economic news summary and street messages

Middle Class Questions

by Elaine Schwartz    •    Apr 23, 2012    •    1109 Views

If you have questions about Verizon and middle class income growth,  your conclusions might depend on the questions that you ask.

My story begins with a disastrous call to Verizon Wireless. One agent left and never returned, three said they could not help me, and the fifth person, hearing I had made no progress after 45 minutes said, “An iPhone is a luxury item; these things take time.” The sixth agent, realizing my problem had an easy solution, helped me graciously and quickly.
Soon after, Verizon asked me to evaluate their service in an automated survey. Using numbers from 1 to 10 to quantify my satisfaction, I was supposed to assess the last person with whom I spoke in a series of questions. Only in a separate optional comment at the end could I tell about the other five people.
I suspect Verizon’s computers will conclude they just made another customer happy because I gave agent #6 a “10” for every question. And yet otherwise, my experience was far from ideal.

The Verizon survey reminded me of statistics about middle class income.

Researchers disagree about how much middle class income grew from 1979-2007. Citing a 3 percent total, economists Thomas Piketty and Emmanuel Saez say there was virtually no growth. By contrast, a group of Cornell scholars says middle class income grew 36.7 percent.

A 33.7 percent difference! How? Because the answers you get depend on what you ask.

Piketty, Saez and the Cornell group had to decide whether they would ask questions about a tax unit, a household, or a family. The former two economists chose the tax unit while the latter selected the household.  Then, the Cornell group considered whether to ask questions solely about returns from land, labor and capital or to include government transfers. And after that, questions about household size become relevant because people sharing a household–even if unrelated–benefit from each other’s income through shared spending.

The Botton Line: When Verizon, Piketty and Saez, and the Cornell group looked at the answers to their questions, their conclusions were totally accurate. Who is right? It all depends on which questions you think are appropriate.

The NY Times introduced Thomas Piketty and Emanuel Saez and their ideas in a front page story. Their paper with much more detail is here. For the Cornell group’s research, an Econtalk podcast provided an excellent description and a great summary comparison chart. Gated, their NBER working paper is here.

*The first sentence of this post was edited after it appeared.

One Response to Middle Class Questions

  1. Kern says:

    The Cornell group’s research is about something completely different than what the economist studied. The economist study looked at an individual’s income alone. The Cornell study looked at the total income of a house hold no matter how many people contributed to it. See the funny math coming to light? You are saying that each person who earns an income will be counted as one because they share the same address. So if you have 10 people sharing a house because they can’t afford to live alone, they are treated as one earner because they share the same address. This is a nice way to hide the real statistic which is each and every person is NOT earning a middle class living. Using a house hold that contains many earners as a unit of measure that is equal to a hold that contains one earner is silly. I guess funny math is the only way Republicans can justify the results of trickle down economics.

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