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The standard of living is going down for the average American

  1. Feb 22, 2015 #1
    average American. The economic pie just isn't growing at a fast enough rate to keep up with the population growth. It's interesting how, when it comes to the big costs in life -- housing, health care, education -- everyone is paying more and getting less, yet no one seems to realize this. As long as the average Millennial has the latest iPhone (bought for on credit) and vehicle (leased), he thinks he's better off than his parents.
     
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  3. Feb 22, 2015 #2
    I'll deny it, got any actual statistics to back up your claim?
     
  4. Feb 22, 2015 #3

    WWGD

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    http://www.washingtonpost.com/busin...6f644e-75f2-11e2-aa12-e6cf1d31106b_story.html

    Jamin's statement is true mostly for the middle class, according to the article; mostly the second part, since Bush 1's presidency. So, since Milenials are those born after 1982, it is true at least according to this article.

    In an informal level, moving up with more than $40000 in loans is not easy.
     
    Last edited: Feb 22, 2015
  5. Feb 22, 2015 #4

    Choppy

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    One of the issues to consider though is the rest of the world. For a long time, first world countries (not just the US) have enjoyed an extremely comfortable standard of living because a lot of the goods they purchase come from countries with much lower standards of living. According to the Millennium Project about a billion people in the world earn less than $1 per day and 2.7 billion earn less than $2 per day as of 2006.

    As the standard of living for developing countries increases, the prices of imports will increase and thus it would seem those who have been enjoying the benefits of "cheap labour" are necessarily going to pay more for less (or at least the same), therefore the standard of living will go down.

    Another factor to consider perhaps is a shift in priorities. I think the younger first world generation is less focussed on material wealth (whether that's a direct result of the fact above or not is up for debate). Apparently there has been a recent shift in job remuneration negotiations from salary to higher weighting on vacation time, and flexible work hours, particularly in younger people (I can't cite a source though).
     
  6. Feb 22, 2015 #5
  7. Feb 22, 2015 #6

    russ_watters

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  8. Feb 23, 2015 #7

    WWGD

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    .....Today, nearly four years after the Great Recession, 12 million Americans are actively looking for work but can’t find a job; 11 million others are stuck working part time when they would like to be full time, or they would like to work but are too discouraged to job-hunt. Meanwhile, workers’ median wages were lower at the end of 2012, after adjustments for inflation, than they were at the end of 2003. Real household income was lower in 2011 than it was in 1989.......
     
  9. Feb 23, 2015 #8

    russ_watters

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    So, one side of one of those claims: housing. Here is median and average house size fo the US and by region, since 1973.
    https://www.census.gov/const/C25Ann/sftotalmedavgsqft.pdf

    In 1973, the median house size in the US was 1,525 sq ft and in 2010, it was 2,169 sq ft., an increase of 42%. That represents a pretty substantial standard of living improvement by your criteria. I'll let you or someone else look up how cost has varied in that time.

    Perceptions - often, feeling-based - do not always equal reality.
     
  10. Feb 23, 2015 #9

    SteamKing

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    In the last five years or so, a lot of people in the US have noticed that costs have risen at unsustainable rates for things like health care and education.

    Housing prices rose steadily until about 2008-9, but this was primarily due to a bubble created by easy lending policies promoted by big banks and several federal agencies.

    In the aftermath of this bubble's collapse, several large banks were driven to the edge of default until their assets were seized by the FDIC, and famous brokerage houses on Wall Street were driven to the edge of ruin, or pushed over the cliff, like Lehman Brothers.

    In reaction to the financial carnage which resulted from excessively easy credit policies, home lending standards were tightened considerably, and prospective buyers had to withstand tougher credit checks and provide a substantial down payment (on the order of at least 10% of the purchase price in cash) in order to receive consideration for being made a mortgage loan.

    The cost of health care and education in the US have both been rising in excess of the amount of inflation for decades. The perceived crisis in health care costs is what ostensibly drove the creation and passage of the Affordable Care Act in 2010.

    The cost of higher education has risen to such levels now that many students are not able to afford a college education without the use of student loans. The total amount of student loan debt outstanding in the US is over $1.2 trillion, which is more than all the outstanding credit card debt. Almost 70% of college graduates leave school owing on some kind of student loan.

    http://projectonstudentdebt.org/

    http://www.forbes.com/sites/special...s-crippling-students-parents-and-the-economy/

    Obviously, unless a graduate with outstanding loans is able to secure a good-paying job and retire this debt quickly, his or her ability to afford the big ticket purchases in life, like new homes and new cars, will be significantly degraded. People without a job and a large amount of debt are probably not likely to start families, either, which has incalculable consequences stretching into the future. People in debt are also unlikely to be entrepreneurial and are unable financially to start a business.

