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Income and Wages

The 1980s: Great For The Middle Class

Economists are challenging the theory that the middle-class fell behind during the Reagan administration. Mary C. Daly and three other analysts at the Federal Reserve Bank of San Francisco contend in a new study that while the middle-class did shrink then, that was because more people were moving upward -- rather than falling behind. In 1979, 50.5 percent of the U. S. population was in the middle-class -- defined as having incomes between twice to five times the official poverty rate. By 1989, that share had fallen to 45.4 percent, a figure often invoked to show the failure of laissez-faire Reaganomics. In fact, more than 90 percent of those who left the middle-class advanced into the ranks of the wealthy. So the share of those who would be considered high-income jumped from 17.2 percent in 1979 to 21.9 by 1989. Thus, the misnamed "decade of greed" was actually a decade of opportunity. As the study notes: "The great majority of working families under age 62 as well as older families in the middle of the income distribution were better off at the end of the decade than were their counterparts at the beginning." A growth rate of well above 3 percent of gross domestic product during the Reagan years looks enticing, compared to an average annual rate of just under 2.6 percent during the Clinton years. Economists credit lower taxes on income and capital during the 1980s with setting off the Reagan boom. Source: Perspective, "The Vanishing Middle-Class?" Investor's Business Daily, March 12, 1997.

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