Gen Z have 86% less purchasing power compared to baby boomers in their twenties

https://www.consumeraffairs.com/finance/comparing-the-costs-of-generations.html

by paulpauper • 4 years ago

207 295 4 years ago

consumeraffairs.com

xqcgrek2• 4 years ago

This is the stuff that can cause or facilitate revolutions.

seydor• 4 years ago

or just resignations

nine_zeros• 4 years ago

So much this. A lot of people are just checked out. Their plan if they get laid off? Take a flight to Mexico and live a better life while the storm passes.

mensetmanusman2• 4 years ago

Median age is too high for revolutions. Most people are tired and chugging along.

bilegeek• 4 years ago

It bears repeating[1]: the mob doesn't replace the king; the court does, using the mob to do it. Nothing will get better under a revolution unless we're EXTREMELY, infinitessimally small chance lucky.

[1]https://youtu.be/rStL7niR7gs?t=878

jleyank• 4 years ago

Well, I spent my twenties (in the 80's) in school, or working for 30K or 36K/year. You can work out what inflation does to those salaries vs. what purchasing power gets you today. Anecdotal, yeah, but it's all I got. And albums cost $4-5 in the mid-70's and I did ok on $20/week for food and stuff in school.

And there was no internet and the only computers filled rooms (but were still fun). One did social interactions F2F, which might actually have been a little more expensive.

msbarnett• 4 years ago

Well, I spent my twenties (in the 80's) in school, or working for 30K or 36K/year.

Ballpark the 80's as 1985 and that works out to 82,604.83 to 99,125.80, for the curious. What most people would consider an excellent salary in their 20s, probably (software engineers in the current market excepted, perhaps).

m00x3• 4 years ago

There's always a golden job in the era.

Back in the 2000s in Canada, you could make 350k/y driving a truck in the oil fields with 0 education.

Software engineers are just the new golden job of this era. Even then, it's still considerably harder and has a higher bar of entry than driving a truck.

throwayyy479087• 4 years ago

This doesnt pass the sniff test.

Sakos2• 4 years ago

It does for me.

ggm2• 4 years ago

Absolutely agree. This is a piece about relative poverty in disposible income against current inflation and % of post-tax income which has to go to rent/power &c against truly disposable income.

I'm not in the cohort, but I still believe the model. Look to UK power bills, and Australian rents, and rates of home ownership since the 1960s.

fallingfrog3• 4 years ago

Well I think it’s partly true and partly not- which is dangerous because it muddies the water and makes people less likely to believe what they read in the future.

Panzer043• 4 years ago

I don't know why you're downvoted - You're correct, even some basic common sense should show that we aren't buying 86% less stuff today than in the 70s.

And that conclusion is born through when you actually read the article, they completely misrepresent reality with that title. It's kind of astounding how many people are just taking it as face value.

elzbardico6• 4 years ago

Boomers in their twenties were mostly working. Gen Z in their twenties is finishing college, working towards a master's or even a PhD.

EDIT: No value judgments here. This is just a fact, people entered the active workforce earlier.

battery_glasses• 4 years ago

Makes sense, a Boomer in their twenties could buy a house and support a family of 4 with a high school education.

throwaway0a5e3• 4 years ago

They also weren't competing with a bunch of people with college degrees so except at the highest end a college degree was less of a necessity therefore they could get away without wasting 4yr on it.

elzbardico6• 4 years ago

The joys of an industrial economy without too much automation.

falcolas7• 4 years ago

My mother, a baby boomer ('48), worked as a waitress part time to pay her way through college in her 20's.

My dad worked for ma'bell, and earned somewhere around $150k in today's dollars as an high-school-educated lineman when he retired (and was then hired back on to train). And that's with a fully funded pension plan.

So, even if they were in the workforce earlier (they weren't, I (as a genX) was working part time in college at 18, my wife full time), the workforce was very different.

The times, they've changed.

elzbardico6• 4 years ago

Sorry for nitpicking, but 48 is not a boomer. She is a Gen X. Boomers are the folks born after WWII and before the oil crisis.

shrubble• 4 years ago

I really feel for the younger than Gen X (which I am) groups.

My older brothers who are boomers did have it easier (than me) and I had it easier than the younger groups.

Purchasing power and a general decline in society's support along multiple axes for what most would call a 'normal' life really does make me think that some form of strife or revolution is coming.

bamboozled• 4 years ago

It does feel inevitable because at some stage, young people aren't going to care about supporting rich older people and check out of the boomers preferred systems of politics and taxes.

elzbardico6• 4 years ago

You're probably an early cohort of Gen X. Late Xers, that started their professional lives in the late 90s or early 2000s already got a bad deal.

falcolas7• 4 years ago

As someone who was saddled with around $150k in college loans in a major I couldn't use (flying; that career was aborted in September of 2001), yeah... Bad deal sums it up nicely.

Took me into my 40's to buy a house, and for my area I got a steal at under $200k. At which point my dad (born '38) chewed me out for not saving money and building it myself like he did for only $10k (~$100 in today's dollars for 5 acres of land and 3,000 sqft).

it_citizen• 4 years ago

Isn't it a natural consequence of capital growing faster than wage?

JumpCrisscross2• 4 years ago

a natural consequence of capital growing faster than wage?

No. It’s the result of our real estate and housing system. (Stocks and Bitcoin can go up faster than wages without spiking CoL.)

