4 ms·

Or maybe they _could_ afford much more if basic necessities such as housing did not swallow up any gain otherwise expected. (Not to mention children, education,

by Jacqued 10y ago

Or maybe they _could_ afford much more if basic necessities such as housing did not swallow up any gain otherwise expected. (Not to mention children, education, healthcare depending on countries). When 35-50% of your income is taken up by rent, you don't care that much that home appliances cost less than they used to.

woodpanel 10y ago
Do you think the income stagnation is due to housing costs rather than globalization? You're right that with increasing utbanization the costs of housing was rising dramatically (as currently people prefer the dense urban areas of a city to its cheaper suburbia). But that would mean that 70% of western workers now live in the dense city parts, which can't be established I think.
- bufordsharkley 10y ago
  Even those not living in city centers are affected by this. 1) It implies a lack of mobility from job-poor places to job-rich places 2) Suburbs outside of job-rich cities are similarly seeing land values rise: marginal land is expanding outward to exurbs Ideally, we'd see people be able to chase well-paying jobs by moving to denser, job-rich areas if they wished to, but that's become an impossibility. As far as solutions go, I think it basically boils down to: 1) People can live in exurbs and ex-exurbs, and work through VR 2) We can lower land costs with a land value tax. I prefer the latter to the former.
- Joof 10y ago
  Housing isnt that much of a problem in most of America. Maybe you have to live farther from the city center, but it's quite affordable. I find HN is a bit focused on San Francisco and New York problems, which are important, but not universally.
  - collyw 10y ago
    I hear similar thinks in the UK, that housing is affordable in such and such a small town. Thats great, but there are never any "good" jobs in these places.
    - Joof 10y ago
      According to this cost of living calculator from CNN [1] housing in San Francisco is 256% higher than in Austin. Both have good jobs in tech. The argument I've heard against it is that you might have to live farther from the city center and commute for 30 minutes or more, which is certainly a tradeoff, but perhaps a worthwhile one. [1] http://money.cnn.com/calculator/pf/cost-of-living/index.html http://money.cnn.com/calculator/pf/cost-of-living/index.html
- Jacqued 10y ago
  > Do you think the income stagnation is due to housing costs rather than globalization? I'm not denying globalization's role. However, as bufordsharkley said in a sibling comment, housing costs often do prevent people from moving for work opportunities. They deprive the companies of potential hires and are a significant opportunity cost for the individual. In aggregate this might have an effect. Plus, long-term stagnating income is painful per se, but it's only disastrous when core expenses rise at the same time. > with increasing urbanization the costs of housing was rising dramatically (as currently people prefer the dense urban areas of a city to its cheaper suburbia) I'm not american so the phenomenon must be different to me. I think most people end up paying too much for housing, relative to their income. Fortunate and less fortunate people alike spend 35-50%, it's just that some end up in a dump far away from anything (incl. their workplace) while others have a proper flat in the city. Also, it might be interesting to look at the problem from an age perspective. Retirees (except the wealthiest ones) probably don't expect to see their incomes rise much, and as a group they're more likely to live in cheap places in the countryside. Younger, working-age people feel the housing pressure, need income to relieve it, and are facing dwindling opportunities for upward mobility.
davidf18 10y ago
The high cost of housing in urban centers such as NYC, SF, Boston, LA is caused by market inefficiencies caused by zoning density restrictions and overuse of historic landmark status. This actions result in a "politically induced" scarcity which works against wealth creation. In microeconomics, this is called, "rent-seeking." Harvard Economist Edward Glaeser has written extensively about this, see NY Daily News: "Build Big Bill" for a solution to the high cost of housing in NYC. Financial Times columnist (and with a masters in Economics) Tim Harford has written about this. See his book, "The Undercover Economist." Economics Nobelist Paul Krugmann has mentioned this in his NYTimes columns as well. In the US, at least, the high cost of health care has impacted wage growth for many since firms generally pay employees according to overall salaries and benefits. As more and more money has gone to health care costs, less money has gone to salaries.
- woodpanel 10y ago
  "This actions result in a "politically induced" scarcity which works against wealth creation" I agree. I do think though that even without this artificial scarcity there are physical limits to efficient housing. Hyperbole: it's impossible to house 7 billion people with a nice balcony facing NY's Central Park. Economically it wasn't much a smart decision to shy away from suburbia.
danielweber 10y ago
So how do we get people to stop bidding up a positional good?
- bufordsharkley 10y ago
  You could negate the gains of land wealth. There are small fixes for this (applying capital gains to home sales), but the big fix would be an application of a land value tax,[0] something generally agreed to be very economically efficient. [0] https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax

by Jacqued 10y ago

woodpanel 10y ago

Do you think the income stagnation is due to housing costs rather than globalization? You're right that with increasing utbanization the costs of housing was rising dramatically (as currently people prefer the dense urban areas of a city to its cheaper suburbia). But that would mean that 70% of western workers now live in the dense city parts, which can't be established I think.

