“Things are hard to measure, so we should just focus on what’s easy, regardless of its actual effectiveness” doesn’t seem like a great compromise.
“Spend less on what they need” is same Walmart argument we’ve heard for decades. Meanwhile, the middle class shrinks and many of the things people need to improve their lives (shelter, healthcare, education) get more and more expensive and wages stagnate.
Food, housing, transportation, and medical care may not get any cheaper. Food is already highly mechanized. Housing is saturated in the places where people want to live. In the US at least we lack the political will to make transformative investments in transportation, and gas production is already as mechanized as it is going to get. Medical care is likely to remain labor intensive using very expensive labor.
Sure, the average worker may be able to buy more things at Walmart than they can today, but that has less of an effect on quality of life.
They also likely use inflation statistics that are problematic, at best.
When considering consumables, we've had pretty reasonable inflation and people are making more than their parents. But if you were to calculate inflation based on prices for things that don't benefit from advances in our production abilities (commodities, equities, housing, education, health care, etc), we'd be making nowhere near as much as previous generations when adjusted for inflation using that calculation.
Affording a car, TV, computer and food to feed ourselves isn't that difficult for many people. It's the life-altering purchases that are slipping farther and farther from the reach of the middle class.
Items are just about as cheap as they've been. Instead of saving the extra money, most people simply buy more crap.
I get that that other costs (healthcare, education, housing) have risen so much that the cheap goods can't offset them. But, it seems that every little bit would still help, even if things were net-worse.
While it's true that buying power for small consumer goods might be greater (see first comment) because a lot of these goods are cheaper now, I think there really is a growing income gap that is eviscerating the middle class.
The important things that matter in standard of living--housing, transportation, and free time--are not better. From the 60's to maybe the 80's, one wage earner with a decent job was enough to support a family nicely with two cars, vacations, guaranteed retirement, health care, and spouse staying at home, plus maybe even a little domestic help. At some point all those things have eroded and all are less common now.
But everything else is definitely not more expensive. If you compare household spend from now to, say, the early 60s, most consumer goods are much cheaper on a relative basis, e.g most people spend a heck of a lot less as a percentage of income for things like food, clothing, appliances, etc. It's primarily housing and service costs (education and health care) that have skyrocketed.
> Meanwhile, concurrent with those changes, the cost of things that used to be "basics", like health care, higher education, and housing, have skyrocketed,
The economic data simply does not support your argument.
In aggregate healthcare only constitutes 8.1% of US household expenditures. Education only constitutes 2.3%. It's simply infeasible that inflation in segments constituting less than one tenth of household expenses has crippled the majority of US households. Especially given strong deflationary trends in autos, apparel, furniture, appliances, consumer household goods, electronics, phone service, natural gas, toys, and media. Which in aggregate represents over 30% of household expenditures.
Shelter at 19.2% is a major expenditure item. But you're wrong that there's been significant inflation. The median price per square foot of American housing has not increased in real terms since 1992. (HN tends to be grossly misinformed on this since the community is heavily concentrated in the ultra-expensive Bay Area.) And this doesn't even account for mortgage rates falling by 60% since 1990.
It's true that Americans on average spend more on housing. But that's because modern homes are substantially larger than they were a few decades ago. Moreover the price per square foot metric doesn't reflect significant aggregate quality improvements like central A/C, better fire safety, higher capacity electrical circuits, more bathrooms, higher ceilings, better insulation, attached garages, and swimming pools.
Altogether the housing story does not reflect your broader thesis. If Americans were feeling overwhelmed by out-of-control housing prices, they wouldn't keep buying bigger and bigger homes. Other statistics tell similar stories. A record number of people are getting cosmetic surgeries. If healthcare costs were crushing US consumers, we wouldn't expect huge growth in Americans choosing to have elective medical procedures. It'd be like claiming there's an ongoing food shortage, while obesity rates are rising.
- People on average have less disposable incoming due to rising costs of housing, education and healthcare.
- Some goods (e.g. computers) have gotten dramatically cheaper in the last 20 years.
So you can save a little by not having the latest products and services, but it is insignificant compared to the overall financial challenges people face. [1]
Except it doesn't matter if general goods and services get cheaper if life necessities like healthcare and residence have their costs ballooning out of control. That $8 minimum wage job in ten years might be able to buy you twice as many trinkets at the same price but that doesn't mean anything if you have no where to live for less than $3,000 a month in rent.
Thats not to say that you cannot make housing and healthcare dramatically cheaper and more efficient, but we simply are not doing it, and there doesn't seem to be nearly enough momentum to see change happen in that regard. Lives rarely get better without a good protest, but there is no uniform movement with only big wig opposition to fixing zoning laws or socializing medicine. Its all working class vs working class infighting between haves and have nots.
