This is a generational thing for me, since I am 41.
Internet- instant information and communication 24/7 anywhere you are, didn't exist when I grew up. It was in its infancy in my 20s, more of a novelty.
I see the Internet as a resource, just like money is or can be.
Its a resource that didn't exist during the boomers generation, previous to me.
Can you imagine your life without it?
"Back in my day..." says Old Man Itchy Brain...
Can't Save? Here's Why
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secretwealth
- Posts: 1948
- Joined: Mon Jun 27, 2011 3:31 am
"Higher education was cheaper back then, but they had no internet, and no way to reach a varied captivated audience of potential partners, employers, or teachers."
…and none of this has anything to do with the core issue that it is harder for the middle class to save. While you might be right on some things (I disagree with a lot of your points, and I'm just on vacation in Guatemala--I don't live here), it's really tangential to the math: things are more expensive. Wages are stagnant. Therefore the middle class cannot save as easily now as they used to.
"I don't think we should be pointing to quantifiable stats or math for the be all and end all deciding factor for this discussion."
Why not? The point that this discussion revolves around is that it is more difficult to save money because income is flat and outgoings are up. That's a pretty basic mathematical equation.
"technology has helped me more than inflation and growing bureaucracy have hurt me"
Yeah, undoubtedly for me as well--but that isn't really relevant to a discussion of how the middle class is suffering a declining living standard due to less access to medical care and education because costs are rising and wages aren't.
…and none of this has anything to do with the core issue that it is harder for the middle class to save. While you might be right on some things (I disagree with a lot of your points, and I'm just on vacation in Guatemala--I don't live here), it's really tangential to the math: things are more expensive. Wages are stagnant. Therefore the middle class cannot save as easily now as they used to.
"I don't think we should be pointing to quantifiable stats or math for the be all and end all deciding factor for this discussion."
Why not? The point that this discussion revolves around is that it is more difficult to save money because income is flat and outgoings are up. That's a pretty basic mathematical equation.
"technology has helped me more than inflation and growing bureaucracy have hurt me"
Yeah, undoubtedly for me as well--but that isn't really relevant to a discussion of how the middle class is suffering a declining living standard due to less access to medical care and education because costs are rising and wages aren't.
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My_Brain_Gets_Itchy
- Posts: 267
- Joined: Fri Mar 02, 2012 5:29 pm
@secretwealth:
-because looking at the same math and stats, can tell you two totally different stories.
-Because the equation although on a high level
S = I-E
I and E also have their own sub equations with many variables that are not quantifiable.
-Because we are beginning the conversation by making the flawed assumption that E is not even part of the equation, or at the least is some constant, like PI, which it is not.
-Because I can argue that this discussion is moreso on the topic of standard of living, which is not as simple as lending itself to an equation or math.
-because looking at the same math and stats, can tell you two totally different stories.
-Because the equation although on a high level
S = I-E
I and E also have their own sub equations with many variables that are not quantifiable.
-Because we are beginning the conversation by making the flawed assumption that E is not even part of the equation, or at the least is some constant, like PI, which it is not.
-Because I can argue that this discussion is moreso on the topic of standard of living, which is not as simple as lending itself to an equation or math.
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secretwealth
- Posts: 1948
- Joined: Mon Jun 27, 2011 3:31 am
"Because we are beginning the conversation by making the flawed assumption that E is not even part of the equation, and should be a constant, like PI, which it is not."
No one is saying expenses is a constant. In fact, our point is that expenses are growing at a fast rate.
If you want to argue for today's higher standard of living, how does the higher medical care cost factor into your thinking? How about education?
No one is saying expenses is a constant. In fact, our point is that expenses are growing at a fast rate.
If you want to argue for today's higher standard of living, how does the higher medical care cost factor into your thinking? How about education?
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Spartan_Warrior
- Posts: 1659
- Joined: Fri Dec 02, 2011 1:24 am
@C40: I thought it was accepted knowledge that the CPI is rigged and constantly changing so the government can avoid making increased payments on TIPS, Social Security, and the like. Once upon a time, steak was included in the food analysis. Then it was replaced with hamburger meat. Then, chicken. I don't believe fuel costs are even included in the calculation. Et cetera.
However... challenge accepted! I'll use the internet in all its wonderful technological innovation to see if I can come up with data to support my opinion. Who knows, maybe you all are right. I like learning new things.
However... challenge accepted! I'll use the internet in all its wonderful technological innovation to see if I can come up with data to support my opinion. Who knows, maybe you all are right. I like learning new things.
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My_Brain_Gets_Itchy
- Posts: 267
- Joined: Fri Mar 02, 2012 5:29 pm
"No one is saying expenses is a constant. In fact, our point is that expenses are growing at a fast rate."
So E (Expenses) is fair game?
The reason why there is such a strong reaction to this thread, is because the author directly says Savings is not because of your E, but your I.
The counter-arguement here is that this premise is tragically flawed, and that the first place to start, is to direct your energies at your E.