KennyBlanken• 4 years ago

It's a result of skyrocketing corporate profit margins and plunging corporate tax share leading to a massive consolidation of wealth among a very, very small number of people.

morninglight• 4 years ago

Don't discount the change in population. The US population has doubled during this period. Everyone has an opinion on how that change would have affected the economy, but it would be foolish to assume that it did nothing.

stolenmerch• 4 years ago

It seems the annual income vs. CPI is the core chart here. Something happened in the decade of 2000-2010 to throw things out of whack. I'm not informed enough to know if that was the result of policy decisions or what, but I'd like to know how wage growth declined so dramatically during this time while prices seemed to maintain its projected linear growth.

mlcrypto• 4 years ago

Quantitative easing

okwubodu• 4 years ago

Unsubstantiated guess: insane P/E ratios became the norm and maintaining them is harder when you’re raising salaries.

DamnYuppie• 4 years ago

How do large P/E ratios impact salaries?

JumpCrisscross2• 4 years ago

insane P/E ratios became the norm and maintaining them is harder when you’re raising salaries

P/E is the inverse of earnings yield. It varies with rates. So 2% -> 1% equity yield means a doubling of P/E. But framed as a yield shift it looks less dramatic (and more familiar).

davesque• 4 years ago

One thing jumps out in my mind. I think of the 2000s as being the decade in which tech companies that survived the dot com bust turned into tech giants. And these companies would go on to rack up market caps that broke historical records. I remember everyone was sort of in awe of the numbers and generally had a pretty positive sentiment towards the success. However, I'm not sure I can craft a really clear narrative that connects this back to stagnant wages. But it seems related. Perhaps in the sense that large corporations like the tech giants seemed to be free to monopolize and suck up all the money without allowing it to circulate in the economy.

The tech giants may have just been a particular touch stone in a long trend of increased, unchecked corporatization of US business. Perhaps that culminated in a kind of phase transition that took place in the 2000s.

But there's another interesting detail to that chart which is that wages appear to be back on track since 2010 and have trended upward pretty sharply since then compared to the 2000s. If the slope of the wage line is to be believed (and were to continue), we'd be in pretty good shape in another decade or so. So, to play devil's advocate, perhaps it's wrong to look sideways at some of the big players in the space right now. I don't know. Not an economist.

gruez6• 4 years ago

However, I'm not sure I can craft a really clear narrative that connects this back to stagnant wages. But it seems related

but the famous productivity/wage gap chart shows it started in the 70s to 80s. What makes you think it's due to the dotcom bubble?

bcrosby95• 4 years ago

My memory is hazy, but iirc Alan Greenspan brought out a lot of easy money in response to the dotcom bubble bursting, which then helped inflate the housing bubble.

lotsofpulp• 4 years ago

I remember everyone was sort of in awe of the numbers and generally had a pretty positive sentiment towards the success. However, I'm not sure I can craft a really clear narrative that connects this back to stagnant wages. But it seems related.

The relation I can think of is the tech giants obviating away many instances of labor that were being sold.

Email, travel agents, streaming, GPS mapping apps, etc all let people do a lot more with the labor of a lot fewer.

But that is not solely the domain of tech giants or tech companies. Automation has been happening for decades, along with outsourcing to countries with cheaper labor.

Since prices (wages) stayed stagnant, one can conclude that the supply of labor increased more than the demand for labor.

Edit: another factor increasing supply of labor is women joining the workforce

hyperation• 4 years ago

Not saying it's related, but 9/11 happened.

Spooky23• 4 years ago

Midpoint of a 20 year war. Inflation, combined with the financial engineering of the 90s and the deflationary power of the internet.

My parents bought a house when I was born in NYC in the 70s for $20k, sold it for 10x more in 1990 and that buyer sold it for 10x more circa 2007.

The deflationary power of the internet powered costs for business. My employer has 1/3 the accountants they had 30 years ago, but 5x as many IT people. Specific occupations make more money, but most make less due to dropped demand. On the production side, you can pretty trivially source goods from a anywhere on the planet. Again, reducing cost.

But the hard assets go up. Housing, food, durable goods. The average white good like a fridge costs 50% more and last 50% less time.

kurupt2135• 4 years ago

there was a significant recession around 2007

quickthrower22• 4 years ago

I would say that is a symptom, not a root cause

api• 4 years ago

Setting a trillion dollars on fire in Iraq and Afghanistan?

Of course Putin's doing it now in Ukraine and maybe China is about to do it in Taiwan so don't worry, the rest of the world is catching up to America's stupidity.

quickthrower22• 4 years ago

I think it is a combination of 1: massive money supply expansion - that mostly benefits the already rich: asset owning classes and banks/institutions that get first dibs on cheap money, and 2: globalization/technology - reducing the value of your typical worker though outsourcing, efficiency, culture, etc. 3: The rich entrenching their power, making it more difficult for everyone else who isn't. Not so much a conspiracy, more of some kind of feedback loop we need to break.

initplus• 4 years ago

This chart is complete garbage though, it's graphing inflation adjusted income against inflation... If you want a comparison it's possible to draw a valid conclusion from you need to compare non-inflation adjusted income.

If I'm being charitable, they made a mistake in their analysis, if I'm uncharitable they didn't care about the methodology and went in looking for a way to write a provocative conclusion like "86% less purchasing power". Obviously a lot of energy was spent here drawing up the pretty infographics, probably should have spent more energy getting the basic statistics correct first?

hot_gril12• 4 years ago

Home prices are misleading because real estate has become an inflation-proof place to store wealth, like stocks but with nuanced subsidies. Even homeowners who live in the house are partially buying with the expectation to sell it for more later. Call it a bubble that never fully pops. In some less countries with higher inflation and less developed markets, this is so extreme that nobody really buys a house, only buys a piece or inherits.

