Why a $100k income no longer buys the American Dream in most places(cnbc.com)
cnbc.com
Why a $100k income no longer buys the American Dream in most places
https://www.cnbc.com/2024/04/16/why-a-100000-salary-no-longer-buys-the-american-dream-in-most-places.html
55 comments
This is the trouble with 'infinite inflation' which is the economic model in which we exist (most central banks target 2% inflation), you combine this modeling with what that doesn't cover - things like housing, that up many multiples higher than the official inflation rate.
Now many argue "well raises should be higher than inflation" but data continues to show that this isn't the case, as mentioned in the top of the article, for the last 50 years or so, raises have not kept pace with real cost of living increases. I have seen an argument that raises have evened out somewhat to beat the official inflation rate, but this is dubious, because the reported government inflation rate has exclusions to its calculation and doesn't capture the real cost of living increases faced across the US, due to inflation rate calculation exclusions and approaches.
I've long argued we need some kind of deflation in real costs, what that would look like is hard for me to say. I know its complicated, however I think a good place to start is perhaps returning to pre Reagan era economic 'reforms' is a good first step, as I've seen mentioned elsewhere (on HN or otherwise), as so called 'Reaganomics' hasn't really panned out for the average American over the long term.
Now many argue "well raises should be higher than inflation" but data continues to show that this isn't the case, as mentioned in the top of the article, for the last 50 years or so, raises have not kept pace with real cost of living increases. I have seen an argument that raises have evened out somewhat to beat the official inflation rate, but this is dubious, because the reported government inflation rate has exclusions to its calculation and doesn't capture the real cost of living increases faced across the US, due to inflation rate calculation exclusions and approaches.
I've long argued we need some kind of deflation in real costs, what that would look like is hard for me to say. I know its complicated, however I think a good place to start is perhaps returning to pre Reagan era economic 'reforms' is a good first step, as I've seen mentioned elsewhere (on HN or otherwise), as so called 'Reaganomics' hasn't really panned out for the average American over the long term.
We haven't had "Reaganomics" at play since Bush senior. Repeal of Glass-Steagall under Clinton, ACA, and Dodd-Frank puts us in a completely different economic regime than 'Reaganomics.' Include alternative definitions for both CPI and unemployment which paint rosier but untrue pictures of the system. These have been in place starting with the Obama administration and continue today.
The admonition from the Reagan administration on economics was fairly simple: Lower the rates, broaden the base. We've not been doing that for a long time.
The admonition from the Reagan administration on economics was fairly simple: Lower the rates, broaden the base. We've not been doing that for a long time.
But the median wage is up 40% in the last 15 years... If your pay has been constant, you're getting salary decreases in real terms.
That's great, but how much has the price of housing, food, cars, energy, and a college education increased during that time frame?
My other comment in this thread compares the growth of CPI and wages (wages grew faster).
CPI doesn’t properly account for these factors that I mentioned.
CPI includes housing, food, cars, & energy.
You're welcome to check an alternate metric (eg Truflation), but they're all quite similar to CPI.
You're welcome to check an alternate metric (eg Truflation), but they're all quite similar to CPI.
A simple Google search will give you an obvious result: “Spending to purchase and improve houses and other housing units is treated as investment and not consumption in the CPI.”
You are welcome.
You are welcome.
Right, that's covered by "owner's equivalent rent." This is LOWER than what homeowners actually pay. (Think about it -- Do landlords make negative `profit = home_payment_expenses - rent`?)
Any why would GGP mention food, cars, and energy? They are directly included in the CPI. I think it's more likely that GGP is under the false impression that these items are excluded from the CPI -- It's a conspiracy theory originating from economists' practice of using "CPI Excluding Food, Shelter, Energy, and Used Cars and Trucks" as a lower-variance estimate of the future inflation rate.
> You are welcome.
Skip the snark, it's against HN guidelines.
Any why would GGP mention food, cars, and energy? They are directly included in the CPI. I think it's more likely that GGP is under the false impression that these items are excluded from the CPI -- It's a conspiracy theory originating from economists' practice of using "CPI Excluding Food, Shelter, Energy, and Used Cars and Trucks" as a lower-variance estimate of the future inflation rate.
> You are welcome.
Skip the snark, it's against HN guidelines.
[deleted]
Until we reverse Reagan's disastrous Trickle-Down Theory(Voodoo Economics), we won't see this changing.
