> Income for this group did not shrink, it just grew more slowly than other groups
Another way of saying that it grew more slowly than other groups is that it shrank.
Another way of saying that it grew more slowly than other groups is that it shrank.
edit: not being sarcastic, I just really admire effective communication (to whoever downvoted me </3)
Another way of phrasing it: child 1 used to be the tallest. The other children grew and now 1 is the shortest. The objective height of 1 may have increased, but relative stature declined.
The figure to think about is purchasing power. How much stuff can you buy with your money, whatever the numerical quantity of that money is. Purchasing power has been roughly flat for the past 40 years for the middle class [1]. The economy is growing, but almost all of that growth is captured by the upper class.
Things that the middle class mostly spend their money on, healthcare, education, housing - has all been getting disproportionately more expensive too. So it's not just that the effective earnings aren't increasing, it's also that the things middle class families spend on are getting more expensive.
It's complicated to think about, but that's partly why you shouldn't trust pithy analogies that try to make stagnant income for the middle class seem acceptable. As the saying goes - for every hard problem there's an answer that's simple, elegant, and wrong. "Everyone is getting richer, just at different rates, like your children grow at different rates" is one such answer. In reality, your upper class child is gigantic, fat, and eating more while the other children haven't developed in years.
1 - https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
This seems like a propaganda term to endow the more aptly named 'working class' with a more prestigious title. In any case, the point holds: your argument about inflation is so clear precisely because you can explain it against the backdrop of the height analogy. It is a really neat way to explain the situation, even if it mostly explains why OP is wrong.
This is the purchasing power of the currency over time. Here is a calculator for that: https://www.measuringworth.com/calculators/uscompare/ and here: https://www.officialdata.org/us/inflation
This gets called inflation. (People do argue about what inflation is and what they argue for depends on their economic ideology – there's the inflation of prices in a currency and the inflation of a currency itself through pumping more of it into the system, so-called quantitative easing)
https://en.wikipedia.org/wiki/Inflation
Put simple, height is measured using a fixed or absolute measure (inches or centimetres or whatever) – a $ in 1970 is not the same $ in 2020, it's relative – but we know this intuitively anyway because when we look at old prices (for most things) they are way less.
What matters is that U.S. middle-income share of aggregate income fell from 62% to 43% – is this not the usual measurement? This is what people mean by "the middle class is shrinking". It doesn't matter if the average middle-income has increased, what matters in this context is the overall purchasing power of the middle class.
Even adjusted for so-called inflation you have to wonder does your 2018 $ go as far as your 1970 $ ? How would we measure that? How about we look at household debt? According to this site “In 1983, the top 5 percent had 80 cents of debt for every dollar of income, while the remaining 95 percent had 60 cents for every dollar. By 2007, after decades in which an increasing share of income flowed to the top, the situation had reversed. The top 5 percent had 65 cents of debt for every dollar of income, while the remaining 95 percent had $1.40 in debt for every dollar. The situation remains skewed today.” https://tcf.org/content/commentary/graph-household-debt-and-... – this suggests that a $ dollar does not go as far today and that today maintain a middle-income lifestyle the average family has to go deeper into debt.
( You'll note that according to the New York Fed total household debt has ballooned from a fraction of a trillion to over fourteen trillion from the '60s to the 2010's https://www.newyorkfed.org/medialibrary/media/research/staff... )
2: It's interesting to look at debt, but net worth gives a more complete picture as larger assets can offset larger debts. On this front things we're looking pretty rosy for the median US household up until 2007, when the Great Recession roughly halved household net worth and hasn't seen a recovery since: https://www.financialsamurai.com/the-median-net-worth-of-us-... - the "good news" is that things aren't worse than where they were in the 60's in inflation-adjusted terms. The terrible news is the truly astonishing racial gaps in household median net worth: https://www.taxpolicycenter.org/fiscal-fact/median-value-wea...
I still think it's odd to argue that the middle class on aggregate are doing better when clearly they are not.