4 ms·

> wage stagnation coupled with inflation in food, energy, housing, medicine, and tuition Is that wage stagnation not adjusted for inflation?

by jahnu 11y ago

api 11y ago
The numbers I've seen are adjusted for inflation and show that real wages have been largely stagnant since the early 70s. There have been periods of modest gain, usually when the economy is absolutely roaring like the late 90s, but the general trend has been flat to downward. The lower you are on the totem pole the worse it's been: the upper middle has seen some gain, the middle none, and the lower middle has lost ground. I'm also not sure that I fully believe the inflation numbers. It's not necessarily that I think they're fraudulent, but I don't think the methodology for calculating inflation has caught up with reality. The models I've seen assume inflation to be consistent across the economy, which may have been largely true in the 20th century but is true no longer. The problem is that inflation since the early 2000s has been extremely uneven. We've had massive deflation in some areas, like manufactured goods. But necessities -- especially real estate, health care, and college tuition -- have almost hyper-inflated. You can go without gadgets and toys but not without food and a place to live. We've had near-hyperinflation in necessities but it doesn't show in the stats because the stats average those numbers in with the deflationary numbers you get if you look at TV sets, appliances, and computers. Real estate is utterly insane. I cannot even comprehend how it can possibly be so high. How can you have a market for real estate at these prices? Who's buying it and what parallel universe of limitless wealth do they come from? I'm not talking about areas like the Bay Area, which has peculiar circumstances at work, or always-hot areas like Manhattan. There will always be "bubbles" of high prices vs. the rest of the market. If you look across the average of the market, real estate is crazy when compared to wages. I suppose it may be a function of historically cheap money causing larger home loans and jacking up prices, but it's essentially locked anyone out who isn't rich or willing to sign up for a crazy mortgage.
- eli_gottlieb 11y ago
  >Real estate is utterly insane. I cannot even comprehend how it can possibly be so high. How can you have a market for real estate at these prices? Who's buying it and what parallel universe of limitless wealth do they come from? From what I've read, the wealthy across the globe, especially from corrupt or unstable countries, are parking their money in stable Western real-estate. Some of it they proceed to rent out. Anglo countries are particularly vulnerable since their real-estate taxation regimes hit buildings and improvements so heavily compared to raw land-value.
- hugh4 11y ago
  >If you look across the average of the market, real estate is crazy when compared to wages. Is it? I've been looking at places that aren't the coast recently and was shocked to find how much house you can still get for $300K in most places. What do middle-class people do with the rest of their money when they can buy a house with $300K?
  - api 11y ago
    Now look into the availability of jobs in those places, and into what those jobs pay.
    - danielweber 11y ago
      They pay pretty well, especially because 28% of your pay won't be going towards rent or mortgage payments. The job hunt is a little harder(going through it now), but not that much harder. https://en.wikipedia.org/wiki/List_of_Metropolitan_Statistical_Areas https://en.wikipedia.org/wiki/List_of_Metropolitan_Statistic... There's lots of nice places in the top 50 of there that aren't crazy expensive.
- danielweber 11y ago
  Some real estate is a positional good, which has the price set by how much money the richest people have. There is no way around this. If everyone wants to live as close to (say) Times Square as possible, that land will be expensive. But you don't have to enter that zero-sum rat race. There are lots of places to live that aren't the only places the very rich want to live. They still enjoy decent schools and low crime. Some college education is positional, too. If you want "Ivy League Education" for your kid, well, there are just about as many slots as there were 30 years, but a lot more rich people, so the price will get bid up to infinity. Here the real shame is that the non-gold-star educational system is still getting more and more expensive, for many many reasons.
  - nostrademons 11y ago
    Interestingly, most of the Ivy League has incredibly generous financial aid packages, enough that most middle-income people pay zero. When I went to college, having had 2/3 of my tuition paid for by the college, I remarked that higher ed in elite universities was basically socialism subsidized by a very capitalist minority that was willing to pay any amount. Not a bad system, but it unfortunately only works at those institutions where rich people will enroll their kids at virtually any price.
- ThrustVectoring 11y ago
  Each of these markets is at the intersection of two or more inflationary forces. Real estate and colleges are often positional goods - you can spend as much money as you can afford to live in a nicer house than your neighbor, or go to a better school than other job applicants. Health care and college tuition are victim to increasing efficiency in making things like manufactured goods. If you're ambivalent between apple farming and practicing medicine, then the price of 2 hour doctor's visit is going to be approximately buyable with two hours of apple farming. And since apples per farmer is going up faster than apples per dollar, the cost of health care is going to increase over time relative to other goods. College loans and mortgages are the debt society has decided it has to pay in order to fund retirement. There really isn't another way to save on a long enough timeframe for enough people (unless you're Norway, and you can just decide to sit on oil reserves). If you make things, they fall apart, become outdated, or require ongoing maintenance - either way, when society stops making them, they stop having them. They can trade these things for promises to make them later, which basically works.
- eru 11y ago
  Real estate might be expensive because interest rates are so low.
dredmorbius 11y ago
Wage stagnation would be expressed in constant (inflation-adjusted) dollars, but it's also quite possible that not all products are subject to the same rates of inlfation. Energy, food, and housing costs have increased. Electronics, especially on a capabilities-based scale, have become profoundly less expensive, though when factored into the end-use impacts (communications, information, entertainment), the cost reductions are far less substantial. Healthcare is another area in which exceptional inflation has lead to only modest improvements in overall outcomes, particularly life expectancy for those already receiving good results: white females and males. Much of the improvement in health outcomes in the US since 1970 has been focused on bringing minority populations' standard of care and health closer to that of privileged majority populations. Not that this isn't a good thing, but it's different from saying that the _overall_ improvements in delivery have been evenly distributed. How to lie with statistics and all that.