That through hedonic adaption, E continues to grow, E becomes a runaway number. E becomes 2xE, and we still think its E. That much of what E is today, is not needed. That we are wasteful. That we are spendthrifts. That we are heavily influenced by consumerism and advertising. That much of our expense is waste. That by cutting our E we are not living in poverty, but living free from the constraints of consumerism and putting E in line to what it should be.
The author directly says, point blank, that your E is not part of the equation. The author directly says that cutting E will not save you thousands of dollars year (ie. cutting your cable and packing lunch), and I demonstrated, through math, that it does.
If no one is arguing against this, than for me, I am satisfied and i have nothing more to argue.
"If you want to argue for today's higher standard of living, how does the higher medical care cost factor into your thinking? How about education?"
I'm saying there are other counter balancing efficiencies. I've mentioned them already.
PS. I still find it admirable that you are in Guatemala even if it is vacation.
Spartan - yes, I've also read about the CPI being misleading and I believe that's probably the case (especially with what seems like huge amounts of stimulus lately). I'm a little surprised then that the first 10 graphs I could find comparing income over years all seem to use the same data (CPI I think). I'd love to see some alternatives that might be more accurate.
Secretwealth - I am saying that prices overall are not rising faster than incomes. We've discussed examples in this thread of things that have gotten more expensive (health care, food?, homes in some areas), and things that have gotten cheaper or much better for similar prices (electronics, cars, homes in some areas. I think this comes down to the question of what inflation really is. If there is a more accurate inflation measure than CPI, it would be very useful for this discussion.
I do agree that SPENDING is growing, but I think it's mostly because people are buying more (more of the same things and also a wider variety of things. We've also discussed many things people buy now that didn't exist a generation ago)
Secretwealth - I am saying that prices overall are not rising faster than incomes. We've discussed examples in this thread of things that have gotten more expensive (health care, food?, homes in some areas), and things that have gotten cheaper or much better for similar prices (electronics, cars, homes in some areas. I think this comes down to the question of what inflation really is. If there is a more accurate inflation measure than CPI, it would be very useful for this discussion.
I do agree that SPENDING is growing, but I think it's mostly because people are buying more (more of the same things and also a wider variety of things. We've also discussed many things people buy now that didn't exist a generation ago)
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secretwealth
- Posts: 1948
- Joined: Mon Jun 27, 2011 3:31 am
"The reason why there is such a strong reaction to this thread, is because the author directly says Savings is not because of your E, but your I.
The counter-arguement here is that this premise is tragically flawed, and that the first place to start, is to direct your energies at your E."
Yeah, but no one disagrees with that. We're just saying that the middle class should not have to direct its energies to reducing E more than their previous generation should, especially since I remains constant despite profitability and productivity are greater than they used to be.
And it's not too admirable--anyone profiting on America's growing income inequality (which I frankly think I do in my work) can come to Guatemala, and other more desirable destinations!
The counter-arguement here is that this premise is tragically flawed, and that the first place to start, is to direct your energies at your E."
Yeah, but no one disagrees with that. We're just saying that the middle class should not have to direct its energies to reducing E more than their previous generation should, especially since I remains constant despite profitability and productivity are greater than they used to be.
And it's not too admirable--anyone profiting on America's growing income inequality (which I frankly think I do in my work) can come to Guatemala, and other more desirable destinations!
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My_Brain_Gets_Itchy
- Posts: 267
- Joined: Fri Mar 02, 2012 5:29 pm
I think that the middle class does have to direct its energies on Expenses moreso than the previous generation because of the influences that exist today, ie. consumerism and advertising, were not as pervasive back then.
Hey I used to be on the other side of this too, but I do believe that the default state of the middle class consumer has tremendous waste in their expenses that the previous generation never had/did. That the default state of the middle class have been brain washed into consumerism by advertising. I also believe that the default middle class consumer doesn't even budget or have a good enough sense of financial literacy.
I'm also saying that reducing these things do not need to necessarily be living a lesser life. it would put us in line to what would have been considered normal back then. By normal, I mean living within our means and or living below our means. I consider this to be normal middle class behavior in the past. I dont consider it normal behaviour today because the normal middle class consumer has a hard time distinguishing what living within your means is, ie. what is luxury and what is necessity.
re guate mala: I do give you credit because most people would not look outside the box, or have the guts or desire, or prefer to spend there money on consumption or a place like Vegas, than have the curiosity to travel to Guatemala.
Hey I used to be on the other side of this too, but I do believe that the default state of the middle class consumer has tremendous waste in their expenses that the previous generation never had/did. That the default state of the middle class have been brain washed into consumerism by advertising. I also believe that the default middle class consumer doesn't even budget or have a good enough sense of financial literacy.
I'm also saying that reducing these things do not need to necessarily be living a lesser life. it would put us in line to what would have been considered normal back then. By normal, I mean living within our means and or living below our means. I consider this to be normal middle class behavior in the past. I dont consider it normal behaviour today because the normal middle class consumer has a hard time distinguishing what living within your means is, ie. what is luxury and what is necessity.
re guate mala: I do give you credit because most people would not look outside the box, or have the guts or desire, or prefer to spend there money on consumption or a place like Vegas, than have the curiosity to travel to Guatemala.