bufordsharkley 10y ago
Even those not living in city centers are affected by this. 1) It implies a lack of mobility from job-poor places to job-rich places 2) Suburbs outside of job-rich cities are similarly seeing land values rise: marginal land is expanding outward to exurbs Ideally, we'd see people be able to chase well-paying jobs by moving to denser, job-rich areas if they wished to, but that's become an impossibility. As far as solutions go, I think it basically boils down to: 1) People can live in exurbs and ex-exurbs, and work through VR 2) We can lower land costs with a land value tax. I prefer the latter to the former.
Joof 10y ago
Housing isnt that much of a problem in most of America. Maybe you have to live farther from the city center, but it's quite affordable. I find HN is a bit focused on San Francisco and New York problems, which are important, but not universally.
- collyw 10y ago
  I hear similar thinks in the UK, that housing is affordable in such and such a small town. Thats great, but there are never any "good" jobs in these places.
  - Joof 10y ago
    According to this cost of living calculator from CNN [1] housing in San Francisco is 256% higher than in Austin. Both have good jobs in tech. The argument I've heard against it is that you might have to live farther from the city center and commute for 30 minutes or more, which is certainly a tradeoff, but perhaps a worthwhile one. [1] http://money.cnn.com/calculator/pf/cost-of-living/index.html http://money.cnn.com/calculator/pf/cost-of-living/index.html
Jacqued 10y ago
> Do you think the income stagnation is due to housing costs rather than globalization? I'm not denying globalization's role. However, as bufordsharkley said in a sibling comment, housing costs often do prevent people from moving for work opportunities. They deprive the companies of potential hires and are a significant opportunity cost for the individual. In aggregate this might have an effect. Plus, long-term stagnating income is painful per se, but it's only disastrous when core expenses rise at the same time. > with increasing urbanization the costs of housing was rising dramatically (as currently people prefer the dense urban areas of a city to its cheaper suburbia) I'm not american so the phenomenon must be different to me. I think most people end up paying too much for housing, relative to their income. Fortunate and less fortunate people alike spend 35-50%, it's just that some end up in a dump far away from anything (incl. their workplace) while others have a proper flat in the city. Also, it might be interesting to look at the problem from an age perspective. Retirees (except the wealthiest ones) probably don't expect to see their incomes rise much, and as a group they're more likely to live in cheap places in the countryside. Younger, working-age people feel the housing pressure, need income to relieve it, and are facing dwindling opportunities for upward mobility.

davidf18 10y ago

The high cost of housing in urban centers such as NYC, SF, Boston, LA is caused by market inefficiencies caused by zoning density restrictions and overuse of historic landmark status. This actions result in a "politically induced" scarcity which works against wealth creation. In microeconomics, this is called, "rent-seeking." Harvard Economist Edward Glaeser has written extensively about this, see NY Daily News: "Build Big Bill" for a solution to the high cost of housing in NYC. Financial Times columnist (and with a masters in Economics) Tim Harford has written about this. See his book, "The Undercover Economist." Economics Nobelist Paul Krugmann has mentioned this in his NYTimes columns as well. In the US, at least, the high cost of health care has impacted wage growth for many since firms generally pay employees according to overall salaries and benefits. As more and more money has gone to health care costs, less money has gone to salaries.

woodpanel 10y ago
"This actions result in a "politically induced" scarcity which works against wealth creation" I agree. I do think though that even without this artificial scarcity there are physical limits to efficient housing. Hyperbole: it's impossible to house 7 billion people with a nice balcony facing NY's Central Park. Economically it wasn't much a smart decision to shy away from suburbia.

danielweber 10y ago

So how do we get people to stop bidding up a positional good?

bufordsharkley 10y ago
You could negate the gains of land wealth. There are small fixes for this (applying capital gains to home sales), but the big fix would be an application of a land value tax,[0] something generally agreed to be very economically efficient. [0] https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax