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The analysis above ignores the inflationary aspects of price because of the extremely low mortgage rate environment we are in. For a majority of people it is not necessarily how much the house costs but what the monthly payment is.
In 1970, an 80% mortgage ($18.8k) on that $23.6k house at 8.5% (average rate for 1970) is $145/mth.
In 2017, an 80% mortgage ($261.6k) on that $327k house at 4% (average rate for 2017) is $1247/mth.
the 2017 mortgage is 8.6 times more expensive than the 1970 mortgage, where the annual household income is 8.3 times greater. So yes the value of the house has appreciated more but the mortgage carrying costs are in line with what they were in 1970.
Except, it is easier to save 20% of $23.6k when savings rates are paying 5%+, rather than saving 20% of $327k at .05%.
Today average person is about twice financially worse than in 1970. Minimum wage earners - about 3 times worse.
Nice "progress".
Let's see what the idiot on your blog has to say:
In 1970, minimum wage was $1.60 an hour. Today, it’s $7.25 an hour. That’s a 353% increase over that period of time, which seems like a fair amount… until you actually start looking at how prices have increased. What about average wages? I couldn’t find a document that laid out full details on average wages per year,...
We can sum that up in one word: Moron. Or, if you prefer French: Imbecile.
Would you like to know why he can't find details on average wages per year?
Because he's clueless.
I can tell you what the average wage by year is.
I can also tell you how many people earned what wages by bracket for each year.
People who know what they're talking about can easily locate primary sources of information on wage data and all of it from the US Government.
And, how daft is the moron/imbecile that he doesn't understand Inflation?
There are different forms of Inflation, each with a unique cause and precisely because they have a unique cause, they have unique solutions.
You do understand the meaning of "unique" right?
As everyone with half-a-brain knows, there is a relationship between the Supply of any good, service or resource, and the Demand for that good, service or resource.
As every competent person knows, when the Demand for any good, service or resource exceeds the Supply of that good, service or resource, the price rises.
As every intelligent person knows, that's called Demand-pull Inflation.
Neither the Federal Reserve or any central bank on Earth can do anything about Demand-pull Inflation.
Demand-pull Inflation has a function; a purpose. That function or purpose is to prevent --- do you understand the meaning of "prevent"? Would you like a dictionary link? -- to prevent the over-consumption, over-use or depletion of any good, service or resource.
It's a built-in safety feature.
Given that reality, why would you want to enable the over-consumption, over-use or depletion of any good, service or resource?
How does any economy or any person or any group of people benefit from the over-consumption, over-use or depletion of any good, service or resource?
Well, the short answer is they do not.
If people cannot afford certain goods, services or resources, that's a good thing, because it means those goods, services or resources are being protected from over-consumption, over-use or depletion.
If people cannot afford them, that's sad really, but sucks to be them.
They are not without recourse.
They can stop consuming.
Or, they can seek substitutes.
Or, they can increase Supply, so prices stop rising. Of course, that assumes that Supply can be increased in the first place.
So, increasing wages to meet Demand-pull Inflation is stupid.
The only thing that happens is prices rise higher and faster.
Your response to that is what? Increase wages again? That will only cause prices to rise even faster and higher.
In case you don't get it, this is a game you can never win. Not ever.
Today, the net worth of a typical retiree is $264,750. This amount shrinks moving down the age ladder: The Silent hold roughly 1.3 times the amount of wealth as Boomers, more than twice that of Xers, and 23 times that of Millennials.[/b]
You're not paying attention.
First, most of that net worth is in the home that Boomer is living in (and there is zero way a "typical" retiree couple has a half million in net worth). I suspect your source does not use the word "typical," which implies "modal." I suspect it's considering a median.
Second, you're not paying attention when we tell you that the retiree is going to eat up his net worth in the last few years of his life. With my mother, for instance, despite her Social Security and a small VA pension (my father died from Agent Orange exposure), putting her into a nursing home when she was rendered permanently comatose by an auto accident would have required us giving them her house.
That is what is typical. That is the modal outcome.
Between nursing care and the overall expense in the medical care of the elderly, whatever nest egg they have will likely be gone by the time we die.
Quote:
For about half of seniors, [Social Security] provides at least 50 percent of their income, and for about 1 in 4 seniors, it provides at least 90 percent of income, across multiple surveys and the recent study that matches survey and administrative data.
