Many people have observed that in the last 5 or 10 years, a gap has emerged between public ratings of economic conditions and standard measures like unemployment and inflation: people say that the economy is bad even when the statistics look pretty good. One view is that the gap is due to politics or the nature of media coverage; the other is that it's because the standard statistics miss something about people's experience of the economy. In the New York Times, David French writes that he used to favor the first view, but has now shifted to the second. He says that what the standard statistics miss is the development of complex pricing systems; rather than offering a standard product at a standard price, companies now offer different levels at different prices. For example, airlines used to distinguish between first class, business class, and economy--now they make a lot of additional distinctions, charging for a little bit of extra legroom, boarding in the first group, and so on. His idea is that now people are constantly being reminded that other people are getting premium service--they are discontented because they're more aware of what they are missing.
This change seems likely to have had the most impact on the middle and upper-middle classes: people who could afford something beyond the necessities, but not at the premium level. You have to be able to afford to fly before you're aware of all the extras you can't afford. Since 1972, the General Social Survey has asked "Compared with American families in general, would you say your family income is far below average, below average, average, above average, or far above average?" If people have reacted in the way that French suggests, the percent who see themselves as "average" or "above average" will have declined in the last decade or so.
The percent who say their income is average:
That's been declining pretty steadily over the whole period. Now, (somewhat) above and below average.
They both go up and down with short-term economic conditions--for example, below average rose and above average fell from 2008 to 2010. But they both have upward trends, and the percent rating themselves as "above average" reached its highest level ever in 2024.
Finally, far above and far below average:
They both have clear upward trends.The basic pattern is that there's more dispersion, but no change in the mean. In a general way, this matches real changes in the distribution of income: inequality has increased since the 1970s. Although the increase has slowed down or stopped in the last 15 years or so, it may take time for people to become aware of that. In any case, average ratings of your relative economic position haven't declined in recent years.
Although French identifies a real change, it doesn't seem to have affected people's perceptions of their economic position. I think that's because it can work in both directions--people may look up at the people who get something better, but they may also look at those who get something worse and congratulate themselves at being able to afford an upgrade. There are also people who could afford an upgrade but pass it up and congratulate themselves at getting a bargain.
So we're still left with the paradox: people think their own economic situation is pretty good, but that "the economy" is in bad shape. Of course, this is just one possible comparison: looking at other people today. Another comparison that people talk about is with previous generations: for example, where your parents were at the same age. I'll look at that in my next post.