5 ms·

It seems like each generation is having more difficulty making ends meet (https://theirrelevantinvestor.com/2021/04/01/the-generational-wealth-gap/ https://thei

It seems like each generation is having more difficulty making ends meet (https://theirrelevantinvestor.com/2021/04/01/the-generational-wealth-gap/ https://theirrelevantinvestor.com/2021/04/01/the-generationa...). Why hasn't this been improving? Is it because of regulatory capture by corporations?

bobthepanda 5y ago
It’s not always corporations. The people often capture regulatory powers too. A good chunk if not the majority of wealth creation for most US households has been the value of their house. Older people own houses and have captured the upside of price increases over the decade. The young people are having a harder and harder time buying the exact same houses going up in price. If you go to any sort of planning meeting for a new development you’ll always run into cranky homeowners complaining that it will ruin the price of their property.
skissane 5y ago
Where I live (Australia), the biggest issue is the massive bubble in property prices. Housing affordability has gotten a lot worse over the last few decades. Arguably it has produced a massive wealth transfer from the younger to older generations. I guess inevitably that is going to be partially reversed when those older generations pass on, and leave some of their accumulated wealth to their children. But inheritance is a very uneven process – some people have more children than others, some people spend a lot more in their retirement than others, some people live a lot longer than others (which can lead to much of their accumulated wealth being spent on aged care), etc. However I do feel like we are transitioning from a society in which each generation was expected to make it mostly on their own (with at best a little bit of help from their parents), to one with a much greater emphasis on inherited wealth. I think as well as property bubbles, another factor is shrinking family sizes. When the average family had 5+ kids, the children couldn't expect to inherit that much. Families with only 1 or 2 kids, the child can inherit a lot more. And even prior to inheritance, it is much easier to extend financial support to your children (such as helping them to buy a home in their 20s) when you only have 1 or 2 instead of 4, 5, 6, 7...
- quacked 5y ago
  I lack your optimism; when they pass on, their houses will be transferred to small- and big-time rental companies, who will rent their houses to young people for more than a mortgage would cost. The only hope, in my opinion, is a giant, propaganda-driven cultural movement away from money and towards societal stability.
  - skissane 5y ago
    In Australia, the tax system favours private individual ownership of residential properties over corporate ownership. Property developers are allowed to keep ownership of new developments (so-called "build-to-rent"), or sell the new development (on a single title) to an investment trust. But corporations buying pre-existing house stock, without plans to redevelop it, are at a tax disadvantage compared to individual owners. I don't think corporations are quite as powerful as you think. Certainly not in Australia. At the end of the day, individuals vote, corporations can't. Governments win elections by appealing to voters, not appealing to corporations. Indeed, almost all of the negative aspects of Australia's housing policies have come about through appealing to individual voters–the older generations who own a lot of property, the "aspirational middle class" who want to own a lot of property too, the "Mum & Dad investors", the professional class (property investment is popular with doctors and lawyers and I believe even software engineers), the small business owner class, etc–rather than being driven by corporate interests.
  - structural 5y ago
    What's also interesting is that transportation & communication are very much easier than they were for past generations. This is also combined with shorter times that a worker stays at a single job before moving on for another opportunity. Put all this together and nobody wants to stay in a single house for 10+ years, or even in the same city for that length of time: at this point, buying a house would be counterproductive -- even if you could afford it -- because the transaction costs eat you alive. For these reasons, a lot of us younger generation folks actually value a high-quality rental property more than buying exactly that same house. [Yes, sure, you buy the house and you'll eventually pay it off, but you'd be surprised how many people don't believe they will be able to afford to retire at all, much less accumulate any wealth whatsoever.]
thorwasdfasdf 5y ago
There's been a pretty huge drop in living standards over the last 40 to 50 years. One interview with a person who lived through the 60s said, back then a painter could own a home, support a non working wife and six kids. These days, that same painter would have a hard time supporting himself, let alone a wife and six kids and house. one of the biggest drivers of wealth reduction is all the regulation that prevents more housing from being built, and how it's built. this leads to higher land costs, higher costs of labor, higher regulatory costs. Not to mention, we've kept adding more and more people to this country but haven't added more land or more material inputs. so of course living standards have to come down as everything gets split up per capita. to be sure, there's a ton of empty land out there, but no one's allowed to use it. and companies have moved jobs to areas where people can't live. meanwhile gov regulates the s** out of the housing dev market and yet let's job creators go nuts in an area that can't grow due to local NIMBYism.
- halsom 5y ago
  Your explanation doesn’t check out. First of all, construction hasn’t necessarily slowed down. Second, jobs were always in cities. That hasn’t changed. Third, new construction trends follow economic trends[0] and that has always been the case, since the dawn of the industrial era. It would be one thing if you were arguing that rising wealth inequality is a result of no new homes being built, but you’d still have to account for all the people who live in homes but don’t own them. [0]:https://fred.stlouisfed.org/graph/fredgraph.png?width=880&height=440&id=HOUST https://fred.stlouisfed.org/graph/fredgraph.png?width=880&he...
- johnnyletrois 5y ago
  Similarly, there’s a sad argument that the “Life in ‘The Simpsons’ is no longer attainable”. https://www.theatlantic.com/ideas/archive/2020/12/life-simpsons-no-longer-attainable/617499/ https://www.theatlantic.com/ideas/archive/2020/12/life-simps...
- sudosysgen 5y ago
  This simply doesn't check out. Land prices even in countries with low barriers to construction are skyrocketing. The simple fact is that private ownership of land leads to the value of the land capturing the value of its inhabitants. It's an inevitable trend, housing prices will increase until people start moving out in a free market. There is no purely free market solution that doesn't simply delay this.
djbebs 5y ago
Increased regulations, taxes and other laws with perverse incentives
cesarvarela 5y ago
I think it has to do with efficiency; you need fewer and fewer people to generate value. But those who are needed, i.e., tech workers, meet their needs and more.
FractalHQ 5y ago
In the US, it boils down to government corruption (lobbyists), and republican propaganda fueled wealth inequality. Aka Citizens United.

