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Reality Check: Standard of Living Steadily Improving

When we measure by consumption, it’s clear people are better off today than they were 30 years ago.

iPhones for sale at the Apple Store in Manhattan.

iPhones for sale at the Apple Store in Manhattan.

Aparna Mathur reports: Commenting on the state of the economy at a Habitat for Humanity construction site in Oakland, Calif., former president Jimmy Carter recently said that “the disparity between rich people and poor people in America has increased dramatically” and that “the middle class has become more like poor people than they were 30 years ago.” These sentiments are commonly echoed across the country as the effects of the most damaging economic slump since the Depression continue into their sixth year.

The Census Bureau’s “Income and Poverty” report, released in September, underscored that the economic recovery has largely failed to reach the poor and middle class. However, there is a subtle but substantive difference between stating that inequality is worse today than it was 30 years ago, and that people are worse off today than they were 30 years ago. Rising inequality does not preclude an improvement in standards of living at the bottom of the income distribution.

Stepping back from the traditional debate about income inequality, Kevin Hassett and I recently co-authored a study that focuses on changes in material standards of living over the last 30 years. Consumption of goods and services is often a far better measure of household welfare than is income. What we buy and consume with our income directly adds to our utility and happiness, and it also has a direct impact on our standard of living. Read the rest of this entry »

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