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Spartan_Warrior
- Posts: 1659
- Joined: Fri Dec 02, 2011 1:24 am
So, for the purposes of demonstrating how necessary non-luxury costs have increased relative to income, I focused on the Big Three: housing, food, and transportation. This is a long post. Long story short, based on my findings, cost of living has risen at roughly double the rate of income.
---HOUSING---
For housing I really would've liked to compare "true apples to apples", that is, the same house's value in 1950 compared to now, but the data just isn't there. The furthest back that the Maryland real property search goes back seems to be to the 90s. Maybe if I called the local county office or something, but I'm not that invested in this.
So, I'm using average figures, based on Maryland where possible (to keep it as close to apples-to-apples as I can) and I'm using the cost per square foot to ameliorate differences in house sizes.
Average house in Maryland in 1950 was 8,033. In 1960, 11,900. So, as my "average" price for the decade of the 1950s, I have 9,966.50, which we may as well round up to 10,000.
http://www.census.gov/hhes/www/housing/ ... alues.html
I honestly can't find a reliable metric for the average size of houses in the 50s, much less in MD in particular. I've seen some mainstream media articles that say 986, but of course, no source is given. I'm just going to use the chart on page 1 that C40 posted which says the average house size was 1,000 square feet.
So, the cost per square foot of the average house in the 1950s (in Maryland) was $10.
Avg. sale price per square foot in Maryland today according to Zillow.com: $155
http://www.zillow.com/local-info/MD-home-value/r_27/
For a grand total of a 1550% increase in cost.
---FOOD---
I'll just compare averages from 1950 to some items from my own most recent grocery trip.
First number is 1950s cost, second number is my cost, third number is total increase in percent.
Chicken per pound: $0.43 $3.99 928%
Large Eggs per dozen: $0.49 $2.18 449%
Ground Beef per pound: $0.30 $4.49 1497%
Loaf of bread: $0.12 $1.99 1658%
Gallon of milk: $0.82 $3.19 389%
Food cost sources: http://www.thepeoplehistory.com/50sfood.html and http://www.centex.net/~elliott/1950.html (beware annoying midi music)
Average total increase: 984%
---TRANSPORTATION---
"In 1950 a gallon of gas was 18 cents and by 1959 was 25 cents." So, average price for the decade: $0.215
http://www.thepeoplehistory.com/1950s.html
Today the national average for regular gas is $3.294
http://fuelgaugereport.aaa.com/?redirec ... /index.asp
For a grand total of a 1532% increase in cost.
As for cars themselves, the easiest apples-to-apples comparison seems to be a Chevy Corvette in 1958 to a Chevy Corvette in 2013:
1958: $3,631 (http://www.thepeoplehistory.com/50scars.html)
2013: $55,595 (http://www.kbb.com/chevrolet/corvette/2 ... ns=#survey)
For a grant total of a 1531% increase in cost.
---INCOME---
Which brings me to income. I'll go with the average income of $5000 for the 50s; that number's been thrown around in this thread already and also came up on some Google searches. Again, I can't find anything specific to Maryland for the 1950s, so for apples-to-apples purposes I'll use national averages for both then and now.
However, because the household of the 1950s was typically one earner, I will use average personal income--NOT household income, which is typically two earners--for the present to more accurately compare.
Average income 1950s: $5000
Average income 2005: $39403
http://en.wikipedia.org/wiki/Personal_i ... ted_States
These 2005 numbers are the closest I could get but I seriously doubt they've changed (positively) since then.
Total increase: 788%
CONCLUSION:
If we average the increases in Housing (1550%), Food (984%), and Transportation (1532%), we come away with a total inflation rate in non-luxuries of 1355%.
Compared to the increase in income of 788%, we're left to conclude that the cost of living has outpaced income by 1355/788 = 172%.
That is, the cost of living has risen at nearly DOUBLE the rate of income.
In particular, fuel and housing (which I believe are excluded from CPI calculations--coincidence?) rose at roughly 200% the rate of personal wages.
If my math or data has come up short somewhere, please let me know.
(I must say, that whole newfangled internet technology did make this relatively easy to come up with this stuff in about an hour.
But, standard of living is a completely different subject than cost of living.)
---HOUSING---
For housing I really would've liked to compare "true apples to apples", that is, the same house's value in 1950 compared to now, but the data just isn't there. The furthest back that the Maryland real property search goes back seems to be to the 90s. Maybe if I called the local county office or something, but I'm not that invested in this.
So, I'm using average figures, based on Maryland where possible (to keep it as close to apples-to-apples as I can) and I'm using the cost per square foot to ameliorate differences in house sizes.
Average house in Maryland in 1950 was 8,033. In 1960, 11,900. So, as my "average" price for the decade of the 1950s, I have 9,966.50, which we may as well round up to 10,000.
http://www.census.gov/hhes/www/housing/ ... alues.html
I honestly can't find a reliable metric for the average size of houses in the 50s, much less in MD in particular. I've seen some mainstream media articles that say 986, but of course, no source is given. I'm just going to use the chart on page 1 that C40 posted which says the average house size was 1,000 square feet.
So, the cost per square foot of the average house in the 1950s (in Maryland) was $10.