In 1970, minimum wage was $1.60 an hour. Today, it’s $7.25 an hour. That’s a 353% increase over that period of time, which seems like a fair amount… until you actually start looking at how prices have increased. What about average wages? I couldn’t find a document that laid out full details on average wages per year,...
We can sum that up in one word: Moron. Or, if you prefer French: Imbecile.
Would you like to know why he can't find details on average wages per year?
Because he's clueless.
I can tell you what the average wage by year is.
I can also tell you how many people earned what wages by bracket for each year.
People who know what they're talking about can easily locate primary sources of information on wage data and all of it from the US Government.
And, how daft is the moron/imbecile that he doesn't understand Inflation?
There are different forms of Inflation, each with a unique cause and precisely because they have a unique cause, they have unique solutions.
You do understand the meaning of "unique" right?
As everyone with half-a-brain knows, there is a relationship between the Supply of any good, service or resource, and the Demand for that good, service or resource.
As every competent person knows, when the Demand for any good, service or resource exceeds the Supply of that good, service or resource, the price rises.
As every intelligent person knows, that's called Demand-pull Inflation.
Neither the Federal Reserve or any central bank on Earth can do anything about Demand-pull Inflation.
Demand-pull Inflation has a function; a purpose. That function or purpose is to prevent --- do you understand the meaning of "prevent"? Would you like a dictionary link? -- to prevent the over-consumption, over-use or depletion of any good, service or resource.
It's a built-in safety feature.
Given that reality, why would you want to enable the over-consumption, over-use or depletion of any good, service or resource?
How does any economy or any person or any group of people benefit from the over-consumption, over-use or depletion of any good, service or resource?
Well, the short answer is they do not.
If people cannot afford certain goods, services or resources, that's a good thing, because it means those goods, services or resources are being protected from over-consumption, over-use or depletion.
If people cannot afford them, that's sad really, but sucks to be them.
They are not without recourse.
They can stop consuming.
Or, they can seek substitutes.
Or, they can increase Supply, so prices stop rising. Of course, that assumes that Supply can be increased in the first place.
So, increasing wages to meet Demand-pull Inflation is stupid.
The only thing that happens is prices rise higher and faster.
Your response to that is what? Increase wages again? That will only cause prices to rise even faster and higher.
In case you don't get it, this is a game you can never win. Not ever.
As usual, lots of blah-blah, zero numbers.
1) We are comparing two minimum wage numbers of two exact dates. Are they wrong? If yes, provide exact number. Are they correct? If yes, the rest of your blah-blah is not relevant.
2) Ever heard of Maslow's pyramid? All these demand-pull-inflation talks are good... for non-essential junk. Housing, health and education are essential, basic stuff laying in the base of Maslow's pyramid (among other things). Otherwise, you can try apply demand-pull-inflation talks to firefighters, police, military and so on. Oh, you don't want that? Why? How is that different? One small example: if you are hinging on the brick of death, and there is doctor around that can easily save you, and it will cost him $1, but he will ask you for all the money you have and will ever have - that's exactly demand-pull-inflation you are describing. Are you happy with the situation? Yes/no? Why?
3) "Stop consuming". Great - if that again applies to non-essential junk. You are on a life-long meds that big farma gouging price to the sky. Hey, just stop consuming! You'll die, but who cares, right? Or, you live in poverty and your only chance to get out is education. Alas, education prices went through the roof way faster than inflation. No, you cannot find cheaper ways to get it. Hey, just stop consuming and stay in poverty forever. That's where your logic goes.
You seems to confuse me with those crazy dems that want uncontrolled wage rise. What I'm saying instead is that US economy is degrading from 70s, when it was at it's all-time high - for an average Joe.
Is the solution to it to raise wages? No, you cannot command wages, as inflation will kick in, nullifying the effort. Problem is - there is no solution in current paradigm. And no one in power suggested anything that would work. What I see is only more insanity like "Green Deal" and other nonsense. Alas, there is no new FDR to have some vision and ideas how to prevent the free-falling US economy.
1. Trust me I do listen. As it's possible I misread or conflated some of your points with those of others I'll reread your posts above tonight and report back.
2. Trust me too that I understand this stuff really well.
The units noted in my chart are CPI.......PPI is an entirely different animal.
Ok, I didn't pay attention. But then it's even less trustworthy, see below.
