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Upvoted you for being the only response with numbers so far, even though I disagree with your conclusion. The average price of a new car in 1980 was $7,200 [1]

Upvoted you for being the only response with numbers so far, even though I disagree with your conclusion. The average price of a new car in 1980 was $7,200 [1]. In 2010, it's $28,400 [2]. That's an almost 300% increase. Federal minimum wage in 1980 was $3.10 [3]. In 2010, it's $7.25, a 130% increase. That's lagging pretty far behind new car prices. You point out that fewer people are earning minimum wage now than in 1980, but I would counterpoint that more people are unemployed now than in 1980 -- by almost double in terms of the real numbers of unemployed people (but "only" a rate increase from 7.1% to 8.4%) [4]. Although car ownership did increase from 1980 to 2010 [5], total new passenger car sales actually fell from 1980 to 2010 [6], which is closer to what the original article was actually discussing, and would support the conjecture that there are simply more cars on the road now than in 1980. Further, the inflation-adjusted income of people aged 25 to 34 has stayed roughly level from 1980 to 2010 [7], which pretty well jives with so much of what I've read everywhere else that shows a tremendously overall weakened buying power amongst the youth demographics -- which, again, was what the article was trying to be about. So, in summary: the price of a new car has gone up a lot but wages have not, especially if you're young. I'm pretty confident that this might be a factor in why young people aren't buying new cars. [1]: http://www.thepeoplehistory.com/1980.html http://www.thepeoplehistory.com/1980.html -- might not be a good source, I'm open to suggestions for something better. [2]: http://www.ehow.com/facts_5977729_average-cost-new-car.html http://www.ehow.com/facts_5977729_average-cost-new-car.html; this number seemed high to me, but http://www.usatoday.com/money/autos/2010-07-12-carprices12_ST_N.htm http://www.usatoday.com/money/autos/2010-07-12-carprices12_S... corroborates it. [3]: http://www.infoplease.com/ipa/A0774473.html http://www.infoplease.com/ipa/A0774473.html [4]: http://www.nidataplus.com/lfeus1.htm http://www.nidataplus.com/lfeus1.htm [5]: http://en.wikipedia.org/wiki/Motor_vehicle#United_States http://en.wikipedia.org/wiki/Motor_vehicle#United_States -- because I questioned the partisanship of your source. [6]: http://www.bts.gov/publications/national_transportation_statistics/html/table_01_16.html http://www.bts.gov/publications/national_transportation_stat... [7]: http://nces.ed.gov/fastfacts/display.asp?id=77 http://nces.ed.gov/fastfacts/display.asp?id=77

