The persistent myth about the financial crisis and living standards

It has become commonplace to describe the period since the Great Recession with lots of dramatic words—not only referring to the financial crisis itself, but how the economy and household living standards have stagnated. Growth in average living standards has been described as “terrible” or “disastrous,” while there has been much talk of a “cost of living crisis” and a “squeezed middle.”

There are good reasons to think that household income growth has been very poor since the crisis. Between 2007-08 and 2011-12, real average household income (measured after taxes have been paid and benefits…