Better to look at rent, which isolates the utility part.

ctoth• 4 years ago

At least they can buy cheap TVs, right? I wonder if we can finally accept that just because things like phones and TVs got better faster than purchasing power got worse, doesn't mean that it hasn't been getting worse for a while. I'd even go so far to say that technical progress in a couple areas has hidden some pretty stark declines. Or at least allowed some people to point at shiny things getting better when complaints surfaced.

Swizec• 4 years ago

What good is cheaper tech if we just use that to add more features and keep the same price?

You could get a TV for less than $50 if it had the same features and processing power as it did in 2002. Same for computers.

Imagine how cheap we could make a car that only has the features we had in the 90’s? Even if you include the mandatory passive safety upgrades.

i_am_proteus2• 4 years ago

I'd be first in line for a new car that only has the features of cars from the 1990s.

gruez6• 4 years ago

What good is cheaper tech if we just use that to add more features and keep the same price?

...having better technology, and therefore higher living standards?

berberous• 4 years ago

You can get a 32" Fire TV for $99 on Amazon right now...I'm not sure it makes sense to make cheaper, especially when you have used items on Craigslist that covers the gap.

m00x3• 4 years ago

The cars would still be fairly expensive. The upgrades on a low-end car are topical and aren't the expensive part of a car. Basic cars

A basic car only costs ~20k brand new. Some cars are as low as 12k.

twic• 4 years ago

I was going to say "and how light we could make a car", but then i actually looked up some stats, and this was news to me:

http://web.mit.edu/sloan-auto-lab/research/beforeh2/files/Ma...

Car weight declined sharply from 1976 to 1982, then started creeping up again, but cars in 2010 were only about as heavy as cars in ~1979.

xtracto• 4 years ago

TVs became cheaper because now companies have recurring revenue by selling ads.

Same with other stuff, it got "cheaper" because the sellers found alternative monetization channels, which often are more anti-consumer.

cactus2093• 4 years ago

You could get a TV for less than $50 if it had the same features and processing power as it did in 2002. Same for computers.

Well have I ever got good news for you. Here's a random article about TV tech from 2002 that I just found on google [0] talking about the top of the line in display tech being a new 30 inch LCD TV that cost $8,000 (that would be $13,200 in today's dollars). Now twenty years later you can buy a 32 inch 720p LCD TV on Amazon for $99.

Same for computers, ever heard of a raspberry pi?

[0] https://www.nytimes.com/2002/04/18/technology/state-of-the-a...

arcticbull4• 4 years ago

As usual, there's a few chart crimes in here. Chart 1 shows CPI and inflation adjusted wages on the same graph? Why? Inflation adjusted wages already take into account CPI. There's no sensible reason to plot these two on the same graph.

The caption is "wages are up 80% but that didn't keep up with living costs" - you cannot draw that inference from this graph. This graph actually shows that in fact wages grew faster than inflation.

Housing is another red herring, of course, because the average new American home is 2x bigger now than it was in the 70s - and the average American family is like 10% smaller. Broadly, 1 square foot of the 'average' American home costs exactly the same as it used to in the 1970s. [1] So yes, housing is more expensive in big cities but that's because of zoning as Mr. Andreessen will tell you. Outside big cities it's still zoning, which requires minimum setback, garages, square footage, etc.

In fact if you look by cohort, inflation-adjusted, millennials are doing roughly as well as other generations did at their age. [2]

Their flagship claim that folks have 86% less purchasing power now holds zero water. The poverty rate remains basically unchanged since the 70s. [3] You'd think there'd be a lot more people in poverty if they only had 1/10th the buying power no?!

Some things are more expensive (college, healthcare, 1 sqft of house in a big city, new houses outside of town) and yes, productivity growth far outpaced wage growth - but wage growth kept pace with inflation. That means folks are just the same off, instead of the better off they could be. [4]

[edit] If you really slice it by decile, the bottom 10% of millennials is much worse off (like 15%) - that's what it looks like when you massacre the social safety net. But millennials as a whole are just as well off as previous generations.

[1] https://fee.org/articles/new-homes-today-have-twice-the-squa...

[2] https://ofdollarsanddata.com/no-millennials-arent-poorer-tha...

[3] https://poverty.ucdavis.edu/faq/what-current-poverty-rate-un...

[4] https://www.cnbc.com/2022/07/19/heres-how-labor-dynamism-aff...

NovemberWhiskey4• 4 years ago

As usual, there's a few chart crimes in here. Chart 1 shows CPI and inflation adjusted wages on the same graph? Why? Inflation adjusted wages already take into account CPI. There's no sensible reason to plot these two on the same graph.

That's absolutely right - it's a gibberish chart.

wbsss44123• 4 years ago

Housing is another red herring, of course, because the average new American home is 2x bigger now than it was in the 70s. Roughly speaking 1 square foot of the average home costs exactly the same as it used to in the 1970s. [1] And the average family has become smaller. So yes, housing is more expensive in big cities but that's because of zoning as Mr. Andreessen will tell you.

Just because houses have gotten bigger and families have gotten smaller, doesn’t mean you can buy an average 1970s house in major cities for the same inflation adjusted price. A lot of those old homes are either gone, extremely expensive, or situated in different metro areas than younger generations live in today.

nerdponx5• 4 years ago

If you really slice it quintile, the bottom quintile of millenials is much worse off - that's what it looks like when you massacre the social safety net. But millenials as a whole are just as well off as previous generations.