bobthepanda 5y ago

It’s not always corporations. The people often capture regulatory powers too. A good chunk if not the majority of wealth creation for most US households has been the value of their house. Older people own houses and have captured the upside of price increases over the decade. The young people are having a harder and harder time buying the exact same houses going up in price. If you go to any sort of planning meeting for a new development you’ll always run into cranky homeowners complaining that it will ruin the price of their property.

skissane 5y ago

Where I live (Australia), the biggest issue is the massive bubble in property prices. Housing affordability has gotten a lot worse over the last few decades. Arguably it has produced a massive wealth transfer from the younger to older generations. I guess inevitably that is going to be partially reversed when those older generations pass on, and leave some of their accumulated wealth to their children. But inheritance is a very uneven process – some people have more children than others, some people spend a lot more in their retirement than others, some people live a lot longer than others (which can lead to much of their accumulated wealth being spent on aged care), etc. However I do feel like we are transitioning from a society in which each generation was expected to make it mostly on their own (with at best a little bit of help from their parents), to one with a much greater emphasis on inherited wealth. I think as well as property bubbles, another factor is shrinking family sizes. When the average family had 5+ kids, the children couldn't expect to inherit that much. Families with only 1 or 2 kids, the child can inherit a lot more. And even prior to inheritance, it is much easier to extend financial support to your children (such as helping them to buy a home in their 20s) when you only have 1 or 2 instead of 4, 5, 6, 7...

