New School Economic Review

‘Middle class’ start at $40,000, so who’s poor?

by Benjamin on April 26, 2010

Who the devil are the middle-class? Development people talk of the ‘rising middle class’, political theorists of the ‘middle-class voting blocks’, pundits of the increasingly discontent middle classes. But who are these people and am I middle class? Are you? Is that a bad thing? Going by Wikipedia there’s a number of different definitions, based on educational background, employment, income, or simply as those people who are not ‘upper class’ and not ‘working class’. The middle class is the Solow residual of society. Nice.

Avoiding all this, and playing with US census data on family income distribution, it can be done differently. Take the median and mean family income (turns out it’s $61,355 and $78,845), and with a bit of linear extrapolation you can work out the income that the ‘middle’ of the income distribution earn, or the 50% of the population who earn between the mean-median and those evenly distributed around it.  (In the below graph, population as a percentage of total are at the top of the bars).

So what does that all mean? Well, the middle class, in terms of the ‘middle’ 50% of families, starts at approximately $40,000 p.a. It ends somewhere slightly above $100,000, and indeed there are more people below the middle class than there are above. So if you have a household income of $40,000 you are unofficially middle class.  Approx 30% of the population live below the middle class threshold and 20ish percent are above. None of this is exact, and we don’t know what the top of the distribution looks like, but we can say that society is not exactly even. The U.S. Gini coefficient has been rising, and peaked (temporarily?) in 2006 at 47, standing at 46.6 in 2008. What the recession will bring I don’t know. The poverty threshold in the US for a four-person family is $22,050, which leaves a lot of people under the line, as indicated by this beautiful graphic. From light to dark it illustrates the Poverty rates from 5% (light pink) to >40% (darkest red).

It seems to be getting darker and redder towards the middle and the bottom… Curious that.

The Wall Street Journal falls foul of Freakonomics style analysis and errors

by Benjamin on September 2, 2009

The Wall Street Journal yesterday explained why football coaches vote Republican by revealing that college and NFL football coaches contributed a ‘massive’ $13,000 to the Republican presidential campaign, whereas they only contributed $4,600 to the Democrats.

For the WSJ this is grounds for some serious soul-searching as Obama appearantly “outraised Mr. McCain by more than a 5-to-1 margin”… Never mind that the figures (via Wikipedia even) were Obama $103m : McCain $42m or Democrat $321m : Republican $261m. Anywho, the WSJ proceeds to make the argument that football coaches have a winning mentality, discipline, down-to-earthness “and [are] just conservative, I think. It fits with the Republicans”. Right… Lets just check that bit about small samples, ‘un-contextual’ data and spurious results – which caused such trouble for the Freakonomics guys. 23 coaches donated money, 20 of which gave (an average $650) to the GOP, and 3 for the democrats. There are some 32 NFL teams and 64 ‘top flight’ College teams, so the sampling of individuals is far from representative – or more correctly, 76% of football coaches didn’t care enough for either party to donate – and when they did, democrats gave more on average than the republicans.

But lets forget all that – lets say the WSJ is on to something. Why might football coaches be more keen to vote republican than democrat? Maybe… Just maybe, they fit the republican voter base? Here I am not talking about the idea that according to the WSJ ‘many’ coaches are from the Southern States – is that true? – nor that “Republicans tend to revere strong, singular executive leaders—a pretty good description of a coach” – whatever that is supposed to say about the republicans and democrats… Maybe it’s just that the people who make more money vote for those who wish to keep the top bracket tax low? But are the coaches in the top brackets?

Yep, college football coaches make an average 11 times more than the average professor, clocking up $1m each on average well illustrated here or written about here, and the NFL coaches averaged some $2.5m in 2003, and by now it’s surely more, with Seattle’s Mike Holmgren leading the pack on an average $5.1m every year. So let me get this straight, of the 24% of football coaches who bothered to contribute to the presidential election, the 20 guys who gave to the republican party each parted with a hefty 0.026% of their annual income… That is equivalent to me buying a lottery ticket. Somehow I am not sure me buying the lottery ticket re-affirms my utter and complete belief in me winning the big prize… No, I’m sorry, the WSJ piece is a cute little piece of pop-economics, which one should probably not read very much into – oh, and for those curious about the relation between income and voter decisions, here’s a nice graph from one post 2008 election analyst:

Data running back to 1980 is available, and shows the same trend. The lowest income brackets 0-$15k and $15k-$30k, have consistently voted democrat, by almost 2:1 under Clinton and Bush. The highest income brackets $100k+ and $200k+ when available voted republican by almost the same proportion…

High Income and bad health?

by NSER Editorial Board on January 14, 2009

The World Bank in 2004 sought to explain socialist Cuba’s success in public health, and juxtaposed Costa Rica as a contender for similar public health gains, through the orthodox model which stresses ‘broad based growth’, backed by increased private investment. However a unique public institution (the Caja Costarricense de Seguro Social) for health and social security insurance better explains Costa Rica’s health advances, and its superior performance to some higher income Latin American countries such as Mexico and Argentina. The relationship between increased income and improved health is positive, but weak and fragile. Other factors which may be more important are: levels of education (especially of women), numbers of trained health workers, universal access regimes for health services, well coordinated public health institutions, decent housing, and the adoption of new technologies. The experience of Latin America tells us that greater attention must be paid to well-organized public institutions, including those which train health workers, arrange universal access to health services and ensure adequate water, sanitation and housing.

Download full paper here

Anderson, Tim. 2007. “Health, income and public institutions: Explaining Cuba and Costa Rica.” New School Economic Review 2(1): 22-37