This I think warrants more than a footnote. A return to extreme class stratification is really quite bad, not just for those individuals affected but for society overall.

thewebcount• 4 years ago

Housing is another red herring, of course, because the average new American home is 2x bigger now than it was in the 70s

My spouse and I ran into this when we were looking for our current home 5 years ago in Los Angeles. Even though we're older, it's just the 2 of us, so we didn't need something huge. It was really hard to find a reasonably-sized house for 2 people (plus a little room to have a guest stay over). It was really hard to find something because people who want huge houses kept buying small ones for more than asking price, then tearing them down and building a much bigger house on the same lot. The one we did eventually buy had even been enlarged sometime between the 50s when it was built and today.

folkrav• 4 years ago

There's literally nothing more recent than something built in the early 70s without going 1h30 outside the city that I can currently afford, and we're a two-income household with a single child. My parents could afford their - much bigger than I'll ever own - house on a single income (in the same ballpark as my current individual salary, adjusted for inflation) in their early 20s, 30min from downtown. My current freaking rent for a 1200sqft flat is higher than the mortgage they paid on the 2200ft house they bought in the mid-90s after selling the first one. The latest inflation, especially on food and transportation, has been eating in my savings/investing budget so less opportunites to make that money work for me.

I guess the numbers you're pointing at do seem to point towards that I'm supposedly faced with provided with opportunities as they were, but I can't help but feel like I'm getting shafted somewhere along the way cause I'm pretty damn far from feeling like it does.

Maybe my timing is just horrible, I don't know - I did get out of school right after 2008, and wasn't financially ready to buy a home before mid-2020... But I just cannot subjectively recognize my situation in those numbers.

nerdponx5• 4 years ago

I could not agree more. I won't romanticize 1950s or 1970s cheap junk products compared to 1990s cheap junk products or 2020s cheap junk products, but something definitely has changed.

Here's how I like to argue it:

TVs might be cheaper "per unit of TV", but it's also difficult to just buy a basic TV. This is also offset intensely by "shrinkflation", which applies as much to durable goods (cheapening components) as it does to food. So you end up stuck with a bunch of "extra TV" that you don't need or want, effectively providing 0 utility, while the core product is lower-quality, even further lowering utility. And meanwhile economists deny that there is a problem because when you average it all out, you do technically pay less per abstracted unit of TV.

The reason this happens is because it ultimately leads to better profit margins for manufacturers. "We make 'em like they used to!" isn't enough of a differentiating factor for most consumers, who are deliberately kept under-educated and constantly bombarded with p̶r̶o̶p̶a̶g̶a̶n̶d̶a̶ advertising and marketing. If you can sell a TV for $100, do you want to spend $10 manufacturing the TV, or do you want to spend $5 manufacturing the TV and $0.25 adding some onboard computer and software to make it "smart" (marketing!) while skimming off a huge data/ad revenue stream as essentially free money on the side?

Moreover, luxury goods are somewhat irrelevant if your basic economic needs become less affordable. Maybe TVs are cheaper "per unit", but housing, healthcare, food, and energy are not. Those are literally all of the basic human needs except one (water), recognizable as such in even the most primitive of ancient societies. And water is problematic ("expensive" in terms of consumer welfare) in much of the USA for reasons other than pure financial cost.

Edit: None of the above should be construed as advocacy or apology for chart-crimes and misleading reports based thereupon.

mf_tomb3• 4 years ago

It's conspiratorial to assume that advertising and marketing is responsible for the status quo, rather than it being reflective of the genuine preferences of consumers to have new toys. Consumer preference has rewarded lowest-common-denominator dopamine trains in basically every facet of modern life. See the gaming industry with microtransactions/lootboxes, or entertainment with the move towards short-form content.

Liquix• 4 years ago

FWIW smart TVs are "cheap" because of how lucrative it is to sell the data they collect. Gen Z probably has even less privacy than they do purchasing power. And while the economy will invariably bounce back - that data stays collected forever

mensetmanusman2• 4 years ago

How does one compare the purchasing power for a phone, which would be like a million dollars back in the day (if it was built to do a fraction of the things it can do now)?

ceejayoz13• 4 years ago

You don't, because that's not a sensible way of looking at things.

Zenst• 4 years ago

Landlines, which were not cheap going by UK prices compared to operating a mobile today.

Don't have figures but then couldn't afford one when I grew up in the 70's.

Then colour TV's.

Much technology has got cheaper.

Now real-estate and travel costs (well apart from plan flights I'd say) have got more expensive.

But when rent and travel is a big chunk of life, and you measure things from owning a home. Well, those do skew things.

Then you also have aspects of population growth, post-war, kinda fewer people, that soon grow to hit that real-estate boom.

Also interest rates, was mentality of saving for things in 70s and shifted towards low interest rates and buy now, pay later. This also changed the landscape and again made those on the property ladder grow and push the access to that property ladder higher and higher.

But rental and travel, those really are the skew factors at play.

Need to compare quality of life really to get a bigger picture of everything, as that has increased in more aspects than people appreciate.

Heck I grew up with no central heating, single pain windows which had ice on the inside in winter and an outdoor toilet. This was in the uk in the 70s. Today, that would be called homeless. So much improved, so can't distract from that difference either.

NovemberWhiskey4• 4 years ago

This doesn't make sense at all to me.