    The recession which started in 2008 also saw a surge in energy and food prices. Energy prices have moderated a bit recently, but food prices remain relatively high and are likely to remain so, given the extended drought in California and recent severe winters. It also doesn't help that food crops like corn are being turned into ethanol for fuel.
     
  11. Feb 23, 2015 #10

    russ_watters

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    That's a quote from the article you linked. What are you trying to say with it? Are you disagreeing with the OP, because that appears to me to contradict a key claim the OP made...?
     
    Last edited: Feb 23, 2015
  12. Feb 23, 2015 #11

    WWGD

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    No I am disagreeing with your claim that the article I linked to doesn't say anything about the standard of living. Should have quoted your post, my bad.
     
  13. Feb 23, 2015 #12

    russ_watters

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    I figured you were responding to me, but that's not what I was asking. I'll be more direct, since you gave a partial answer: What does the quote you posted have to do with standard of living? I don't see any mention of standard of living in it.
     
  14. Feb 23, 2015 #13

    WWGD

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    Don't mean to nitpick, but it would be nice to see more recent data to see the full effects of the housing bubble.
    Sorry, I gotta go sleep now, will try to give you a better answer soon. Still, in order to understand data it is good to have the full distribution and not just mean and median; I know unfortunately the census does not include it in its reports, it is a pity.
     
  15. Feb 23, 2015 #14

    russ_watters

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    Median house size rose again in 2010, so it would appear that the fallout from the housing bubble hit bottom in 2009, at least for that stat. Still, not to nitpick back, but you quoted data from 2011...
    Mean and median what? Income? The census bureau does indeed provide the data by quinitle, not just mean/median.
     
  16. Feb 23, 2015 #15

    SteamKing

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    The charts found in the attached blog post are troubling:

    http://taxprof.typepad.com/taxprof_blog/2015/02/ny-fed-.html

    According to a report issued by the NY Federal Reserve Bank, total student loan debt outstanding as of the end of 2014 equaled $1.12 trillion, which is greater than credit card debt, auto loans, and home equity lines of credit (HELOC).

    About 2/3 of the student loan debt is held by those under 39 years of age, and the default rate on these types of loans is growing.
     
  17. Feb 23, 2015 #16

    PAllen

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    I see a fundamental difficulty trying to relate changes in "real household income" as defined by various bodies to changes in 'standard of living'. If a smartphone didn't exist in 1989 (at any cost), and a median household has at least one smartphone now (not sure if this true, but seems plausible; change median to appropriate quartile if not true), how do you compare standard of living? What is the 'weight' of a smartphone? You could make a ridiculous claim that it is infinite because it could not be had at any price in 1989.
     
  18. Feb 23, 2015 #17

    russ_watters

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    That is certainly problematic for quantifying how much better or worse the standard of living is, but fortunately the OP only made the qualitative claim that it is worse. So while quantifying, where possible, is good, it isn't essential. The mere existence of smartphone is an improvement. For others, like cars, can there really be any argument that cars are subjectively better today than in the '70s/'80s?
     
  19. Feb 23, 2015 #18

    Pythagorean

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    Shouldn't be a surprising response to the housing crisis that mortgages have tighter restrictions on them now.

    I also wonder to what extent this relates to a transitions from home-owning to rent. Rent isn't reported by credit/loan boroughs, but it can be just as expensive (and worse, endless, there's nothing being paid off, just upkeep).
     
  20. Feb 23, 2015 #19

    WWGD

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    It is difficult to make definitive claims without the full data, which I will look into. And then there is the issue of defining quality of life; I assumed that real income (adjusted for inflation, even better if adjusted for PPP) would be one component, a necessary component. Then there is debt too: is your quality of life if you have a bigger house or more, better stuff at the expense of substantially large debt?
    But then a problem with these threads is that of coming to an agreed-upon definition of quality of life and of what constitutes an improvement.
     
  21. Feb 23, 2015 #20

    russ_watters

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    So.....does this mean you are retracting/declining to substantiate your agreement with the OP's initial claim, at least for now?

    Certainly it is complicated, but I think the vast majority of indicators indicate the OP's claim(s) to be false.

    And again, you set a trap for yourself by your seeming intent to focus on income. There is certainly some corellation, but income isn't standard of living. And the income situation is both better than people tend to think and currently on the upswing after a particularly bad recession.

    That said, I share SteamKing's student loan and heal care cost concerns.
     
    Last edited: Feb 23, 2015
  22. Feb 23, 2015 #21

    WWGD

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    No I am not retracting them, but you have not offered any evidence yourself. I just think that without clearer definitions it is harder to have a productive discussion.
     
  23. Feb 23, 2015 #22

    russ_watters

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    I most certainly have, you just didn't respond: cars and houses (other than to nitpick the date: you didn't comment on the stat itself). Still, the original claim came from the OP, without substantiation. You agreed and provided a link, which you are currently declining to explain.
    Fair enough. Since you agreed with the OP, you can provide both the criteria and the evidence you were thinking of when you said it.
     
