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Well the method was wage stagnation. The cost of living went up far more quickly than our pay did.
As for what actually caused this, you would get a myriad of answers.
The failure of "trickle-down" economics
The ability of corporations to create tax loopholes and keep the majority of their profits, while having no incentive to provide workers with anything more than subsistence wages.
Two-income families becoming the norm.
Offshoring of manufacturing jobs and essentially ending the working middle class.
Consumer driven greed which demands families "NEED" a 60" TV, 100 Mb/s internet and a 20 Gb data-plan.
Lots of things caused it, and I'm certainly leaving some out, but how do we address it? For that, well, I'm not an expert on the matter, but I can tell you that whatever we've been doing for the past 15 years or so has NOT been working. I have a STEM job and earn in roughly the 70 %ile for my metro area, but because I'm a millennial with no home equity, in order to live within my means I have to live in a working-class neighborhood and drive a 15 year old car.
It's not such a bad thing, but I can guarantee that someone in my position 30 years ago would have lived in a desirable neighborhood with a newer car. That's just the unfortunate reality we have to live with for a while, until we fix it - if we ever do.
Not much more I can add here, this one is spot on. Inflation means that things will naturally become more expensive over time. (the alternatives- no growth or negative growth are even worse).
If worker pay moved up along with it, there wouldn't be an issue- however this hasn't happened at all. Wages have stagnated horribly since supply side economics (trickle down) became trendy during the reagan era. Wealth has exploded for the top 10% or so while their taxes are at all time lows. The theory was that the benefits from increased spending for the wealthy would result in benefits for everyone else, however this theory has been soundly debunked- it only resulted in wealth hoarding, frequently overseas.
Look at the inflation adjusted cost of things like houses and cars. The base price for a new camaro in 1969 was $2762, and the average house was about $27,000. The average salary for an individial was about $5800 per year. easily affordable on one income, even WITHOUT loans.
Today? the average new car price is $33,560. the average home is $337,000. The median salary for an individual? about $26,000. buying a home now is totally out of the question for the average worker without loans. Even WITH loans, it's eating up a huge amount of monthly income.
Think about a "middle class" family in the 60s. A 1.2k sq ft house, no AC, no cable, 1 television, ate almost all meals at home, had one car, vacations involved local trips like camping, going to the lake for a day, etc.
Today's middle class family: 2.5k sq ft house, house at a constant 70 degrees, cable, 3-4 TVs, eats most meals out, 2 new cars, 1-2 large vacations a year, 2+ cell phones, gym memberships, etc.
It's pretty easy to see how many families needed to almost double their income to maintain that middle class lifestyle.
Now this isn't the case for all, but it is for many.
Exactly this.
Your hardworking grandpa didn't have a 2,400 square foot house, 2 suv's, 3 led TV's, 3 cell phones, internet access, 150 channels of crap on the TV's, on and on. I'll bet he never heard of Dolce & Gabbana, Fossil, Dooney & Bourke, Tag Heuer, or even Polo. He may have had a Sears credit card, but I'll be damned if he ever used it. He probably chopped wood in the winter and in the summer knew which doors to open and which ones you better keep closed. He cut his own hair with a pair of sheep shears he bought at trade day and still remembers the first movie he ever saw.
He doesn't care that you feel you have it rough...
in the 60s. A 1.2k sq ft house, no AC, no cable, 1 television, ate almost all meals at home, had one car, vacations involved local trips like camping, going to the lake for a day, etc.
Today's middle class family: 2.5k sq ft house, house at a constant 70 degrees, cable, 3-4 TVs, eats most meals out, 2 new cars, 1-2 large vacations a year, 2+ cell phones, gym memberships, etc.
Add to that total healthcare costs (insurance PLUS out of pocket) in 1960's versus now. But somehow it seems like it was probably easier to just get a doctors appointment then versus now where there are so many middlemen to go through now versus then.
Not much more I can add here, this one is spot on. Inflation means that things will naturally become more expensive over time. (the alternatives- no growth or negative growth are even worse).
If worker pay moved up along with it, there wouldn't be an issue- however this hasn't happened at all. Wages have stagnated horribly since supply side economics (trickle down) became trendy during the reagan era. Wealth has exploded for the top 10% or so while their taxes are at all time lows. The theory was that the benefits from increased spending for the wealthy would result in benefits for everyone else, however this theory has been soundly debunked- it only resulted in wealth hoarding, frequently overseas.
Look at the inflation adjusted cost of things like houses and cars. The base price for a new camaro in 1969 was $2762, and the average house was about $27,000. The average salary for an individial was about $5800 per year. easily affordable on one income, even WITHOUT loans.
Today? the average new car price is $33,560. the average home is $337,000. The median salary for an individual? about $26,000. buying a home now is totally out of the question for the average worker without loans. Even WITH loans, it's eating up a huge amount of monthly income.
Interesting you're mixing up average and median. Are you trying to make a point by conflating the two?
Also, where are you getting your numbers from? Why would you use average instead of median?
When I grew up not that long ago, we lived a decidedly middle-class lifestyle, had a 2 bedroom house (for 4 of us), one car, one window mount air conditioner (we'd all pile in to that one room when it got real hot out), one landline, one TV with rabbit ears, and we ate out once a week at Pizza Hut or equivalent. We certainly were not wanting in life.
Both parents worked, but life like that was pretty much the norm. No expensive cell bill, cable bill, internet bill, etc. Library was free. We played outside. The car was paid for and repaired, not replaced, every few years.