yummyfajitas 14y ago
If car ownership increased, but sales of new cars fell, it implies people are keeping the same car for more time. The employment to population ratio is the same as it was during the 80's, and was considerably higher until the recent recession. In contrast, the fraction of people earning min wage has fallen. http://research.stlouisfed.org/fred2/series/EMRATIO http://research.stlouisfed.org/fred2/series/EMRATIO Further, adjusting wages (rather than total comp) for inflation is a gratuitous statistical fallacy. One of the biggest drivers in "inflation" is an average of the price of the expanding basket of goods called "health care" [1]. For most people, this is paid for out of non-wage compensation. [1] I.e., an MRI + laparoscopic spine surgery today costs more than back pain in 1980.
- trevelyan 14y ago
  Quibbling about the exact source of inflation is irrelevant unless you want to claim that people are not buying cars or houses because they are buying health care instead. And that is clearly not the case. According to government statistics [1], nearly one-third of those lacking health care coverage in the United States are young adults. The unemployment rate among this cohort is over 15 percent, and much higher if one looks at U6. And those who are employed are collecting lower wages which are not offset by higher benefits: less than 25 percent of young workers are provided health insurance through their jobs as compared with over 57 percent for the rest of the labor force. Put simply, breaking down aggregate statistics into demographic chunks gives a much better picture of what is really happening. Younger works have it really hard these days. Older (employed) people are still doing OK and they are the ones pulling up the aggregate income figures. But for young people -- the focus of this article -- the data supports Thaumaturgy's argument that younger people these days are simply poorer. [1] http://money.cnn.com/2012/04/16/pf/health-care-young-adults/index.htm http://money.cnn.com/2012/04/16/pf/health-care-young-adults/...
  - yummyfajitas 14y ago
    People are buying cars and houses, as you'd know if you read my link. We currently have more cars/houses than ever before. If inflation-adjusted compensation were down, this fact would pose a paradox and suggest we are incorrectly measuring inflation - however, the paradox is easily resolved by looking at total comp.
snowwrestler 14y ago
I don't think it's useful to compare minimum wage, which is a fixed floor, with the average cost of a new car, which will float upward if rich people buy more expensive cars. I also don't know why you would limit yourself to new cars, since the least expensive cars are typically used--and cars have undoubtedly gotten more reliable since 1980. They last a lot longer. Unfortunately I don't have the time to do the research and math myself to tease out these relationships.
CWuestefeld 14y ago
So, in summary: the price of a new car has gone up a lot but wages have not, especially if you're young. I'm pretty confident that this might be a factor in why young people aren't buying new cars. You're probably right, but that doesn't lead to a conclusion that the effect is caused by the economy. In absolute dollars, cars are more expensive than they used to be, but for your dollar, you get much more car. That is, there are more features (stereo, A/C, power everything), more safety (both structurally as well as ABS, better restraints, etc.), more reliability, and much greater life expectancy [1] from a modern car. In short, it's a better investment. If you've got enough money to meet the minimum threshold for buying a new car, you're going to get more for your money than you did in 1980. But that minimum threshold has definitely been raised. Part of this is from consumer demand; part of it (particularly in areas related to safety or emissions) is government mandated. So it looks to me like the car market just evolved itself out of the reach of many young people. [1] We just got a new car for the wife, trading in her old car at 200,000 miles. My car has 128,000 and is still running strong. In this age those numbers are expected; back then, a 200K mile car would be a minor miracle.
liber8 14y ago
Note that your “average price of a new car in 2010" is skewed wildly high for a number of reasons. (1) The variety of mid-high end luxury cars (i.e. $50k+), and the number of such cars sold, far exceeds the choices available in 1980. For example, you now have a variety of choices if you want to drop >$50k on a pickup truck. (2) We simply have more disposable income to spend on cars. That we’re so rich we can afford to spend a higher minimum wage multiple on a frivolous expense isn’t really a bad thing. This of course also overlooks the fact that today, right now, you can buy a brand new car for about $7,200. (I just bought a Ford Ranger for about that, but there are numerous other choices in that range as well.) Even these very cheap cars are so much better in every tangible and intangible metric than even “decent” 1980's cars that it’s laughable. Step up to cars in the $15k range, and you’re able to buy cars that are better in just about every way, except for upholstery, than even luxury cars in from 1980.
ahoyhere 14y ago
To take your increase in traditional unemployment numbers and build on it: http://en.wikipedia.org/wiki/File:US_incarceration_timeline-clean-fixed-timescale.svg http://en.wikipedia.org/wiki/File:US_incarceration_timeline-... Incarceration rates: it's a hockey stick! Incarcerated people are all unemployed, and most of them, if in the job pool, are likely to be in the minimum wage or similar bracket. The equivalent of a $3.80 minimum wage in 1980 is also nearly $9 today with inflation, so the group of true "minimum wage" workers is much larger for yet another reason.

yummyfajitas 14y ago

If car ownership increased, but sales of new cars fell, it implies people are keeping the same car for more time. The employment to population ratio is the same as it was during the 80's, and was considerably higher until the recent recession. In contrast, the fraction of people earning min wage has fallen. http://research.stlouisfed.org/fred2/series/EMRATIO http://research.stlouisfed.org/fred2/series/EMRATIO Further, adjusting wages (rather than total comp) for inflation is a gratuitous statistical fallacy. One of the biggest drivers in "inflation" is an average of the price of the expanding basket of goods called "health care" [1]. For most people, this is paid for out of non-wage compensation. [1] I.e., an MRI + laparoscopic spine surgery today costs more than back pain in 1980.