Avg. sale price per square foot in Maryland today according to Zillow.com: $155
http://www.zillow.com/local-info/MD-home-value/r_27/
For a grand total of a 1550% increase in cost.
---FOOD---
I'll just compare averages from 1950 to some items from my own most recent grocery trip.
First number is 1950s cost, second number is my cost, third number is total increase in percent.
Chicken per pound: $0.43 $3.99 928%
Large Eggs per dozen: $0.49 $2.18 449%
Ground Beef per pound: $0.30 $4.49 1497%
Loaf of bread: $0.12 $1.99 1658%
Gallon of milk: $0.82 $3.19 389%
Food cost sources: http://www.thepeoplehistory.com/50sfood.html and http://www.centex.net/~elliott/1950.html (beware annoying midi music)
Average total increase: 984%
---TRANSPORTATION---
"In 1950 a gallon of gas was 18 cents and by 1959 was 25 cents." So, average price for the decade: $0.215
http://www.thepeoplehistory.com/1950s.html
Today the national average for regular gas is $3.294
http://fuelgaugereport.aaa.com/?redirec ... /index.asp
For a grand total of a 1532% increase in cost.
As for cars themselves, the easiest apples-to-apples comparison seems to be a Chevy Corvette in 1958 to a Chevy Corvette in 2013:
1958: $3,631 (http://www.thepeoplehistory.com/50scars.html)
2013: $55,595 (http://www.kbb.com/chevrolet/corvette/2 ... ns=#survey)
For a grant total of a 1531% increase in cost.
---INCOME---
Which brings me to income. I'll go with the average income of $5000 for the 50s; that number's been thrown around in this thread already and also came up on some Google searches. Again, I can't find anything specific to Maryland for the 1950s, so for apples-to-apples purposes I'll use national averages for both then and now.
However, because the household of the 1950s was typically one earner, I will use average personal income--NOT household income, which is typically two earners--for the present to more accurately compare.
Average income 1950s: $5000
Average income 2005: $39403
http://en.wikipedia.org/wiki/Personal_i ... ted_States
These 2005 numbers are the closest I could get but I seriously doubt they've changed (positively) since then.
Total increase: 788%
CONCLUSION:
If we average the increases in Housing (1550%), Food (984%), and Transportation (1532%), we come away with a total inflation rate in non-luxuries of 1355%.
Compared to the increase in income of 788%, we're left to conclude that the cost of living has outpaced income by 1355/788 = 172%.
That is, the cost of living has risen at nearly DOUBLE the rate of income.
In particular, fuel and housing (which I believe are excluded from CPI calculations--coincidence?) rose at roughly 200% the rate of personal wages.
If my math or data has come up short somewhere, please let me know.
(I must say, that whole newfangled internet technology did make this relatively easy to come up with this stuff in about an hour.
But, standard of living is a completely different subject than cost of living.)
Thanks for gathering those numbers, Spartan. These are much more interesting to look at than just opinions or random examples. A few questions:
1 - HOUSING - for the housing costs - what square footage did you use? If the average home price is $230,000, it looks like you used 1,500(?). The average new home (across all U.S.) is now 2,300 square feet, which puts it at $100 per square foot.
2 - Food - nothing to argue about here. Chicken is chicken and eggs are eggs.
3 - Transportation - I don't think comparing the 50's Corvette to the 2013 is apples to apples.
Look at what you were getting in 1958:
- 230 Hp
- 0-60 in 7 to 9 seconds (found various numbers)
- Lateral acceleration - not good - couldn't even find numbers
- miles per gallon - 11.4
- Luxury options - none
- Style - yes, very nice
The 2013 Vette:
- 430hp
- 0-60 in less than 4 seconds
- Lateral acceleration: 1.04 G
- Miles per gallon: 16-26
- All kinds of luxuries standard
I'd say the 58 Vette is more comparable to a current Mazda Miata, which is $24,000.
- 170hp (less, but the car weighs much less - see 0-60)
- 0-60 in 7 seconds
- Lateral accel: 0.92 (way better than the 58 vette)
- Mileage: 22-28 (More than double the 58 Vette - so cut the gas price in half for calculations)
- Looks - ok, not quite as good as the 58 vette, but what is?
1 - HOUSING - for the housing costs - what square footage did you use? If the average home price is $230,000, it looks like you used 1,500(?). The average new home (across all U.S.) is now 2,300 square feet, which puts it at $100 per square foot.
2 - Food - nothing to argue about here. Chicken is chicken and eggs are eggs.
3 - Transportation - I don't think comparing the 50's Corvette to the 2013 is apples to apples.
Look at what you were getting in 1958:
- 230 Hp
- 0-60 in 7 to 9 seconds (found various numbers)
- Lateral acceleration - not good - couldn't even find numbers
- miles per gallon - 11.4
- Luxury options - none
- Style - yes, very nice
The 2013 Vette:
- 430hp
- 0-60 in less than 4 seconds
- Lateral acceleration: 1.04 G
- Miles per gallon: 16-26
- All kinds of luxuries standard
I'd say the 58 Vette is more comparable to a current Mazda Miata, which is $24,000.