> wage stagnation coupled with inflation in food, energy, housing, medicine, and tuition Is that wage stagnation not adjusted for inflation?

by jahnu 11y ago

> wage stagnation coupled with inflation in food, energy, housing, medicine, and tuition Is that wage stagnation not adjusted for inflation?

api 11y ago

The numbers I've seen are adjusted for inflation and show that real wages have been largely stagnant since the early 70s. There have been periods of modest gain, usually when the economy is absolutely roaring like the late 90s, but the general trend has been flat to downward. The lower you are on the totem pole the worse it's been: the upper middle has seen some gain, the middle none, and the lower middle has lost ground. I'm also not sure that I fully believe the inflation numbers. It's not necessarily that I think they're fraudulent, but I don't think the methodology for calculating inflation has caught up with reality. The models I've seen assume inflation to be consistent across the economy, which may have been largely true in the 20th century but is true no longer. The problem is that inflation since the early 2000s has been extremely uneven. We've had massive deflation in some areas, like manufactured goods. But necessities -- especially real estate, health care, and college tuition -- have almost hyper-inflated. You can go without gadgets and toys but not without food and a place to live. We've had near-hyperinflation in necessities but it doesn't show in the stats because the stats average those numbers in with the deflationary numbers you get if you look at TV sets, appliances, and computers. Real estate is utterly insane. I cannot even comprehend how it can possibly be so high. How can you have a market for real estate at these prices? Who's buying it and what parallel universe of limitless wealth do they come from? I'm not talking about areas like the Bay Area, which has peculiar circumstances at work, or always-hot areas like Manhattan. There will always be "bubbles" of high prices vs. the rest of the market. If you look across the average of the market, real estate is crazy when compared to wages. I suppose it may be a function of historically cheap money causing larger home loans and jacking up prices, but it's essentially locked anyone out who isn't rich or willing to sign up for a crazy mortgage.