trevelyan 14y ago
Quibbling about the exact source of inflation is irrelevant unless you want to claim that people are not buying cars or houses because they are buying health care instead. And that is clearly not the case. According to government statistics [1], nearly one-third of those lacking health care coverage in the United States are young adults. The unemployment rate among this cohort is over 15 percent, and much higher if one looks at U6. And those who are employed are collecting lower wages which are not offset by higher benefits: less than 25 percent of young workers are provided health insurance through their jobs as compared with over 57 percent for the rest of the labor force. Put simply, breaking down aggregate statistics into demographic chunks gives a much better picture of what is really happening. Younger works have it really hard these days. Older (employed) people are still doing OK and they are the ones pulling up the aggregate income figures. But for young people -- the focus of this article -- the data supports Thaumaturgy's argument that younger people these days are simply poorer. [1] http://money.cnn.com/2012/04/16/pf/health-care-young-adults/index.htm http://money.cnn.com/2012/04/16/pf/health-care-young-adults/...
- yummyfajitas 14y ago
  People are buying cars and houses, as you'd know if you read my link. We currently have more cars/houses than ever before. If inflation-adjusted compensation were down, this fact would pose a paradox and suggest we are incorrectly measuring inflation - however, the paradox is easily resolved by looking at total comp.

snowwrestler 14y ago

I don't think it's useful to compare minimum wage, which is a fixed floor, with the average cost of a new car, which will float upward if rich people buy more expensive cars. I also don't know why you would limit yourself to new cars, since the least expensive cars are typically used--and cars have undoubtedly gotten more reliable since 1980. They last a lot longer. Unfortunately I don't have the time to do the research and math myself to tease out these relationships.

CWuestefeld 14y ago

So, in summary: the price of a new car has gone up a lot but wages have not, especially if you're young. I'm pretty confident that this might be a factor in why young people aren't buying new cars. You're probably right, but that doesn't lead to a conclusion that the effect is caused by the economy. In absolute dollars, cars are more expensive than they used to be, but for your dollar, you get much more car. That is, there are more features (stereo, A/C, power everything), more safety (both structurally as well as ABS, better restraints, etc.), more reliability, and much greater life expectancy [1] from a modern car. In short, it's a better investment. If you've got enough money to meet the minimum threshold for buying a new car, you're going to get more for your money than you did in 1980. But that minimum threshold has definitely been raised. Part of this is from consumer demand; part of it (particularly in areas related to safety or emissions) is government mandated. So it looks to me like the car market just evolved itself out of the reach of many young people. [1] We just got a new car for the wife, trading in her old car at 200,000 miles. My car has 128,000 and is still running strong. In this age those numbers are expected; back then, a 200K mile car would be a minor miracle.

liber8 14y ago

Note that your “average price of a new car in 2010" is skewed wildly high for a number of reasons. (1) The variety of mid-high end luxury cars (i.e. $50k+), and the number of such cars sold, far exceeds the choices available in 1980. For example, you now have a variety of choices if you want to drop >$50k on a pickup truck. (2) We simply have more disposable income to spend on cars. That we’re so rich we can afford to spend a higher minimum wage multiple on a frivolous expense isn’t really a bad thing. This of course also overlooks the fact that today, right now, you can buy a brand new car for about $7,200. (I just bought a Ford Ranger for about that, but there are numerous other choices in that range as well.) Even these very cheap cars are so much better in every tangible and intangible metric than even “decent” 1980's cars that it’s laughable. Step up to cars in the $15k range, and you’re able to buy cars that are better in just about every way, except for upholstery, than even luxury cars in from 1980.

ahoyhere 14y ago

To take your increase in traditional unemployment numbers and build on it: http://en.wikipedia.org/wiki/File:US_incarceration_timeline-clean-fixed-timescale.svg http://en.wikipedia.org/wiki/File:US_incarceration_timeline-... Incarceration rates: it's a hockey stick! Incarcerated people are all unemployed, and most of them, if in the job pool, are likely to be in the minimum wage or similar bracket. The equivalent of a $3.80 minimum wage in 1980 is also nearly $9 today with inflation, so the group of true "minimum wage" workers is much larger for yet another reason.