Blog Post

AEIdeas

Many of us get much of our news and information from social media. But much of that news and info is distorted or just plain wrong. Take this graphic I saw on Facebook. It’s the sort of thing a friend might share with you:

It’s the sort of thing an activist or partisan would cook up. It has no interest in context or nuance or presenting a complete picture of economic trends. You are dumber and less informed for reading it. So here’s what I am going to do as a sort of case study. I am going to do five blog posts examining each of these economic claims as a way of showing how facts get distorted to make a political point.

Here’s the first one: When bad ‘facts’ downplay a good economy, part 1: Stagnant wages.

Here’s the second: When bad ‘facts’ downplay a good economy, part 2: Are most Americans really living paycheck to paycheck?

And here’s the third: “62% of jobs can’t support a middle class life.” This claim seems to be derived from a 2018 Third Way survey that found the following: “Nationwide, just 38% of jobs pay enough to afford a middle or upper class life for a dual income-earning family with children.” And 100 percent minus 38 percent equals 62 percent. So there you go.

If only the claim were as simple and straightforward as the math. The study itself offers a number of caveats that help present a more nuanced picture. For instance:

This low national figure for middle class or better jobs means that to work full time and live a life where one gets ahead, people must make do in other ways – living in a more modest housing unit than what is typical in that MSA, taking gig jobs on the weekend, accepting a longer commute, having fewer children or having them later, skipping vacations, or putting off saving for retirement. For holders of the other 62% of jobs that classify as living-wage or hardship, some of those people may consider themselves middle class and may not live paycheck to paycheck, but their full-time, primary jobs alone likely are not sufficient to get ahead without sacrifices or government benefits.

Indeed, these calculations ignore income subsidies for low-wage workers to improve their overall living standards and purchasing power. But rather than pick at the study, I actually want to highlight one of its key findings: “High living costs, particularly expensive housing, severely restrict the opportunity to earn a middle class life in some of the largest coastal metros that are commonly considered thriving.”

And what is driving those escalating housing costs that gobble up rising incomes generated by decent jobs? Here is a great analysis from economist Daniel Shoag:

Regulatory constraints on housing production have shut millions of Americans out of the country’s most productive labor markets. Historically, Americans have moved to the parts of the country that offered the highest wages and most economic opportunity. This tendency for Americans to move has changed in recent decades, as changes in legal land-use restrictions have limited housing construction in America’s richest locations. These restrictions have created limits on housing supply and have led to rapidly rising prices that make high-wage places unaffordable to less-educated workers. As a result, workers without a college education are now moving away from the places that offer them the highest wages and their children the best later-life outcomes.

So this stat doesn’t reflect a problem with markets but rather a problem with government interfering with markets and distorting them. As a headline in The New York Times recently put it: “Build Build Build Build Build Build Build Build Build Build Build Build Build Build.”

AEI intern Gayoung Lee contributed research for this blog series.