Even in the '80s they knew this current world would be the outcome. This isn't a surprise to the Fed or the Reaganites.
Even in the '80s they knew this current world would be the outcome. This isn't a surprise to the Fed or the Reaganites.
> "Unfortunately, what has happened is that wages haven’t kept up with the cost of living, by and large, for the last 50 years or so"
Not sure about 50 years, but from 2001-2020 (period where data is most easily available for me) things seem fine?
CPI: 175.1->257.971 (2.1%/yr)
Median wage: $27060 -> $46310 (2.9%/yr)
Mean wage: $34020 -> $61900 (3.2%/yr)
Bottom 10% wage: $18140 -> $27340 (2.2%/yr)
Rent burden (median_wage / median_rent): 25% -> 28% (and it's now back down to 27%)
[1] https://data.bls.gov/cgi-bin/surveymost?bls [2] eg https://www.wolframalpha.com/input?i=median+US+wage+2022
Not sure about 50 years, but from 2001-2020 (period where data is most easily available for me) things seem fine?
CPI: 175.1->257.971 (2.1%/yr)
Median wage: $27060 -> $46310 (2.9%/yr)
Mean wage: $34020 -> $61900 (3.2%/yr)
Bottom 10% wage: $18140 -> $27340 (2.2%/yr)
Rent burden (median_wage / median_rent): 25% -> 28% (and it's now back down to 27%)
[1] https://data.bls.gov/cgi-bin/surveymost?bls [2] eg https://www.wolframalpha.com/input?i=median+US+wage+2022
> median_rent
I am wondering if it is low because people simply downsizing..
I am wondering if it is low because people simply downsizing..
[deleted]
It barely seems possible (much less likely) for everyone (in aggregate) to downsize. Probably someone is buying or moving into their old (newly-vacant) property?
If rent to income increased two times in 25 years, I totally see how significant fraction of population downsized.
[deleted]
Why do you think rent to income increased 2x in L25y? The numbers I've seen are a small fraction of that.
> Why do you think rent to income increased 2x in L25y?
I didn't say I think this happened, I just gave example with "if", in reality change may be not as extreme, but even say 20% change on average meaning that certain slice of population was downsizing because was affected dramatically.
I think these stats are not even and can be heavily sliced by region/social slice, e.g. in silicon valley rent definitely raised 2-3 times in last 15 years, but blue color workers didn't receive equal raise in wages.
I didn't say I think this happened, I just gave example with "if", in reality change may be not as extreme, but even say 20% change on average meaning that certain slice of population was downsizing because was affected dramatically.
I think these stats are not even and can be heavily sliced by region/social slice, e.g. in silicon valley rent definitely raised 2-3 times in last 15 years, but blue color workers didn't receive equal raise in wages.
> in silicon valley rent definitely raised 2-3 times in last 15 years, but blue color workers didn't receive equal raise in wages.
Source? In the last 15 years, SF median rent went up 78% and SF minimum wage went up 93% [1] [2], so it seems quite likely blue color wages outpaced inflation.
I notice a worrying trend where people invent negative economic stats instead of looking at the real numbers [3].
[1] https://fred.stlouisfed.org/series/CUURA422SEHA
[2] https://www.sf.gov/sites/default/files/2023-02/Historical%20...
[3] https://en.wikipedia.org/wiki/Vibecession
Source? In the last 15 years, SF median rent went up 78% and SF minimum wage went up 93% [1] [2], so it seems quite likely blue color wages outpaced inflation.
I notice a worrying trend where people invent negative economic stats instead of looking at the real numbers [3].
[1] https://fred.stlouisfed.org/series/CUURA422SEHA
[2] https://www.sf.gov/sites/default/files/2023-02/Historical%20...
[3] https://en.wikipedia.org/wiki/Vibecession
I know the price of specific apartments. 2br went up from 1600 to 3200-3800(depending on month price varies), and many blue color workers who used to live there moved from that complex.
> SF median rent
your graph shows not SF (which is actually not silicon valley) but SF-Oakland metropolitan area. SF rent likely raised more than that.
> SF minimum wage went up 93%
Min wage is an outlier, they couldn't afford rent then and now.
Another factor is taxes, while wages increased, wages after taxes increased slower, because pushed income to another bracket.
> SF median rent
your graph shows not SF (which is actually not silicon valley) but SF-Oakland metropolitan area. SF rent likely raised more than that.