  24. Feb 23, 2015 #23

    WWGD

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    Read my post #10, where I state that an increase in real income is a necessary (though not sufficient) condition for an improvement in living conditions, and, according to the article this condition does not hold up . And how about you explaining how it is that having a bigger house either correlates or alone constitutes an improvement in living conditions.
     
  25. Feb 23, 2015 #24

    WWGD

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    But the benefits of better cars may be arguably outweighted by the increasing difficulties --because of the drop in real income -- of buying those cars without going into substantial debt.
     
  26. Feb 23, 2015 #25

    russ_watters

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    You mean post #7? First, you gave two data points, but no details about what connection exists between them. So, were you claiming that incomes have been declining for 30 years? Your quote below seems to imply that...

    Second, after criticising me for an obsolete stat, you provided your own. Median income did, in fact, rise in 2012 and 20013:
    http://money.cnn.com/2014/08/20/news/economy/median-income/
    There should be little doubt that, it rose in 2014 as well, but that data isn't out yet.

    Third, income isn't standard of living. The conventional wisdom is that with an inflation adjustment a steady income provides at worst a stable standard of living. The reality, however, is that inflation adjustments are more aggressive than standard of living alone, so a stable income should provide an increasing standard of living. Regardless, since income isn't standard of living, and you're the one who wants to use it as a proxy, you'll have to prove that additional claim of a neutral or negative corellation.
    Bigger is better, is it not? The OP listed several different "things" people own that one can judge standard of living by, but didn't provide any details about any of them. I picked one and showed that the OP was pretty substantially wrong about it. But sure, I can expand, since apparently neither you nor the OP are interested in proving your claims:

    The OP said "..everyone is paying more and getting less..." and listed housing, health care, education, technology (iPhone), education and cars. Taking them one at a time, it is fairly self-evident that one or both halves (paying more/getting less) of almost every one is wrong -- in most cases, spectacularly, self-evidently wrong.

    Housing:
    "Getting less"? No: Getting 40% more (data already provided). And that's just the size, it doesn't even include features, which is self-evidently better than decades ago (more houses with central air, appliances, building codes are tighter for better windows and insulation, etc.). I'm not sure if that market has stabilized yet, but prices are also back down to about where they were in the'80s and '90s, before the bubble took hold (note, there has been a slight upward trend over the decades):
    http://www.theatlantic.com/business/archive/2014/04/how-did-canadas-middle-class-get-so-rich/361053/

    Health Care:
    Clearly, we are paying more. Getting less? No: lifespans are up, disease rates/severities are down, we can repair things we didn't used to be able to (my knee, pitchers' elbows), anti-vaxers notwithstanding.

    Education:
    I assume this meant college. Again, clearly, paying more. Getting less? I've heard it argued that pre-college education is getting worse, but not college. I'm willing to call this one a push, though I would argue education alone isn't a standard of living item, but rather an enabler. Slightly different claim.

    Consumer Technology:
    We have it -- we didn't used to. Yes, it is impossible to quantify how much better it has made life (however, cell phones are an evolution of the telephone, so that should should be easy to track), but it seems pretty self-evident to me that these are improvements.

    Cars:
    Really? Do I have to? You'd be hard pressed to find anything about cars that hasn't improved over the past few decades. Safety, fuel economy, features (technology), emissions, reliability, comfort, driveability. And if anything, they've gotten cheaper over time: http://www.investopedia.com/financial-edge/0512/how-inflation-has-affected-the-price-of-cars.aspx

    Housing and cars are by far most peoples' largest expenses. Healthcare may be next, depending on age. Together, these represent - to me - the bulk of what one would measure "standard of living" by and they have been, unquestionably, on the rise over the decades.
    You can't just make stats up, you have to look them up. You are both claiming a drop in real income with thin, at best, justification* and a rise in car prices, which you are pulling fully out of the air and are wrong about (article provided above).

    But even if you were correct about the price rising, it's still a better standard of living to have a better car.

    *Really, it's worse than that. The dates are cherry-picked: measuring peak to peak is consistent, peak to trough is cherry-picked to create a false impression of a bad trend. One could easily cherry-pick a start date a year or two or three on either side and get a completely different result. And even if we completely ignore every other data point, that would indicate essentially flat incomes, not declining incomes: You didn't look up the actual stat yet, but 2011 income was only about 1.1% lower than 1989. But again, that's not just out of date, but also ignores all the rises and falls prior and in between. The reality is that incomes are cyclical but tend to rise over time. The Great Recession had a bigger dip than typical, but at the 2007 peak, they were 7.6% above the 1989 peak.
     
    Last edited: Feb 23, 2015
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