- 170hp (less, but the car weighs much less - see 0-60)
- 0-60 in 7 seconds
- Lateral accel: 0.92 (way better than the 58 vette)
- Mileage: 22-28 (More than double the 58 Vette - so cut the gas price in half for calculations)
- Looks - ok, not quite as good as the 58 vette, but what is?
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Spartan_Warrior
- Posts: 1659
- Joined: Fri Dec 02, 2011 1:24 am
For modern housing prices I just went straight to the sale price per sq ft (found here: http://www.zillow.com/local-info/MD-home-value/r_27/), so I didn't have to calculate based on total prices or square footage myself. I also used Maryland numbers (past and present) which may have distorted the outcome (looks like national price per sq ft is $118). I originally intended to use Maryland numbers for everything, again, in the pursuit of an apples-to-apples comparison, but the data doesn't seem to be there.
You all may be right about the cars. I'm not much of a car guy so I just figured to look for the same model and the Corvette was the one recognizable model still in production today.
You all may be right about the cars. I'm not much of a car guy so I just figured to look for the same model and the Corvette was the one recognizable model still in production today.
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jacob
- Site Admin
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- Contact:
Alright, I'm going to say that the "middle-class" IS going to have to redirect its energies towards reducing E. In particular, the era of the "salary man" is coming to and end or more precisely, it will not be thriving under the current economic conditions.
The problem is that the article sees the world in terms of the "salary man". If the world is a hammer ... the only solution is to increase wage-income, right?
Maybe a less myopic perspective can create some resolution. One of the problems with this discussion is that you're using middle class methods, like wages, to measure middle-class success, like how much stuff one can afford. ---Without considering other forms of success or other methods. It is a very one-dimensional projection.
This is done without acknowledging that wages and consumerism are getting outdated by progress in other areas of the economy. The guard is changing.
All this gen x/y vs boomers is a completely wrong way to look at it. Switch time around and look at the things gen x/y appreciate like mobility and technology and run time backwards. Over time, things would appear to get worse and worse. People can't get access to information, they can't get anywhere, etc.
It's like complaining that the weather is getting colder WITHOUT realizing that the season has changed from summer to fall to winter. In particular, the complainer insists he CAN'T put on an extra pair of pants and a jacket. He'd rather summer just return (maybe some solar stimulus?). But hey, the economy or the seasons don't care what we think about them. The smart thing to do is to realize that the situation has changed and change with it. The even smarter thing to do is to foresee that change.
Well, we're now in the economic equivalence of winter. Winter is not a horrible time. It is a time of preparation for renewal. It is a preparation of spring. It's when all the deadwood decays away and gets rebuilt into new life.
People can go along with that process or they can try to resist with painful futility.
Those who put on pants can now appreciate that shorts are on sale. These early adopters of ERE and the likes can now buy houses and cars and boats in cash. Their multiple streams of income are all thriving. Their wages are irrelevant. Yeah, so I'd say the current economy pretty much rocks. It's awesome. So form my perspective, thingss are getting better and better. While the middle class (or summer-only class) struggles, the seasonally current class (winter) is thriving.
Then there are those who suddenly realized that it had gotten cold. They're not set like the early adopters, but at least they're taking measures and because they put on some pants, they're not whining.
And then there are those, the middle-class, who still live in denial. Who think that increasing wages are a permanent feature of life. Maybe they believe that vegetables keep growing bigger and bigger all year around as well until they eventually reach the moon? Who think that success is measured in spending; eating the harvest.
This class is getting left behind by evolution. It's as simple as that.
Unfortunately, economic evolution (technology changes) and economic cycles are so slow that a human being only get to experience one set of seasons. Hence most humans are oblivious to it. Imagine if you only lived one year to observe what went on in a garden. You had a bunch of pleasant and unpleasant experiences ... and they would all be unexpected/random. That lack of insight would probably lead to a lot of dumb mistakes (putting down seeds in November. Harvesting seedlings in April). Similarly, human beings make a lot of dumb economic mistakes.
Fortunately, humans can talk to each other, so knowledge of economic cycles actually exists. Ignore it at your peril.
So to get back to the thread.
Yes, the seasons are changing in disfavor of the paycheck-consumer
middle class who did really well in the 1980s and 90s, terribly in the 1970s, and well in the 1960s.
But, people can thankfully change their behavior if they want to.
They're not insects. So, if someone says they "can't", I don't pity them overly much. They're essentially refusing to be human which is all about adapting to changing circumstances.
TL;DR - Because the economy has changed (partly from a completely mismanaged strategy of moving manufacturing out of the country and focusing on building unproductive housing) and there's more competition (BRIC), the middle class SHOULD NOT expect that the same methods of hyperspecialized jobs and easy credit will keep working as well as it did in the 1980s and 90s. The middle class (and anyone for that matter) should accept the fact of a changed environment and ACT on that.
PS: This was also noted in the ERE book.
PPS: I suggest also reading Taleb's newest book. Essentially, the middle-class, which are mostly salary men are very fragile. ERE on the other hand is partially anti-fragile and otherwise robust.