> SF minimum wage went up 93%
Min wage is an outlier, they couldn't afford rent then and now.
Another factor is taxes, while wages increased, wages after taxes increased slower, because pushed income to another bracket.
It's impossible to have a serious discussion on (rent/income) trends if your only source is an ancedote about a single (unnamed) apartment's price. (And you include no data on wages at all.)
Government expenditure in 1960 was $77 Billion/year.
Adjusted for inflation that would be $820 Billion/year today.
Actual spending today is $6,180 Billion/year, a ~7.5x multiplier above inflation.
Your income is being stolen through taxes and spent at an alarming rate.
Adjusted for inflation that would be $820 Billion/year today.
Actual spending today is $6,180 Billion/year, a ~7.5x multiplier above inflation.
Your income is being stolen through taxes and spent at an alarming rate.
The population is also a lot higher now. Taking your figures and computing it on a per capita basis in the respective eras gives a 3.72 multiplier, not 7.5.
Not saying 3.72 is great, of course, but it's more accurate in terms of actual impact on people.
But I don't think the expenditure increase supports the argument that people's income is being stolen. Whether or not you consider taxation as theft is an ideological stance.
Not saying 3.72 is great, of course, but it's more accurate in terms of actual impact on people.
But I don't think the expenditure increase supports the argument that people's income is being stolen. Whether or not you consider taxation as theft is an ideological stance.
Reaganomics. We should try to slowly go back to a pre-Reagan economic world.
You are mistaken. Reagan's tax cuts, which included cuts for the lower class, decreased tax revenue and put more money in the average person's pockets.
Presidents after Reagan started to pillage the lower and middle class for more tax revenue. Notably George H.W. [1]
[1] https://en.wikipedia.org/wiki/Omnibus_Budget_Reconciliation_...
Presidents after Reagan started to pillage the lower and middle class for more tax revenue. Notably George H.W. [1]
[1] https://en.wikipedia.org/wiki/Omnibus_Budget_Reconciliation_...
Taking what you say as accurate and complete just for the sake of argument, those tax cuts also meant that people had a greater non-tax financial burden. They also had adverse social consequences that increased costs for everybody.
The wealthy certainly did get great gains out of it, but it was at the expense of the non-wealthy because the tax cut they received was tiny and didn't offset the increased expenses.
The wealthy certainly did get great gains out of it, but it was at the expense of the non-wealthy because the tax cut they received was tiny and didn't offset the increased expenses.
> They also had adverse social consequences that increased costs for everybody.
This is just not true
This is just not true
The shift to neoliberalism happened under Carter.
https://www.salon.com/2011/02/08/lind_reaganism_carter/
Nixon was our last New Deal President.
https://isi.org/modern-age/richard-nixon-new-deal-nationalis...
Silly as it may seem, you probably want a more Nixonian world.
https://www.salon.com/2011/02/08/lind_reaganism_carter/
Nixon was our last New Deal President.
https://isi.org/modern-age/richard-nixon-new-deal-nationalis...
Silly as it may seem, you probably want a more Nixonian world.
Really? The situation isn't so simple. High income earners are paying historically low taxes.
Not to mention cuts in inheritance taxes from the 80s onward.
You'll need to explain your data more carefully than claiming it is all being stolen by taxes.
https://www.wolterskluwer.com/en/expert-insights/whole-ball-...
https://www.wolterskluwer.com/en/expert-insights/whole-ball-...
Your argument supports that tax burden has increased for the majority - if the high income folks are proportionally paying less while the total burden has increased, this a disproportionate increase has hit everyone else harder
So you agree with his statement? A larger proportion of the average person's income is taken by taxes.
We have too many asset owners who are trading amongst themselves, leaving real workers in the dust.
It's time to cut down real estate investors by restricting ownership to real people and heavily taxing multiple property ownership.
Yes, building more helps but until the landed gentry is removed as a demand pressure then affordability will not get better.
It's time to cut down real estate investors by restricting ownership to real people and heavily taxing multiple property ownership.
Yes, building more helps but until the landed gentry is removed as a demand pressure then affordability will not get better.
Wouldn't building more houses solve the problem without having to increase taxes and create programs?
A house wouldn't be at these incredible prices of $500,000 or $1 million if there were more of them available (supply/demand), real estate investing would in general be less incentivized, where today it's a major channel for loans and investment.