quacked 5y ago
I lack your optimism; when they pass on, their houses will be transferred to small- and big-time rental companies, who will rent their houses to young people for more than a mortgage would cost. The only hope, in my opinion, is a giant, propaganda-driven cultural movement away from money and towards societal stability.
- skissane 5y ago
  In Australia, the tax system favours private individual ownership of residential properties over corporate ownership. Property developers are allowed to keep ownership of new developments (so-called "build-to-rent"), or sell the new development (on a single title) to an investment trust. But corporations buying pre-existing house stock, without plans to redevelop it, are at a tax disadvantage compared to individual owners. I don't think corporations are quite as powerful as you think. Certainly not in Australia. At the end of the day, individuals vote, corporations can't. Governments win elections by appealing to voters, not appealing to corporations. Indeed, almost all of the negative aspects of Australia's housing policies have come about through appealing to individual voters–the older generations who own a lot of property, the "aspirational middle class" who want to own a lot of property too, the "Mum & Dad investors", the professional class (property investment is popular with doctors and lawyers and I believe even software engineers), the small business owner class, etc–rather than being driven by corporate interests.
- structural 5y ago
  What's also interesting is that transportation & communication are very much easier than they were for past generations. This is also combined with shorter times that a worker stays at a single job before moving on for another opportunity. Put all this together and nobody wants to stay in a single house for 10+ years, or even in the same city for that length of time: at this point, buying a house would be counterproductive -- even if you could afford it -- because the transaction costs eat you alive. For these reasons, a lot of us younger generation folks actually value a high-quality rental property more than buying exactly that same house. [Yes, sure, you buy the house and you'll eventually pay it off, but you'd be surprised how many people don't believe they will be able to afford to retire at all, much less accumulate any wealth whatsoever.]

thorwasdfasdf 5y ago

There's been a pretty huge drop in living standards over the last 40 to 50 years. One interview with a person who lived through the 60s said, back then a painter could own a home, support a non working wife and six kids. These days, that same painter would have a hard time supporting himself, let alone a wife and six kids and house. one of the biggest drivers of wealth reduction is all the regulation that prevents more housing from being built, and how it's built. this leads to higher land costs, higher costs of labor, higher regulatory costs. Not to mention, we've kept adding more and more people to this country but haven't added more land or more material inputs. so of course living standards have to come down as everything gets split up per capita. to be sure, there's a ton of empty land out there, but no one's allowed to use it. and companies have moved jobs to areas where people can't live. meanwhile gov regulates the s** out of the housing dev market and yet let's job creators go nuts in an area that can't grow due to local NIMBYism.

halsom 5y ago
Your explanation doesn’t check out. First of all, construction hasn’t necessarily slowed down. Second, jobs were always in cities. That hasn’t changed. Third, new construction trends follow economic trends[0] and that has always been the case, since the dawn of the industrial era. It would be one thing if you were arguing that rising wealth inequality is a result of no new homes being built, but you’d still have to account for all the people who live in homes but don’t own them. [0]:https://fred.stlouisfed.org/graph/fredgraph.png?width=880&height=440&id=HOUST https://fred.stlouisfed.org/graph/fredgraph.png?width=880&he...
johnnyletrois 5y ago
Similarly, there’s a sad argument that the “Life in ‘The Simpsons’ is no longer attainable”. https://www.theatlantic.com/ideas/archive/2020/12/life-simpsons-no-longer-attainable/617499/ https://www.theatlantic.com/ideas/archive/2020/12/life-simps...
sudosysgen 5y ago
This simply doesn't check out. Land prices even in countries with low barriers to construction are skyrocketing. The simple fact is that private ownership of land leads to the value of the land capturing the value of its inhabitants. It's an inevitable trend, housing prices will increase until people start moving out in a free market. There is no purely free market solution that doesn't simply delay this.

djbebs 5y ago

Increased regulations, taxes and other laws with perverse incentives

cesarvarela 5y ago

I think it has to do with efficiency; you need fewer and fewer people to generate value. But those who are needed, i.e., tech workers, meet their needs and more.

FractalHQ 5y ago

In the US, it boils down to government corruption (lobbyists), and republican propaganda fueled wealth inequality. Aka Citizens United.