The problem is that the article sees the world in terms of the "salary man". If the world is a hammer ... the only solution is to increase wage-income, right?
Maybe a less myopic perspective can create some resolution. One of the problems with this discussion is that you're using middle class methods, like wages, to measure middle-class success, like how much stuff one can afford. ---Without considering other forms of success or other methods. It is a very one-dimensional projection.
This is done without acknowledging that wages and consumerism are getting outdated by progress in other areas of the economy. The guard is changing.
All this gen x/y vs boomers is a completely wrong way to look at it. Switch time around and look at the things gen x/y appreciate like mobility and technology and run time backwards. Over time, things would appear to get worse and worse. People can't get access to information, they can't get anywhere, etc.
It's like complaining that the weather is getting colder WITHOUT realizing that the season has changed from summer to fall to winter. In particular, the complainer insists he CAN'T put on an extra pair of pants and a jacket. He'd rather summer just return (maybe some solar stimulus?). But hey, the economy or the seasons don't care what we think about them. The smart thing to do is to realize that the situation has changed and change with it. The even smarter thing to do is to foresee that change.
Well, we're now in the economic equivalence of winter. Winter is not a horrible time. It is a time of preparation for renewal. It is a preparation of spring. It's when all the deadwood decays away and gets rebuilt into new life.
People can go along with that process or they can try to resist with painful futility.
Those who put on pants can now appreciate that shorts are on sale. These early adopters of ERE and the likes can now buy houses and cars and boats in cash. Their multiple streams of income are all thriving. Their wages are irrelevant. Yeah, so I'd say the current economy pretty much rocks. It's awesome. So form my perspective, thingss are getting better and better. While the middle class (or summer-only class) struggles, the seasonally current class (winter) is thriving.
Then there are those who suddenly realized that it had gotten cold. They're not set like the early adopters, but at least they're taking measures and because they put on some pants, they're not whining.
And then there are those, the middle-class, who still live in denial. Who think that increasing wages are a permanent feature of life. Maybe they believe that vegetables keep growing bigger and bigger all year around as well until they eventually reach the moon? Who think that success is measured in spending; eating the harvest.
This class is getting left behind by evolution. It's as simple as that.
Unfortunately, economic evolution (technology changes) and economic cycles are so slow that a human being only get to experience one set of seasons. Hence most humans are oblivious to it. Imagine if you only lived one year to observe what went on in a garden. You had a bunch of pleasant and unpleasant experiences ... and they would all be unexpected/random. That lack of insight would probably lead to a lot of dumb mistakes (putting down seeds in November. Harvesting seedlings in April). Similarly, human beings make a lot of dumb economic mistakes.
Fortunately, humans can talk to each other, so knowledge of economic cycles actually exists. Ignore it at your peril.
So to get back to the thread.
Yes, the seasons are changing in disfavor of the paycheck-consumer
middle class who did really well in the 1980s and 90s, terribly in the 1970s, and well in the 1960s.
But, people can thankfully change their behavior if they want to.
They're not insects. So, if someone says they "can't", I don't pity them overly much. They're essentially refusing to be human which is all about adapting to changing circumstances.
TL;DR - Because the economy has changed (partly from a completely mismanaged strategy of moving manufacturing out of the country and focusing on building unproductive housing) and there's more competition (BRIC), the middle class SHOULD NOT expect that the same methods of hyperspecialized jobs and easy credit will keep working as well as it did in the 1980s and 90s. The middle class (and anyone for that matter) should accept the fact of a changed environment and ACT on that.
PS: This was also noted in the ERE book.
PPS: I suggest also reading Taleb's newest book. Essentially, the middle-class, which are mostly salary men are very fragile. ERE on the other hand is partially anti-fragile and otherwise robust.
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My_Brain_Gets_Itchy
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RealPerson
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@Jacob - I was writing a much less eloquent and less comprehensive post along the same lines, but you were faster and better. I could not agree with you more. I would add that the jobs prone to change are not just salaried men. High paying hourly union jobs are rapidly becoming extinct also. Just a result of competition and a changing economy. Change is not just a political slogan. It is real and it is here. Adaptability is the name of the game. Not bad, just different.
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secretwealth
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I think we all owe Spartan_Warrior a huge round of applause (and a beer or two in person, if anyone gets the chance) for the legwork. Whether you agree or disagree--that's some solid research.
Of course I agree; I think quibbling over the horsepower differential between a 50's vette and a '13 vette is quibbling. The fact is, the item's sociocultural position is pretty much the same, and for that same (relatively speaking) item, the cost is higher. Even if you dispute that--fine--the food is pretty clear.
So for transport let's compare a NYC subway ride:
1953-1966: 15 cents.
2013: $2.25.
For an increase of 1500%. So, yeah, being a middle class working stiff in Queens today sucks compared to in 1955. Let alone the cost of medical care, food, and the other kinds of somewhat important things that you can't play Angry Birds on.