It's fine that it is - of course investors should be able to trade housing and properties like anything else - but it's wrong and cruel to stop building them, as the population continues to increase. They're making people homeless so a much smaller group can make millions of dollars off the scarcity.
It's not a great future if the average person can't afford to own a shelter, and if the price to rent one continues to be thousands of dollars every 30 days in relation to these wages - nobody can realistically pull away when the house price and the rent rate both are rising so fast. My Sacramento midtown apartment in 2010 was $660/mo, my first place in SF was $900/mo the next year. The same places are both over $3k/mo now, yet I made less money in 2023 than I did back in 2010, doing the same job and working more hours.
Meanwhile those who inherited a house for free, or bought it for a lot less money than they cost today can make hundreds of thousands from refinancing (doing nothing) or millions from selling it. That so-called value was created out of intentional scarcity and nothing else - out of depriving other people of homes.
Even the average homeowner can make out like a rockstar investor year-after-year without even having to try because houses are just increasing in value as supply diminishes, there's a problem - it's a real estate bubble that will burst the moment people start building houses and neighborhoods again.
I agree we have to cut down real estate investors, I just think you can solve it in a productive way rather than battling them in politics.
A house wouldn't be at these incredible prices of $500,000 or $1 million if there were more of them available (supply/demand), real estate investing would in general be less incentivized, where today it's a major channel for loans and investment.
It's fine that it is - of course investors should be able to trade housing and properties like anything else - but it's wrong and cruel to stop building them, as the population continues to increase. They're making people homeless so a much smaller group can make millions of dollars off the scarcity.
It's not a great future if the average person can't afford to own a shelter, and if the price to rent one continues to be thousands of dollars every 30 days in relation to these wages - nobody can realistically pull away when the house price and the rent rate both are rising so fast. My Sacramento midtown apartment in 2010 was $660/mo, my first place in SF was $900/mo the next year. The same places are both over $3k/mo now, yet I made less money in 2023 than I did back in 2010, doing the same job and working more hours.
Meanwhile those who inherited a house for free, or bought it for a lot less money than they cost today can make hundreds of thousands from refinancing (doing nothing) or millions from selling it. That so-called value was created out of intentional scarcity and nothing else - out of depriving other people of homes.
Even the average homeowner can make out like a rockstar investor year-after-year without even having to try because houses are just increasing in value as supply diminishes, there's a problem - it's a real estate bubble that will burst the moment people start building houses and neighborhoods again.
I agree we have to cut down real estate investors, I just think you can solve it in a productive way rather than battling them in politics.
Which real estate investors? Because it’s a spectrum. From the mom and pop trying to supplement their income to the investment firms that bought tens of thousands of properties. The latter being a bigger problem here.
What I’ve seen lately is mega apartment complexes being built and funded by private equity. That’s not good either. Things will end up like Europe where no one owns their flat they just rent in perpetuity.
What I’ve seen lately is mega apartment complexes being built and funded by private equity. That’s not good either. Things will end up like Europe where no one owns their flat they just rent in perpetuity.
Almost all low income earners rent from an investment firm. Any tax on investment firms will be passed down to the renters. Taxing those investment firms is a tax on the poor.
Taxing short term rentals, OTOH...
Taxing short term rentals, OTOH...
All of them from Mom and Pop to black rock.
A small leach is the same as a big leach.
A small leach is the same as a big leach.
> heavily taxing multiple property ownership
Which would harm the development of multi-family housing and increase the cost of living. Remember that "real workers" do not build and own 100+-unit dwellings
Which would harm the development of multi-family housing and increase the cost of living. Remember that "real workers" do not build and own 100+-unit dwellings
This is utterly false. Unless those developers are selling their units they are part of the problem. Ban renting and force the sale of units in those multi new builds and it eliminates the problem .
Doubly so once you've forced the sale of multi unit owners, now you have a gkut of available properties on the market and reduced demand which lowers the price.
The fact that this farce keeps getting perpetuated is why the problem will never go away.
Doubly so once you've forced the sale of multi unit owners, now you have a gkut of available properties on the market and reduced demand which lowers the price.
The fact that this farce keeps getting perpetuated is why the problem will never go away.
> Ban renting
Yikes! You are really out of touch and clearly are not thinking in good faith. I hope you feel better soon
Yikes! You are really out of touch and clearly are not thinking in good faith. I hope you feel better soon
Landlord detected, opinion rejected.