I agree with most of the posts here re: lifestyle. Great stuff.
"the average new car price is $33,560. the average home is $337,000". I don't know about these numbers. What kind of car are you talking about and what state is this?
In my area (large East Coast metro area) many homes in better neighborhoods might be near this number but I wouldn't call it the "average". There are many homes around $170-200K.
Many cars are much less than $33K.
I think the point of the thread was why it's so much more expensive to live today and I think the point is well taken that people want the $33K car and the $337K house but you can live well on much less expensive things. Whereas back in the day when I was growing up, people were satisfied with much less expensive things. People today want an upscale lifestyle but don't have the money to pay for it. Well that's not the fault of the economy, that's the fault of people wanting more than they can afford. They call this "champagne tastes on a beer budget"
That's why I tend to shrug off people's complaints about not making enough money or not having enough money to make ends meet. Tell me what kind of car you drive, what kind of house you own, and what you are buying and spending your money on, and I will decide whether to give you any sympathy or not.
I have a home that doesn't have an "updated" kitchen or bathroom. I drove a car for 11 years before I got the one I have now. When this one gets too old I will buy a used car. I only eat out about once a month and I pack my own lunch. I do not spend money on takeout or buy junk food at WAWA. I shop at thrift stores for most of the stuff I need. I do not have cable TV or internet. I realize other people want more, but that is the point, if someone is complaining about not making enough money then do without frivolous stuff for a few years until you can get back on your feet. No one NEEDS to spend $2400 on cable and $2100 on cell phones every year.
you could get a job, any kind of job without any education and live a decent life and support a family, now it takes 3 jobs working 80 hours a week just to pay your rent. many people cant even afford basic needs(food, shelter) without government assistance (something like 50% of the US population, 150 million people get government assistance)
its almost impossible to start a family without everyone working full time or without government assistance.
how did this happen?
Because personal expectations and cost of living has dramatically risen since that time. Doesn't hurt that people back then knew how to save money, now some will spend time broke just so their kids can play on the latest Xbox. That's why.
When I grew up not that long ago, we lived a decidedly middle-class lifestyle, had a 2 bedroom house (for 4 of us), one car, one window mount air conditioner (we'd all pile in to that one room when it got real hot out), one landline, one TV with rabbit ears, and we ate out once a week at Pizza Hut or equivalent. We certainly were not wanting in life.
Both parents worked, but life like that was pretty much the norm. No expensive cell bill, cable bill, internet bill, etc. Library was free. We played outside. The car was paid for and repaired, not replaced, every few years.
Is it possible today? I don't see why not.
See Jacob from Early Retirement Extreme or Mr. Money Mustache. It is most certainly doable today.
Your hardworking grandpa didn't have a 2,400 square foot house, 2 suv's, 3 led TV's, 3 cell phones, internet access, 150 channels of crap on the TV's, on and on. I'll bet he never heard of Dolce & Gabbana, Fossil, Dooney & Bourke, Tag Heuer, or even Polo. He may have had a Sears credit card, but I'll be damned if he ever used it. He probably chopped wood in the winter and in the summer knew which doors to open and which ones you better keep closed. He cut his own hair with a pair of sheep shears he bought at trade day and still remembers the first movie he ever saw.
He doesn't care that you feel you have it rough...
Yes, all these things are factors, but according to Forbes and The Economist,
Real Estate prices vs. income have sky-rocketed from the mid-80's to around 2008, and even after the Great Recession, prices in most areas still didn't go back down to where they used to be (this is inflation-adjusted and compared to the average American wage)
So, even for the EXACT SAME 1,200 sq, ft home, it is now much harder to afford that place.
The point is that you can't simply blame the younger generations' extravagant lifestyles (although that is part of the problem), but it actually IS harder to afford things now-a-days.
Your hardworking grandpa didn't have a 2,400 square foot house, 2 suv's, 3 led TV's, 3 cell phones, internet access, 150 channels of crap on the TV's, on and on. I'll bet he never heard of Dolce & Gabbana, Fossil, Dooney & Bourke, Tag Heuer, or even Polo. He may have had a Sears credit card, but I'll be damned if he ever used it. He probably chopped wood in the winter and in the summer knew which doors to open and which ones you better keep closed. He cut his own hair with a pair of sheep shears he bought at trade day and still remembers the first movie he ever saw.
He doesn't care that you feel you have it rough...
I don't either. Why do you have this perception that people live an absurd and unsustainable lifestyle?
I have a 2000 sq ft house, 2 paid-off sedans, 1 LED TV and 1 ancient CRT TV, 2 cell phones (but no home phone), internet (but no newspaper), 20 channels of well.. still mostly crap, it comes with the internet.. and I've never heard of any of those brands either. I think the fanciest place I shop is Macys. I use an evaporation cooler in the summer and a gas furnace to keep the house at 65 in the winter and the first movie I saw was Milo and Otis (though I have no idea what this has to do with anything). I do splurge on Starbucks once a week or so, but I rarely buy beer and I never took out any student loans.
Despite all that my wife and I earn well above median, but if we ever want to retire (which by the way, we have to fund that ourselves, your grandpa didn't), we can only afford to buy in either a working class suburb, that I'm sure your college educated grandpa would have never considered, or an exurb so far from the city that I would need a new car. If I wanted your grandpa's old 1200 square foot home in the city, I'd have to spend 1.5x as much as I do on my current home.
How do you not see this as an issue? Consumerism plays a part for some, I agree, but for most the cost of living has far outpaced wage gains, for about 2 decades now.
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