Blog: Interesting Report on the Middle Class in Philadelphia

Mark PriceCross posted at Third and State

Susan Warner of The Pew Charitable Trusts has a very interesting study out titled Philadelphia’s Changing Middle Class. The Philadelphia Inquirer has a quick summary of the findings here.

The study is impressive work, and I would encourage our Philadelphia readers to put it on their list of weekend long reads. As always, context matters. While there is much that is good in this study, how best to link it into the city's economic and social policy is going to be a matter of intense debate. So take a moment now to read up on what this study does and doesn’t say.

The study brought to mind Michael Smerconish's recent Inquirer column that cites another study identifying marriage as a factor in growing income inequality — specifically, the marriage of highly educated people to other highly educated people (resulting in higher incomes). The study is a great example of what Larry Mishel at the Economic Policy Institute (EPI) calls "misdirection" (more on that later). The essential problem is that it identifies demographic trends, rather than changes in the distribution of income, as the reason we have rising income inequality.

Smerconish opens his column with a brief summary of the Piketty and Saez top income series, which tracks the rise in incomes of the top 1% nationally. The chart below presents the Pennsylvania version of these data, focusing on the share of income claimed by the top 10% of Pennsylvania taxpayers. Notice (it will be important later) this pattern in the chart: not a lot of change in the share of income going to the top 10% from 1960 to 1980, and then a big increase in the share going to the top 10% after 1980.

Share of Income Claimed by Top 10% in PA

After that pretty good summary of recent inequality trends, Smerconish shifts gears badly:

Of course, to listen to the public debate about income and wealth inequality is to hear about the minimum wage, the extension of unemployment benefits, the effects of globalization, and the loss of manufacturing jobs. But new research suggests that into that mix must also be placed the institution of marriage.

Smerconish then summarizes the study, coauthored by Jeremy Greenwood of the University of Pennsylvania, tracking changes over time in the frequency with which highly educated individuals marry one another. (If an economist is in the room with you, they call it positive assortative mating.)

On Monday, EPI's Larry Mishel reviewed the same paper, calling it an example of "misdirection," or "how authors contort their analysis to answer a question no one is asking but make it seem as if they are answering an important current question."

Greenwood et al.’s data show that positive assortative mating declined(!) from 1980 to 2005, which directly tells us that this phenomenon did not cause any of the income inequality generated after 1980: in fact, positive assortative mating was a force that equalized incomes after 1980 [my emphasis]. It was in the period from 1960 to 1980 that positive assortative mating lead to more unequal incomes. Consequently, their research in no way lifts up the role of ‘like marrying like’ in generating inequality since 1980: it actually means that economic inequalities overcame an equalizing demographic factor and that the inequality of economic outcomes had an even larger impact than we might have thought.

Smerconish speaks for a common bias in Pennsylvania that what troubles the City of Philadelphia and feeds the decline in the middle class is a breakdown in the institution of marriage, not changes in the degree to which middle- and low-income families see their income rise as their productivity rises. Or as Larry says: "Misdirection."