They're comparing income in constant 2022 dollars with the CPI. That's saying "if we adjusted historical salaries for inflation, then assumed that the constant 2022 dollar numbers were actually nominal numbers for each point in history, then people would've been able to buy much more stuff back then". Which is true, but not very meaningful.

The whole point of the constant 2022 dollar adjustment is to back out the effect of inflation. If 2020 average salaries in 2022 dollars were $44.2K, and 1970 average salaries in 2022 dollars were $24.6K then 2020 workers have 80% higher purchasing power for whatever basket is used for the deflator.

readams• 4 years ago

They've specifically pulled out only the categories that have risen faster than inflation, and didn't include any categories that have fallen relative to inflation. So it's guaranteed to get this result.

Skunkleton• 4 years ago

Maybe they are arguing that GenZ should commute to the past? That way they can spend their 2022 dollars on good value 1970s products?

andrew_2• 4 years ago

My parents are boomers and frequently talk about the 2020s being 70s dejavu. My father entered his 20s in in 1968, and the tail end of his 20s in a deep recession and purchased a modest home in 1976 at a blistering 14% on 30 year fixed. His experience in the Midwest did not match with the assertions in the article.

Pxtl• 4 years ago

How much was the total price of that modest home? 14% of cheap is still cheap.

nemo44x2• 4 years ago

It’s pretty much the same as today when you consider inflation and interest rates. People love to believe homes were basically free back then but they weren’t. Interest rates were super high and people still paid the same percentage of their monthly income line today.

There has been sone warping to be sure in and around metro areas people want to live in. Those areas were being abandon back then. Most places in the country are really cheap.

But overall it’s about the same.

fallingfrog3• 4 years ago

Rents really are higher though.

andrew_2• 4 years ago

very true. in my area it's related to Zillow and the iBuyers swallowing property and inflating rent artificially.

kbrannigan• 4 years ago

The proliferation of payment plans.

Everyone can "afford" a flagship smartphone. Only 36$ per month Everyone can afford a car only : 340$ a month.

numbers add up fast digging themselves into a hole

gruez6• 4 years ago

Everyone can "afford" a flagship smartphone. Only 36$ per month Everyone can afford a car only : 340$ a month.

But auto loans were around since the 20s. What changed?

https://lendedu.com/blog/history-of-auto-lending-industry

mattrick• 4 years ago

It seems like everywhere is pushing financing as an alternative to payment upfront. Even small (<$50 purchases) are being offered financing through services like Klarna. It really feels like it's become an option for almost any purchase now.

nomel• 4 years ago

Financial responsibility, it would appear: https://www.businessinsider.com/credit-card-debt-record-2017...

rvz• 4 years ago

Given the banks know these people can't afford it anyway they will still allow them to continue borrowing despite knowing that it is already getting expensive for average people to do so quickly.

If some are rejected directly by the banks for getting these loans, then the banks can still get them by setting up a BNPL (Buy-Now-Pay-Later) competitor / service with even higher interest rates. Either way, the banks still win.

So you will own nothing, and you will be very happy. Even if you can't afford it, the banks will be very happy to charge you interest and you will still be happy.

The scam of the century.

m00x3• 4 years ago

That's incorrect.

If anything, banking and lending regulation have only increased since the boomer era. We made it more convenient, but we also made it harder for businesses to trap people in bad loans.

lettergram2• 4 years ago

To be fair, most (the vast majority) of people I know in gen z I know works significantly less hard than my parents did, I did, etc.

Those who do work hard are fairly well off. They work two jobs, didn’t go to college, but own their homes and have a steady income.

There’s definitely systemic issues, but work ethic is the major issue. And that’s a cultural issue.

Would you want the gen z you know building your house? I know some that I would, but not many.

hot_gril12• 4 years ago

I know gen Z as working harder, especially in school. The bar gets higher every year.

kurupt2135• 4 years ago

kids left highschool knowing more math in the 70's than college graduates do now

Gigachad• 4 years ago

I'd attribute it more to the fact that zoomers are mostly just finishing high school or in uni right now. While boomers mostly left school early to jump directly in to a job. Give it 10 years and see if the education pays off.

bryant• 4 years ago

To be fair, most (the vast majority) of people I know in gen z I know works significantly less hard than my parents did, I did, etc.

Any possibility this perceived "less-hard" working is an effect rather than a cause?

Those who do work hard are fairly well off. They work two jobs, didn’t go to college, but own their homes and have a steady income.

Any possibility that Baby Boomers achieved this with just one job?

There’s definitely systemic issues, but work ethic is the major issue. And that’s a cultural issue.
Would you want the gen z you know building your house? I know some that I would, but not many.

I'd take literally any Gen Z to build me a house because I'd know how to compensate them for their work. It's largely unskilled/low-skilled labor, hence why almost anyone with some physical fitness and capability (Gen Z or otherwise) can do it.

Bear in mind: lots of Gen Z are children of Gen X and may have already witnessed the negative impact of inequality on Gen X and Millennials, which could very well be the "cause" for lower perceived participation in the workforce among Gen Z.

Either way, this is an exceptionally low-EQ take.

Kaze4045• 4 years ago

This might sound like an extreme take, but I want people who don’t work hard to be able to live.

lettergram2• 4 years ago

I mean you can, but you won’t collect wealth.

endisneigh• 4 years ago

I don't understand why people compare now to before (Boomer adolescence) in the United States. The USA basically had no competition when Boomers were in their 20s. All of the major powers destroyed themselves and their economy.

