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A "Second Opinion" on the Economic Health of the American Middle Class

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  • Richard V. Burkhauser
  • Jeff Larrimore
  • Kosali I. Simon

Abstract

Researchers considering levels and trends in the resources available to the middle class traditionally measure the pre-tax cash income of either tax units or households. In this paper, we demonstrate that this choice carries significant implications for assessing income trends. Focusing on tax units rather than households greatly reduces measured growth in middle class income. Furthermore, excluding the effect of taxes and the value of in-kind benefits further reduces observed improvements in the resources of the middle class. Finally, we show how these distinctions change the observed distribution of benefits from the tax exclusion of employer provided health insurance.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17164.

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Date of creation: Jun 2011
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Handle: RePEc:nbr:nberwo:17164

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  1. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2011. "Top Incomes in the Long Run of History," Journal of Economic Literature, American Economic Association, vol. 49(1), pages 3-71, March.
  2. Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
  3. Robert J. Gordon, 2009. "Misperceptions About the Magnitude and Timing of Changes in American Income Inequality," NBER Working Papers 15351, National Bureau of Economic Research, Inc.
  4. Lynn Karoly & Gary Burtless, 1995. "Demographic change, rising earnings inequality, and the distribution of personal well-being, 1959–1989," Demography, Springer, vol. 32(3), pages 379-405, August.
  5. Wankyo Chung, 2003. "Fringe Benefits and Inequality in the Labor Market," Economic Inquiry, Western Economic Association International, vol. 41(3), pages 517-529, July.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Is Income Stagnation a Myth?
    by Karl Smith in Modeled Behavior on 2011-09-20 20:34:55
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Cited by:
  1. Dennis Fixler & David S. Johnson, 2012. "Accounting for the Distribution of Income in the U.S. National Accounts," NBER Chapters, in: Measuring Economic Sustainability and Progress National Bureau of Economic Research, Inc.
  2. Bargain, Olivier & Dolls, Mathias & Immervoll, Herwig & Neumann, Dirk & Peichl, Andreas & Pestel, Nico & Siegloch, Sebastian, 2013. "Partisan Tax Policy and Income Inequality in the U.S., 1979-2007," IZA Discussion Papers 7190, Institute for the Study of Labor (IZA).

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