Donald J. Boudreaux: Stats counter belief in middle-class decline behind protectionism
Much of today's U.S. support for protectionism — for punitive taxes on Americans who buy imports — springs from the belief that America's middle class has been impoverished over the past several decades. Never mind that, if this belief were true, it's twisted logic that leads to the conclusion that the middle class will be enriched by artificially restricting their access to goods and services.
Instead, be aware that this belief in middle-class economic impoverishment is balderdash.
The U.S. Census Bureau collects yearly data on households in nine inflation-adjusted annual-income categories, from less than $15,000 to $200,000 or more (in 2016 dollars). These data allow us to compare the percentage of households in each category today and in the past — say, in 2001, the year China joined the World Trade Organization and, hence, became a more established part of the global economy.
While from 2001 through 2016 there was a slight increase in the percentage of households earning less than $15,000 annually (up 0.6 percentage points, from 10.6 to 11.2), in each of the other six categories for annual incomes less than $150,000, the percentage of households slightly declined.
But in each of the top two categories — $150,000 to $199,999, and $200,000 and up — the percentages are significantly higher . The percentage of $150K-to-$199.9K households rose from 5.4 to 6.6, while those earning $200K or more increased an incredible 1.7 percentage points, from 5.3 to 7. All told, the percentage of households that earn annual, inflation-adjusted incomes of $150,000 or more rose from 10.7 in 2001 to 13.6 in 2016.
If America's middle class truly is disappearing, it's disappearing not into the lower class, but into the upper class. And because both imports and exports have risen as a percentage of U.S. GDP since 2001, it's reasonable to give at least some credit for ordinary Americans' rising prosperity to Americans' increased participation in the global economy.
“How can this be?!” skeptics shout. “We're constantly reminded of America's declining manufacturing.”
First, the service sector is just as valuable as the manufacturing sector. (Would you be disappointed if your children grow up to be doctors or lawyers instead of factory hands?) Second, U.S. manufacturing output's value today is near its all-time high (which it hit just prior to the Great Recession) and growing. Yet manufacturing employment is indeed declining — as it has been for almost 40 years. Today, 7 million fewer Americans work in manufacturing than in 1979 (the year this number hit its peak). Note also that the percentage of the workforce in manufacturing has been declining for even longer — 75 years.
President Trump wants you to think this decline in manufacturing employment is bad. But it's not. It's caused not so much by trade but by technology improvements that allow factories to produce more output with fewer workers, thereby releasing workers to produce even more valuable service-sector outputs — which is one reason why today, more U.S. households than ever are high-income.
Donald J. Boudreaux is a professor of economics and Getchell Chair at George Mason University in Fairfax, Va. His column appears twice monthly.