I'd be interested to see this analysis done per country.

nemo44x2• 4 years ago

Agreed. Compare to previous eras. Post WW2 America was an anomaly.

smt88• 4 years ago

This isn't a chart of declining GDP. It's a chart of declining purchasing power.

The US economy is thriving. The profits just aren't getting to actual workers.

colinmhayes2• 4 years ago

Right, all we have to do to return to a post ww2 era of middle class success is destroy the rest of the worlds industry.

kurupt2135• 4 years ago

aren't taxes lower now, though?

throwaway0a5e3• 4 years ago

At the federal level nominal rates are lower. Effective rates are a lateral move or slight change depending on your bracket. Unless you're rich enough that progressive taxes (e.g. income and property) dominate your tax burden (most 20yos are not this wealthy) overall tax burden in most places is way up due to the proliferation of regressive consumer taxes and government fees that are basically taxes in the past 70yr.

The above paragraph is a broad brush statement and does not apply to all jurisdictions and situations. The prior sentence shouldn't be needed but is.

telchior2• 4 years ago

One of the items this article doesn't cover is healthcare spending, which has increased between 2 and 8 times since 1980 (depending on whether you're looking at individual spending or share of GDP). Here's a decent collection of charts: https://www.healthsystemtracker.org/chart-collection/u-s-spe...

It has been shocking to me to see how cheap and effective healthcare can be in other countries, from an emergency visit to the hospital (in the US: I got a $50k bill for one emergency surgery) to an eye test and new pair of glasses (US costs running $500-$1000, although startups have chipped away at this). In the US, healthcare is effectively a collection of cartels -- an enormous parasite that will be nearly impossible to rip off our soft underbelly.

hot_gril12• 4 years ago

I always see the healthcare cost to consumer compared to other countries, but that isn't the true cost to society if the govt is subsidizing the rest. AFAIK the US healthcare is still truly more costly. Monopolies or something, idk.

SQueeeeeL• 4 years ago

It actually just is, if we're talking about purchasing power of an individual, which is pretty much the only thing the average person cares about

willcipriano• 4 years ago

The US government spends more on healthcare per capita than any other OECD nation. We are just being robbed.

buildartefact2• 4 years ago

The US federal government also spends more per capita on healthcare than almost every other nation.

gruez6• 4 years ago

Not saying that healthcare spending isn't an issue, but it doesn't seem like a major contributor to the problem of gen Z being poor. They're not exactly at the age where most of them are racking up huge healthcare bills from chronic illnesses.

ceejayoz13• 4 years ago

Their salaries are suppressed by the cost of insurance premiums, typically paid by their employer.

zbuf• 4 years ago

You might find this video interesting from a UK perspective, I suspect with a mix of overlap and difference to the USA:

https://m.youtube.com/watch?v=ZuXzvjBYW8A

David Willets draws comparison of "boomers" to other generations, and includes what is paid into healthcare vs. what is consumed in a lifetime.

ekianjo3• 4 years ago

In the US, healthcare is effectively a collection of cartels

Not just in the US. For example there's a huge glasses cartel in France with specialists that are protected by the government and make pairs of glasses cost 500~1000 USD with very little reimbursement, while in Japan private companies (that actually compete against each other's) let you have glasses for 60~70 USD all included. You are literally better off flying to Japan from France to shop for eyewear.

rhexs2• 4 years ago

Might be tricky if you don’t speak Japanese though. Do they have multilingual optometrists that cater to tourists? I suppose Tokyo is big enough you can probably find one of anything.

haroldp• 4 years ago

I paid $97 in the US for my last optometrist visit to get a prescription at Costco, and about $50 for (ehem) "transition" lens glasses from zenni.com.

troebr• 4 years ago

I don't know how much things have changed, but in 2008 I bought my first pair of glasses in France, and had to leave the store to get some cash because they had a 10 euro minimum. I lost my prescription sunglasses a few months ago and got a replacement for $700 _after_ insurance. The frame was $150, so not outrageous.

peoplefromibiza• 4 years ago

according to the stats it is true that in France glasses and lenses are expensive, but not that expensive as you claim.

It's between 50 and 250 euros, depending on the brand.

For a pair of Prada or Louis Vuitton sunglasses you can easily spend 350-500 euros, but luxury brands are expensive by definition.

Anyway you pay for glasses and lenses once and then you're good for years.

merry_flame• 4 years ago

Things have improved significantly over the past few decades. Once you have a prescription, you can independently buy your glasses from a discount seller or on the Internet. Most opticians also offer very decent pairs that are fully covered by social security, or that cost €1. The pain point these days is getting that prescription renewed.

pezezin2• 4 years ago

I recently bought a pair of prescription sunglasses and I had to pay almost 35 000 yen, about 250 USD or EUR at the current exchange rate, the same I paid for the previous ones in Spain 5 years ago. I would love to know where I can get them for a quarter the price!

Macha• 4 years ago

Honestly, glasses there sound like they're only double what they are here which as far as comparing US healthcare costs normally go is practically reasonable. Usually I'm hearing about the same thing costing 10x or more.

notch656a13• 4 years ago

Healthcare in the US is hilarious. I got a bill when Border Patrol forcefully took me to the hospital to "search" me, despite not consenting to the search and them having no warrant or court order at the time care was rendered.

That's right, you can be billed in the US if you never consented to have care, refused to even go to the hospital, no psych hold was in place, never had any emergency at all, and some healthcare workers touched you against your will without a court order nor being under arrest. I complaint to the state nursing board and they said this is all good and dandy.