I think it's crazy how $100k seriously can't cut it in the US?
Here where I live, in Norway, $100k is more than enough to live very comfortably almost anywhere in the country. Only exceptions would be certain expensive parts of Oslo, and some other high-income areas/towns around Oslo.
And if you're two people earning that kind of money? Early retirement would be a viable option in as little as 10-15 years, if you have a sober lifestyle.
But, then again, I have friends and ex-colleagues that live in the US - and I'm not talking about expensive places like NYC, SF, etc. - bur rather medium sized cities in flyover country, and even there people are paying rents (or purchasing homes) that feel pretty stiff to me.
Here where I live, in Norway, $100k is more than enough to live very comfortably almost anywhere in the country. Only exceptions would be certain expensive parts of Oslo, and some other high-income areas/towns around Oslo.
And if you're two people earning that kind of money? Early retirement would be a viable option in as little as 10-15 years, if you have a sober lifestyle.
But, then again, I have friends and ex-colleagues that live in the US - and I'm not talking about expensive places like NYC, SF, etc. - bur rather medium sized cities in flyover country, and even there people are paying rents (or purchasing homes) that feel pretty stiff to me.
$100k absolutely can cut it in most of the US- even in expensive cities. The median income in New York City is $76k [1].
The article uses a wild definition of "American Dream" where 50% of income has to be able to be spent on non-essential things. I really don't think most people will actually spend like that.
[1] https://www.census.gov/quickfacts/fact/table/newyorkcitynewy...
The article uses a wild definition of "American Dream" where 50% of income has to be able to be spent on non-essential things. I really don't think most people will actually spend like that.
[1] https://www.census.gov/quickfacts/fact/table/newyorkcitynewy...
Rents are still $3.5k though. I guess everyone has roommates and that doesn't show up in the data.
https://www.renthop.com/average-rent-in/new-york-ny
https://www.renthop.com/average-rent-in/new-york-ny
Median vacant rentals are listed for $3.5k. Half of NYC apartments are rent stabilized. Renting a new place today is very high, but the median rent actually being paid is closer to $1500.
page 18 shows rent types https://www.nyc.gov/assets/hpd/downloads/pdfs/services/2021-...
page 18 shows rent types https://www.nyc.gov/assets/hpd/downloads/pdfs/services/2021-...
> I guess everyone has roommates
Yes, apparently 40% of single people have roommates in NYC
Keep in mind that having a "roommate" is common everywhere in the US- 50% of households are romantic partners, with most of those households having 2 incomes. You have to keep that in mind when looking at living expenses everywhere.
Yes, apparently 40% of single people have roommates in NYC
Keep in mind that having a "roommate" is common everywhere in the US- 50% of households are romantic partners, with most of those households having 2 incomes. You have to keep that in mind when looking at living expenses everywhere.
> the median income in New York City is $76k
> Keep in mind that having a "roommate" is common everywhere
You are not selling this dream very well. Maybe you're just young/inexpereinced, but this sounds like a dystopian nightmare to most people. You want families just rooming together because they cant afford the ever dwindling supply of housing - something civilization has known how to build for thousands of years?
Our asset owning class won't allow the building of houses and neighborhoods anymore (and all the land is owned so don't even try, anywhere), so that's the problem - artificial scarcity and inflation. Your room mate idea is an absurd remedy when such an obvious solution exists that would make everyone happier: Let people own their own shelter ffs.
You are not selling this dream very well. Maybe you're just young/inexpereinced, but this sounds like a dystopian nightmare to most people. You want families just rooming together because they cant afford the ever dwindling supply of housing - something civilization has known how to build for thousands of years?
Our asset owning class won't allow the building of houses and neighborhoods anymore (and all the land is owned so don't even try, anywhere), so that's the problem - artificial scarcity and inflation. Your room mate idea is an absurd remedy when such an obvious solution exists that would make everyone happier: Let people own their own shelter ffs.
This is what happens when the fiat economic system is based on constant inflation without any moderation.
The next recession - without adequate drop in prices - is literally going to create third-world-esque homelessness in vast majority of the country.
The next recession - without adequate drop in prices - is literally going to create third-world-esque homelessness in vast majority of the country.
[deleted]
That's putting it mildly. I lived better 15 years ago making $40k less than I do now. Price increases for consumer goods, energy, food, and property taxes in the last four years have been especially brutal!