On the contrary, I think the thing that has deceived us about how much poorer we've become is cheap stuff. TVs are cheaper than ever. We spend less as a percentage of income on food than we've ever done in the past. Even automobiles and computers are more affordable than they've ever been. To a superficial viewpoint, we have more purchasing power than we've ever had (and the CPI includes many of these items which give that superficial viewpoint).
But we see the true regression in purchasing power once we look at things that haven't benefitted from lowered manufacturing costs. Housing, education, health care and the like are showing the true nature of the situation of how poor we've become.
P.S. Yes, I know I took the quote out of context and I'm more agreeing with you than disagreeing with you. But there is a distinction to be made that it's not all stuff that's more expensive, just the important stuff.
Just listened to a podcast that pointed out that housing is expensive, education is expensive, childcare is expensive, cars are expensive, and money is expensive (interest rates are high). And out of pocket expenses for healthcare are going up and up.
Economists don't have a handle on the compromises and adaptations that people have been making over the last decade or more, e.g. moving to the cheaper place further out of town rather than where they want to live, or house-sharing rather than living as a couple.
It seems people are at the limit of the adaptations they can make and are pretty pissed off about it.
Except in the basics, like housing costs, health costs, and tuition, which have been more or less skyrocketing, and job security and pensions have pretty much gone out the window.
Sure, we have cooler, cheaper toys and food is easier to get, but the rest of it makes it much harder to get by, in general.
The problem is buying power isn't increasing across all domains of needs. Even though a 3rd world individual can now afford a smart phone and nice clothes my healthcare costs are only going up. Who cares if you can buy "luxury" items for pennies if these formerly middle class people can't secure something as fundamental as their health?
You're missing the point. The gross numbers haven't increased, but the things that actually matter (what you can buy for your money) have decreased. The key point being:
"spending by households on many of modern life's "basics"—food at home, automobiles, clothing and footwear, household furnishings and equipment, and housing and utilities—fell from 53% of disposable income in 1950 to 44% in 1970 to 32% today."
There's a reason why the middle class today can buy so much MORE stuff, it's all much cheaper. The article is saying people are not richer, but the quality of life is not significantly different for the middle class then it is for the rich (the same access to long life, short travel, etc...)
This is the problem with rolling up the human experience into a price index, and then using that index to judge changes in standard of living.
Purchasing power of electronics, appliances, etc, has gotten a lot better.
Purchasing power of food has somewhat stagnated, though variety has gotten better.
It is harder for a single earner to pay for a standard three bedroom house in a good school district that is close to jobs. It is also much more expensive to buy the education admission ticket to the job market, due to cost inflation of schools and credential inflation of job requirements.
A bunch of that non-wage compensation is just going directly into bigger healthcare bureaucracy that doesn't do anything the worker, it should be considered an increase in income that is offset by a bureaucracy tax. Healthcare has gotten better, but the things that have gotten better are generally related to where the money is going.
> The price for some cornerstone needs that govern access to opportunity - i.e. healthcare, housing, education
First, I wholeheartedly agree that this is the major stakes. I mentioned consumer goods prices because they're immediately tangible. The differences in the others are all too easy to handwave away as improvements.
> Everything from food to toys to tools got much cheaper than it was before
I don't know about toys, and they seem hard to compare. Food has gone up over the past few decades (groceries that used to cost $2 now cost $3, $3->$4, etc). From one of the first hits for historical milk price (https://www.in2013dollars.com/Milk/price-inflation): "Between 1997 and 2020: Milk experienced an average inflation rate of 1.73% per year". Note that I'm talking about sticker prices here, not any "but they actually went down with inflation", as the original argument was referencing stationary wages.
Tools are being made much more flimsy and disposable - eg real high speed steel has been replaced by inferior foreign steel with gimmicky coatings to "prolong" its poor wear characteristics. If you look at good quality tool brands today, the prices are higher than what tools cost several decades ago. This goes for appliances as well - take a look at "commercial" offerings that are built to be maintained.
I worry about this too. Who cares if you have more money if it has less buying power per dollar? This is also why I worry about drastically higher minimum wage. Poor people have more money but all the places they spend it have higher costs that lead to higher prices. Rich people don't spend the majority of their money at Wal-Mart so it affects them less. EITC and other tax reductions on the poor seems more effective and doesn't reduce buying power.
I don't believe it's purely a spending issue when things like childcare, education, and healthcare are growing at 2x the inflation rate. We have basic infrastructure costs in America that are spirally out of control that are really eating into wages.
“Spend less on what they need” is same Walmart argument we’ve heard for decades. Meanwhile, the middle class shrinks and many of the things people need to improve their lives (shelter, healthcare, education) get more and more expensive and wages stagnate.
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