Name one other country where you can bill care to someone who refused it while being psychologically stable and being alert and oriented to deny consent, and no court authorized the treatment.

slg11• 4 years ago

This is all true, but I am guessing the article skipped it because rising healthcare costs likely impact Gen Z much less than the population overall.

Obamacare has allowed children to stay on their parent's insurance for much longer. All of Gen Z is still young enough to qualify for that, so as a generation they haven't felt the full cost of seeking insurance independently. Plus the overturning of the personal mandate means young people are once again free to simply not get insurance which is often a bad decision overall, but can end up saving a healthy young adult some money.

There is still something very wrong with the healthcare system in the US, it just isn't a problem that has hit Gen Z particularly hard yet.

WalterBright19• 4 years ago

There is still something very wrong with the healthcare system in the US

Government interference with the free market.

curo4• 4 years ago

I've heard this so often yet we left the UK for no other reason than the healthcare. My wife was pregnant and the experience from 0-7 months was so terrible, we flew to the US to have the child.

Post-operative outcomes and survival rates in the US are far better than in the UK and many European countries. Statistics about better birth outcomes or higher longevity is best attributed to healthier lifestyles in Europe/UK and to lower stress (shorter work weeks, etc).

While healthcare in the US can be very expensive, we paid 8k GBP for our NHS immigration surcharge and an additional 5k GBP in NHS-specific taxes (for 2 people, 1 year). A 1k/m health plan in the US (for two of us at the time) gave us 10x better health care.

Yet Americans and Brits alike sing the praises of the NHS vs US healthcare. I chalk it up to shoddy journalism and folklore.

bawolff2• 4 years ago

I don't think anyone disputes that us healthcare is better if you have the money.

Bilal_io3• 4 years ago

You're very lucky! Where can I find a plan that costs $1k/mo in the US for 2 people and I assume you got kids as well.

Is it paid fully by you or does your employer contribute to it? If your employer contributes, how much would it cost you if you leave the job?

I assume the $1k/mo is only premiums. How much do you pay for deductibles and copays?

Does your insurance cover 100% of your medical bills when you meet your deductibles? Or are you still on the hook for 20% of it?

What happens if one day you lose everything, and you can no longer pay the monthly premiums?

cameronh90• 4 years ago

IHS is £624/yr, and what do you mean by NHS-specific tax?

Overall, I probably pay more towards the NHS than I would for healthcare in the US, because I'm a comparatively high earner, and that's the nature of progressive taxation. The NHS seems fairly good value for money, however, although I think that may be due to how much we underpay nurses and doctors.

I'm sorry you had a bad experience. Many people do, and the service's deficiencies are widely publicised domestically. Even at its best, the service has always been a bit rough around the edges - not like the beautiful hospitals with friendly service that you often get by going private.

However, what people like so much about the NHS here is the universality and lack of barriers to access. If you're sick, you just walk in and get treatment - doesn't matter who you are, no charges, no paperwork, no insurance or anything else. Unfortunately, even accessing care is becoming more difficult in recent years. Increasingly people I know are relying on private insurance or self funding to get treatment in a reasonable timeframe.

WalterBright19• 4 years ago

Healthcare costs increased in step with inflation until 1968, when the rate increased dramatically and never slowed down.

What happened in 1968? LBJ's Great Society massive efforts at free medical care started.

The same thing happened with college tuition. Government attempts to reduce its costs resulted in greatly expanded costliness.

The most expensive things in the world are government provided "free" stuff.

xadhominemx• 4 years ago

The US has less government provided care than any other industrial country and by far the highest costs in the world

geysersam3• 4 years ago

How does this rhyme with the fact that many countries have well functioning, tax financed healthcare systems?

Kaze4045• 4 years ago

I took a sabbatical month between jobs, living in a (somewhat cushy) emergency fund, and while we were traveling my partner got sick with something and had to be rushed to a hospital. I called an ambulance at 7AM, and by noon she was back in bed, medicated and feeling much better. We didn’t spend a single dime, not even on the medication, and it’s crazy to me to think that if we were in the US that experience would’ve basically bankrupt us for no reason other than bad timing.

It’s in these moments that the fact that I’ve paid an absurd amount in taxes over the years just… disappears.

elzbardico6• 4 years ago

Things have been bad for the young for quite some time. It all started way back in the dawn of neo-liberalism. Since then, productivity has been raising without salaries growing as much. And worse than income concentration, we've seen an absurd level of wealth concentration since the late 80s and early 90s. Late Gen-Xers were already pretty much fucked.

fallingfrog3• 4 years ago

Ah not to be a spoilsport but I don’t the title is accurate.

Actual quote is: “Gen Z dollars today have 86% less purchasing power than those from when baby boomers were in their twenties.”

Quite a different claim.

koboll• 4 years ago

Some of these charts are atrocious chart crimes.

This one is particularly bad: https://i.imgur.com/hfHmvhP.png

rrrrrrrrrrrryan2• 4 years ago

Jesus Christ, the person who made this chart needs to accept Tufte into their life.

phonon3• 4 years ago

The author apparently has no idea how to do CPI calculations.

She somehow seems to be calculating inflation adjusted wage increases to CPI changes. Rather--

Median Family income in 1970 was $9,870 [0]

Median Family income in 2021 was $79,900 [1]

CPI in 1970 was 38.8 [2]

CPI in 2021 was 271.0

Ratio of incomes = 8.1

Ratio of CPI = 6.98

So household income has increased more than inflation.