@jacob: I think we all agree that this is happening, but I think the point S_W and I are trying to make is that what is causing this winter for the middle class is a breakdown of the social contract between the rich and the poor, the old and the young, the white collars and the blue collars. To focus on one point of yours:
"All this gen x/y vs boomers is a completely wrong way to look at it. Switch time around and look at the things gen x/y appreciate like mobility and technology and run time backwards. Over time, things would appear to get worse and worse. People can't get access to information, they can't get anywhere, etc."
Yes, we have access to information and mobility. But at the sacrifice of job security and stability. You and I both know that academia has been bleeding tenure-track positions for over a generation now--and if the social contract is breaking down in so-called "non-profit" universities, you can hardly expect less to happen in the for-profit universe.
Likewise, we both know that the upper crust is taking a bigger and bigger portion of the pie. I see it in my work everyday: the masters of the universe, even after 2008, just have more and more buying power. If EVERYONE was losing the middle class lifestyle in favor of the technological advancements, I'd say, fine--we're entering a new cycle. Cool.
But that's not the case. The investment bankers, hedge fund managers, and other elite of the financial world are getting a bigger and bigger return--partly because of the way compound interest works, partly because of the tax code, and partly because the job market sucks. Still, what is happening isn't a paradigm shift--it's a shift of yield from labor to capital. For example: http://money.cnn.com/2012/04/19/news/ec ... /index.htm
http://www.guardian.co.uk/business/2013 ... nuses-rise
Now, I'm not even necessarily even saying this trend is bad--although it's kinda obvious that's how I feel. I'm just saying that the implicit social contracts that held American society together and brought it prosperity in the 20th century have been frayed since the 1970s, and as a result the middle class is getting poorer. This is not even an inevitability--it's pretty damn easy to sustain a slowly but steadily rising standard of living and secure middle class lifestyle for your citizenry, as Scandinavia and Australia have demonstrated for decades. America could do it too--but we choose not to. Again, not saying this is bad, but it sure is disingenuous to deny.
Of course I agree; I think quibbling over the horsepower differential between a 50's vette and a '13 vette is quibbling. The fact is, the item's sociocultural position is pretty much the same, and for that same (relatively speaking) item, the cost is higher. Even if you dispute that--fine--the food is pretty clear.
So for transport let's compare a NYC subway ride:
1953-1966: 15 cents.
2013: $2.25.
For an increase of 1500%. So, yeah, being a middle class working stiff in Queens today sucks compared to in 1955. Let alone the cost of medical care, food, and the other kinds of somewhat important things that you can't play Angry Birds on.
@jacob: I think we all agree that this is happening, but I think the point S_W and I are trying to make is that what is causing this winter for the middle class is a breakdown of the social contract between the rich and the poor, the old and the young, the white collars and the blue collars. To focus on one point of yours:
"All this gen x/y vs boomers is a completely wrong way to look at it. Switch time around and look at the things gen x/y appreciate like mobility and technology and run time backwards. Over time, things would appear to get worse and worse. People can't get access to information, they can't get anywhere, etc."
Yes, we have access to information and mobility. But at the sacrifice of job security and stability. You and I both know that academia has been bleeding tenure-track positions for over a generation now--and if the social contract is breaking down in so-called "non-profit" universities, you can hardly expect less to happen in the for-profit universe.
Likewise, we both know that the upper crust is taking a bigger and bigger portion of the pie. I see it in my work everyday: the masters of the universe, even after 2008, just have more and more buying power. If EVERYONE was losing the middle class lifestyle in favor of the technological advancements, I'd say, fine--we're entering a new cycle. Cool.
But that's not the case. The investment bankers, hedge fund managers, and other elite of the financial world are getting a bigger and bigger return--partly because of the way compound interest works, partly because of the tax code, and partly because the job market sucks. Still, what is happening isn't a paradigm shift--it's a shift of yield from labor to capital. For example: http://money.cnn.com/2012/04/19/news/ec ... /index.htm
http://www.guardian.co.uk/business/2013 ... nuses-rise
Now, I'm not even necessarily even saying this trend is bad--although it's kinda obvious that's how I feel. I'm just saying that the implicit social contracts that held American society together and brought it prosperity in the 20th century have been frayed since the 1970s, and as a result the middle class is getting poorer. This is not even an inevitability--it's pretty damn easy to sustain a slowly but steadily rising standard of living and secure middle class lifestyle for your citizenry, as Scandinavia and Australia have demonstrated for decades. America could do it too--but we choose not to. Again, not saying this is bad, but it sure is disingenuous to deny.
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jacob
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@secretwealth - The world oscillates between states of stability and instability. In general, trying to create stability (e.g. low interest rates, regular burning of undergrowth) creates instability (stupid investments, massive forest fires) which when triggered results in periods of massive volatility as the tensions are worked out.
Scandinavia runs a fairly decentralized socio-economic model where massive gains are quickly eliminated and distributed out. The US runs a very centralized form of economy where money either flows to big corporations (Republican preference) or big government (Democrat preference). The Scandinavian model therefore spreads risk/reward very well (most things aren't handled at the "federal" level but at the municipal level) while the US concentrates power at the top. (The banking bailout was very problematic in that sense since Wall Street took the rewards while parting the risk out on the tax payers. Very bad karma!)
