New York Times Is Badly Confused on European Data: Growth Is a Problem15th February 2019
The New York Times ran a piece headlined “Europe’s middle class is shrinking. Spain bears much of the pain.” The gist of the piece is that the middle class in Europe, and especially Spain is disappearing as the result of some mysterious process.
It tells readers:
“Spain’s economy, like the rest of Europe’s, is growing faster than before the 2008 financial crisis and creating jobs. But the work they could find pays a fraction of the combined 80,000-euro annual income they once earned. By summer, they figure they will no longer be able to pay their mortgage.” [The “they” refers to a formerly middle class couple who lost jobs in the downturn and had to find new jobs at far lower pay.]
The piece continues:
“It is a precarious situation felt by millions of Europeans.
“Since the recession of the late 2000s, the middle class has shrunk in over two-thirds of the European Union, echoing a similar decline in the United States and reversing two decades of expansion. While middle-class households are more prevalent in Europe than in the United States — around 60 percent, compared with just over 50 percent in America — they face unprecedented levels of vulnerability. …
“The hurdles to keeping their status, or recovering lost ground, are higher given post-recession labor dynamics. The loss of middle-income jobs, weakened social protections and skill mismatches have reduced economic mobility and widened income inequality. Automation and globalization are deepening the divides.”
Just about every part of this story is wrong, as a quick look at the data would show. To start with, Spain and most other European countries are not growing faster than before the recession. According to the I.M.F. Spain’s economy grew at a 2.7 percent rate in 2018 and is projected to grow 2.2 percent this year. By comparison, it grew at an average rate of more than 3.9 percent in 2006 and 2007, the last two years before the recession.
Spain’s per capita GDP was just 3.0 percent higher in 2018 than it was in 2007. By comparison, coming out of the Great Depression in the United States, per capita income in 1940 was more than 8.0 percent higher than in 1929.
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