines, U.S. Department of Health & Human ServicesSlide6
PROBLEMS WITH ORSHANSKY MEASUREBased only on money income from work or “market income”Ignores other income (health care benefits)Ignores Taxes on incomeIgnores Government Benefits (Food Stamps, Medicaid, Housing Vouchers, etc.)Says nothing about assets or debt
(Pressman & Scott, ROSE, June 2009)
What is regarded as necessary changes over time & from place to place
100 years ago, cars, phones, computers, child care, college education and 2 cars to commute to work were not necessary
Today, food multiplier 4 or 5 rather than 3.
Regional Cost of Living Differences
Used “emergency food budget” (result in 75%-80% lower
poverty thresholds) rather “low-cost” budget
6Slide7
POSITIVE ASPECTS OF THE ORSHANSKY DEFINITIONShe went out & found out what was necessary for a household to survive during the year. “Grounded theory”Recognized importance of family size & came up with an empirical solutionRecognized that location mattersRecognized that inflation matters
7Slide8
WHY THE MIDDLE CLASS MATTERSECONOMIC REASONSTheir income & spending are main determinants of economic growthProductivity growth suffersPOLITICAL REASONSVoting increases
Aristotle (Politics, Book IV) noted that communities with a large middle class would be dominated by neither the rich nor the poor & will be better run as a result
Lipset
(1959) Hypothesis- a large middle class penalizes extremists & sustains democracy
PSYCHOLOGICAL or HEALTH REASONS
Inequality leads to stress and to health problems (Wilkinson & Pickett, 2011)
8Slide9
WHO IS MIDDLE CLASS- A 5 STEP PROGRAMTake median household income for a family of 4 (surveys and estimates of household wealth in 2010 found a middle-class income for a family of four was $68,000+, close to the median for a family of four Find median household disposable income Middle class those 4-member households with disposable income between 67% & 200% of the median (Pew Research Center)
For households of other sizes, use the
Orshansky
adjustments & repeat.
% middle
class
= % all households that are middle class
9Slide10
AN ADDITIONAL PROBLEMDOWNWARD MOBILITYDuring the Great
Recession
median
household income
fell.
Households may still be counted as middle class, even after experiencing a 5% drop in disposable income, because the median also dropped.
10Slide11
LUXEMBOURG INCOME STUDYBegan in 1984Now 48 countries in LIS databaseComparable definition of income & other variablesData centered around particular years, called “Waves”-Wave #1 centered around 1980
-
Wave
#8
centered around
2010
-Wave #9
centered around 2013
11Slide12
MIDDLE-CLASS INCOME LEVELS (US2013)12
HOUSEHOLD SIZE
INCOME
RANGE (Household
Income)
1
$28,569-$85,281
2
$37,140-$110,865
3
$45,710-$136,449
4
$54,281-$162,033
5
$62,852-$187,617
6
$71,422-$213,201
7
$79,993-$238,786
8
$88,564-$264,370
9+
$97,135-$289,954
Source: Luxembourg Income Study DatabaseSlide13
US MIDDLE CLASS OVER TIME13Slide14
MIDDLE CLASS, ANGLO-SAXON COUNTRIES14Slide15
MIDDLE CLASS, NORDIC COUNTRIES15Slide16
MIDDLE CLASS, CONTINENTAL EUROPE16Slide17
MOVING FORWARDWe need to control for regional difference in cost of living & expand the number of countries with measures of the middle class.We need to begin to test theories find out what it is that has caused the middle class to shrink in the US & other developed nations.Standard economic explanations (robots and trade) seem to lack empirical support.
We need to understand why the middle class did not shrink in some countries (Canada, Italy and Norway) & increased in a few (France).
A paper of mine on the case of Italy identifies demographics and the lack of
financialization
as two key factors.
17Slide18
Thank you for paying attention and putting up with me!!