eli_gottlieb 11y ago
>Real estate is utterly insane. I cannot even comprehend how it can possibly be so high. How can you have a market for real estate at these prices? Who's buying it and what parallel universe of limitless wealth do they come from? From what I've read, the wealthy across the globe, especially from corrupt or unstable countries, are parking their money in stable Western real-estate. Some of it they proceed to rent out. Anglo countries are particularly vulnerable since their real-estate taxation regimes hit buildings and improvements so heavily compared to raw land-value.
hugh4 11y ago
>If you look across the average of the market, real estate is crazy when compared to wages. Is it? I've been looking at places that aren't the coast recently and was shocked to find how much house you can still get for $300K in most places. What do middle-class people do with the rest of their money when they can buy a house with $300K?
- api 11y ago
  Now look into the availability of jobs in those places, and into what those jobs pay.
  - danielweber 11y ago
    They pay pretty well, especially because 28% of your pay won't be going towards rent or mortgage payments. The job hunt is a little harder(going through it now), but not that much harder. https://en.wikipedia.org/wiki/List_of_Metropolitan_Statistical_Areas https://en.wikipedia.org/wiki/List_of_Metropolitan_Statistic... There's lots of nice places in the top 50 of there that aren't crazy expensive.
danielweber 11y ago
Some real estate is a positional good, which has the price set by how much money the richest people have. There is no way around this. If everyone wants to live as close to (say) Times Square as possible, that land will be expensive. But you don't have to enter that zero-sum rat race. There are lots of places to live that aren't the only places the very rich want to live. They still enjoy decent schools and low crime. Some college education is positional, too. If you want "Ivy League Education" for your kid, well, there are just about as many slots as there were 30 years, but a lot more rich people, so the price will get bid up to infinity. Here the real shame is that the non-gold-star educational system is still getting more and more expensive, for many many reasons.
- nostrademons 11y ago
  Interestingly, most of the Ivy League has incredibly generous financial aid packages, enough that most middle-income people pay zero. When I went to college, having had 2/3 of my tuition paid for by the college, I remarked that higher ed in elite universities was basically socialism subsidized by a very capitalist minority that was willing to pay any amount. Not a bad system, but it unfortunately only works at those institutions where rich people will enroll their kids at virtually any price.
ThrustVectoring 11y ago
Each of these markets is at the intersection of two or more inflationary forces. Real estate and colleges are often positional goods - you can spend as much money as you can afford to live in a nicer house than your neighbor, or go to a better school than other job applicants. Health care and college tuition are victim to increasing efficiency in making things like manufactured goods. If you're ambivalent between apple farming and practicing medicine, then the price of 2 hour doctor's visit is going to be approximately buyable with two hours of apple farming. And since apples per farmer is going up faster than apples per dollar, the cost of health care is going to increase over time relative to other goods. College loans and mortgages are the debt society has decided it has to pay in order to fund retirement. There really isn't another way to save on a long enough timeframe for enough people (unless you're Norway, and you can just decide to sit on oil reserves). If you make things, they fall apart, become outdated, or require ongoing maintenance - either way, when society stops making them, they stop having them. They can trade these things for promises to make them later, which basically works.
eru 11y ago
Real estate might be expensive because interest rates are so low.

dredmorbius 11y ago

Wage stagnation would be expressed in constant (inflation-adjusted) dollars, but it's also quite possible that not all products are subject to the same rates of inlfation. Energy, food, and housing costs have increased. Electronics, especially on a capabilities-based scale, have become profoundly less expensive, though when factored into the end-use impacts (communications, information, entertainment), the cost reductions are far less substantial. Healthcare is another area in which exceptional inflation has lead to only modest improvements in overall outcomes, particularly life expectancy for those already receiving good results: white females and males. Much of the improvement in health outcomes in the US since 1970 has been focused on bringing minority populations' standard of care and health closer to that of privileged majority populations. Not that this isn't a good thing, but it's different from saying that the _overall_ improvements in delivery have been evenly distributed. How to lie with statistics and all that.