Quote:
Originally Posted by EDS_
CPI absolutely does track healthcare, including insurance, and has for many years.
Unfortunately, they invented "leisure adjusted" CPI. That just doesn't work in real life. Comparing actual numbers "now" and "then" is the only way to go. Substitutions are nice to cover up drop in QoL, but doesn't allow comparison "apples to apples".
Quote:
Originally Posted by EDS_
The average home built in 1970 was ~53% smaller than today. About 50% of 1970 homes had central heat and air - today that number is roughly 90%. The average 1970 also home had fewer bathrooms and was less likely to have pool etc. The 1970 home probably lacked GFCI and did lack ARC Fault protection and on and on. Point being comparing item prices over time without careful analysis can lead to weak conclusions.
I would be happy to buy a new house in a good area (i.e. not a ghetto) that has a size of 1970 house, and corresponding price. I'm ok with no GFCI, as I can install them myself for very cheap. Guess how many I can find? Exactly zero. Point being you cannot compare actually available goods with imaginary ones.
Quote:
Originally Posted by EDS_
Relatedly, since 1970 millions and millions of people (somewhere around 30 million) have moved from rural areas to the burbs and cities. Those who bought homes paid more.
And how that relates to average price/wage ratio changes?
Quote:
Originally Posted by EDS_
Your claim that one worker households were the norm in 1970 but not now is belied by the fact that The Labor Force Participation Rate in 1970 was ~60.4% last month it was was 62.8%.
LFPR was ~67% in 2000 vs ~60.4 in 1970 (exactly due to the influx of women to workplaces; to be fair, influx started in 1963, not in 1970), but is steady declining since ~2000. Reasons? Here:
Great idea... that is not going to work. People are not angels. If you magically create Communist society overnight, next day people will destroy it due to their greed, jealousy, hunger for power etc.
The analysis above ignores the inflationary aspects of price because of the extremely low mortgage rate environment we are in. For a majority of people it is not necessarily how much the house costs but what the monthly payment is.
In 1970, an 80% mortgage ($18.8k) on that $23.6k house at 8.5% (average rate for 1970) is $145/mth.
In 2017, an 80% mortgage ($261.6k) on that $327k house at 4% (average rate for 2017) is $1247/mth.
the 2017 mortgage is 8.6 times more expensive than the 1970 mortgage, where the annual household income is 8.3 times greater. So yes the value of the house has appreciated more but the mortgage carrying costs are in line with what they were in 1970.
Now we are talking!
Great point, actually.
But, just add on top of that taxes and insurance, which are calculated from the price of the house.
Say, we have 80% mortgage ($261.6k) on that $327k house, which is 1247/mth. Taxes @ 1.75% (in my area - PBC, FL) will be $477/mth. Insurance is ~$120/mth. If house cost would be twice less (to keep up with wages), then Tax+Ins payments will be ~2 times less. So, taking it all into account we will have
(1247 + 597) / (145 + 43) = 9.8.
While 9.8 times house payments increase is better than 13 house price increase, it is still higher than 8.3 income increase. And, to be frank, comparing payments is just like car sales deception - "let's calculate your monthly payments, don't care about total price!".
First, most of that net worth is in the home that Boomer is living in...
A home is an asset. Shares of stock in Facebook are an asset. Short term treasuries are an asset. Gold bullion is an asset. Cash stuffed in the proverbial mattress is an asset. That 60-year old gold Rolex is an asset. That 1966 Mustang under a tarp in the barn is an asset.
What matters, of course, is the accumulation of assets over a lifetime. And yes, some of those assets liquid while others are not.
Quote:
Originally Posted by Ralph_Kirk
Second, you're not paying attention when we tell you that the retiree is going to eat up his net worth in the last few years of his life.
For many that will be true.
For some, they go to sleep never to wake up, having died in the middle of the night from from sudden cardiac arrest (SCA), or myocardial infarction (a heart attack) - particularly the "widow maker" variety which entails a blockage of the left anterior descending artery, or carbon monoxide poisoning or a rupture of a cerebral aneurysm or sudden unexplained nocturnal death syndrome (SUNDS).
When its my time to go, just push me in front of a bus. Others might want to spend every last penny extracting an incremental 90 days of extremely low quality & painful life - which really is just prolonging death.
Regardless, the 60+ age cohort has never been wealthier than it is now. I'm sorry if this doesn't fit your narrative.
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