This observation is not related to the point I was making, namely that different species, call them middle-class, professionals, CEOs, etc. will tend to do well under different environments. Since the US has a centralizing socioeconomic structure, those who have been in the wrong class, that is, acted as the wrong species... in this case blue collar, technical, and service personnel (i.e. middle class) have fallen behind while the professional and management (upper) class have thrived during the 80s and 90s. Tech, entrepreneurs, and renaissance-oriented people have done well during the 00s. I think artificial intelligence and expert systems are dangerously close to impacting the professional class however.---The friendly robots will be replacing your surgeon soon. This leaves ...
So the main question is what to do about it. Yearning for the good old days to come back won't work. Those are gone and for a good reason. Success keeps getting assigned to luck, intelligent, genetics, connections, etc. but what I really think makes the difference is the ability to realize that one is wrong about one's view of the world (when the world has changed). However, an attitude of "hey, I realized that I am wrong and therefore I will change my mind".. well, that's just _inhuman_. It's not normal. But that's what it takes. In this forum, we're rather good at it (maybe by selection bias). Most people plainly suck at it. Their ego is too invested in their opinions.
So back to the welfare model vs the corporate model ... each have their advantages. The welfare model won't leave groups of people behind even when they aren't keeping up. On the other hand, it won't let people get too far ahead. It will happily sacrifice the few for the many. This US is kinda the other way around. It will see the best effort from the best people at the cost of nonperformers. So each model has a cost on each end by construction. The question is who do you want to hurt? The best or the worst?
PS: If I knew the answer of what society as a whole should change into in order to fix these problems, I'd write a book about it.
Scandinavia runs a fairly decentralized socio-economic model where massive gains are quickly eliminated and distributed out. The US runs a very centralized form of economy where money either flows to big corporations (Republican preference) or big government (Democrat preference). The Scandinavian model therefore spreads risk/reward very well (most things aren't handled at the "federal" level but at the municipal level) while the US concentrates power at the top. (The banking bailout was very problematic in that sense since Wall Street took the rewards while parting the risk out on the tax payers. Very bad karma!)
This observation is not related to the point I was making, namely that different species, call them middle-class, professionals, CEOs, etc. will tend to do well under different environments. Since the US has a centralizing socioeconomic structure, those who have been in the wrong class, that is, acted as the wrong species... in this case blue collar, technical, and service personnel (i.e. middle class) have fallen behind while the professional and management (upper) class have thrived during the 80s and 90s. Tech, entrepreneurs, and renaissance-oriented people have done well during the 00s. I think artificial intelligence and expert systems are dangerously close to impacting the professional class however.---The friendly robots will be replacing your surgeon soon. This leaves ...
So the main question is what to do about it. Yearning for the good old days to come back won't work. Those are gone and for a good reason. Success keeps getting assigned to luck, intelligent, genetics, connections, etc. but what I really think makes the difference is the ability to realize that one is wrong about one's view of the world (when the world has changed). However, an attitude of "hey, I realized that I am wrong and therefore I will change my mind".. well, that's just _inhuman_. It's not normal. But that's what it takes. In this forum, we're rather good at it (maybe by selection bias). Most people plainly suck at it. Their ego is too invested in their opinions.
So back to the welfare model vs the corporate model ... each have their advantages. The welfare model won't leave groups of people behind even when they aren't keeping up. On the other hand, it won't let people get too far ahead. It will happily sacrifice the few for the many. This US is kinda the other way around. It will see the best effort from the best people at the cost of nonperformers. So each model has a cost on each end by construction. The question is who do you want to hurt? The best or the worst?
PS: If I knew the answer of what society as a whole should change into in order to fix these problems, I'd write a book about it.
"I think quibbling over the horsepower differential between a 50's vette and a '13 vette is quibbling."
It's certainly not quibbling. The cars are in completely different ballparks. Have you ever driven a car that does 0-60 in less than 4 seconds and pulls over a lateral g? I have, and it is "OH MY GOD!" territory.
I bought a used Japanese sports car in high school that was better than 58 Corvette or any car you could buy in the 50's in pretty much every respect*. It cost me less than $4,000 with 45,000 miles.
*(acceleration, breaking, cornering, reliability, fuel mileage, comfort & ergonomics, safety, emission, luxury options - everything except for maybe looks or collector's value)
If you check the inflation number using the price of a Miata and also the fuel mileage difference (effectively halves the cost of gas now) it shows the cost of Automobile transportation has decreased rather than increased.
It's certainly not quibbling. The cars are in completely different ballparks. Have you ever driven a car that does 0-60 in less than 4 seconds and pulls over a lateral g? I have, and it is "OH MY GOD!" territory.
I bought a used Japanese sports car in high school that was better than 58 Corvette or any car you could buy in the 50's in pretty much every respect*. It cost me less than $4,000 with 45,000 miles.
*(acceleration, breaking, cornering, reliability, fuel mileage, comfort & ergonomics, safety, emission, luxury options - everything except for maybe looks or collector's value)
If you check the inflation number using the price of a Miata and also the fuel mileage difference (effectively halves the cost of gas now) it shows the cost of Automobile transportation has decreased rather than increased.
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Spartan_Warrior
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