Median household income might not be the best comparison--family sizes have changed, there are more women in the workforce, etc. But "86% less purchasing power" makes no sense.

[0] https://www.census.gov/library/publications/1971/demo/p60-80... [1] https://www.huduser.gov/portal/datasets/il/il21/Medians2021.... [2] https://www.minneapolisfed.org/about-us/monetary-policy/infl...

titzer• 4 years ago

This one's a whopper. The annual salary in the first graph is adjusted for inflation, while the CPI is not adjusted for inflation. Rather the CPI is how inflation is calculated.

Wildly misleading.

88913527• 4 years ago

There have been methodology changes between 1970 and today.

NovemberWhiskey4• 4 years ago

That doesn't make any difference; any methodological differences are just swamped by the erroneous double application of the price deflator in the comparison.

gruez6• 4 years ago

Okay but two wrongs don't make a right. If there were actually methodology changes that caused CPI to be not representative of purchasing power then accounting for CPI twice doesn't really fix anything, it just adds more noise into the result. To do it properly you need to explain what the methodology changes were, estimate their impact on the "real" CPI, and use your revised CPI to account for inflation. The author hasn't done that, so it's far more likely she has no idea what she's doing.

dan-robertson2• 4 years ago

I don’t know if you’re thinking of it but there’s this site called shadowstats which claims to calculate CPI/inflation with the old method and shows totally wild inflation numbers but the way it actually works is that the guy who runs the site takes regular CPI and adds in adjustments to his liking to get inflation numbers that he thinks look right.

My understanding is that you get pretty similar numbers with either methodology.

See more here for example: https://fullstackeconomics.com/no-the-real-inflation-rate-is...

falcolas7• 4 years ago

Something to remember - the median family in the '70's had one income. A median family today has two. So the margins (single income households) are in more dire straits today than they were in the past.

Measuring in households and not individuals hides a large number of changes in how people are paid. It also doesn't account for things like pensions, which were common in the '70's and earlier.

phonon3• 4 years ago

There are also more single person households now[0], and the average household size has decreased by about 15%.[1]

[0] https://www.statista.com/statistics/242189/disitribution-of-...

[1] https://www.statista.com/statistics/183657/average-size-of-a...

hedora• 4 years ago

Your numbers don't take into the age bands (you include older, wealthier families).

However, the comparing CPI to inflation adjusted incomes (as the article does) doesn't work either. Clearer explanation of the error I think the article made (and that I think you're pointing out):

For the sake of argument, say CPI is always proportional to income (which it would be if purchasing power was constant). To make arithmetic easy, say the CPI and median nominal income were both 1 in 1970, and are now both 8.

The inflation adjusted income in 1970 would be 8. (If we assume CPI moves with inflation, we multiply the 1970 median income by the ratio of 2022 CPI / 1970 CPI.)

So, by the author's calculations, a median family would have had 8 units of purchasing power in 1970, but only 1 unit of purchasing power in 2022, even though, by construction, CPI and nominal income went up in lockstep, and real purchasing power should be the same.

phonon3• 4 years ago

The original article was not based on incomes in any age ranges either. If they had wanted to do a more rigorous analysis, they would have compared say, 18-34 year olds in 1970 and today.

Anyway, the point is the first half of the article is fundamentally mistaken, There are ways to do more interesting analyses, but this one was mostly incoherent.

chongli• 4 years ago

The consumer price index (CPI) is untrustworthy. It incorporates adjustments into things like technology that don't actually reflect utility. For example, if you look at the section on "Computers, peripherals, and smart home assistants" you'll note a nearly 300-fold decrease in the consumer price of computers from 1997 to 2022. How the heck does that work? Computers today are cheaper than in 1997 but surely not 300 times cheaper.

It turns out that they use a "quality adjustment" that takes into account the relative performance of a modern computer compared to previous years. The bulk of the 300-fold decrease in price is due to the fact that modern computers are many times faster than those made in the 1990's. But there's a problem with that: a consumer doesn't get hundreds of times more utility out of a computer. You can't have a hundred people in your house sit there and work on the same computer and achieve the productivity scaling which would warrant this adjustment.

In reality, you're paying for one computer an amount which is nominally within an order of magnitude of what you would have paid in 1997. So this adjustment has the effect of drastically skewing the CPI statistic in this sector. Furthermore, computers have only grown in importance. What was a luxury in 1997 has become a necessity today. Families often have multiple computers. Parents may work from home and use their personal computer for paying bills, applying for jobs, doing taxes, budgeting, or applying for government services, while children may use their computers for doing schoolwork, research, playing games. Everyone uses their computers and devices for communications. However, none of these tasks (besides playing games) has markedly improved or been made more efficient by the technological advances in the computers themselves.

syntheweave• 4 years ago

In practice, the way the poor live is to always look for a used, refurbished, or pre-owned option.

So while if you buy new you can't get very much computer, if you buy a bunch of junkers, you can get enough to get by. But they have to be in a sweet spot of "old enough" to have depressed price and "new enough" to not be useless for current applications. This was actually a problem during the 2010's long reign of Intel, because they didn't add a lot of generational performance improvement, so old systems retained their price for longer. Since other architectures have caught up on leading performance, pricing has finally started discounting these older CPUs again.

Still, it's not a 300-fold difference and the bottommost price brackets tend to need a DIY approach. But it's definitely more feasible than 1997.

Panzer043• 4 years ago

I've lost quite a bit of respect for some of the HN community here - this should be obviously wrong, we obviously aren't buying 86% less today than we were in the past.

The title's premise is so outlandish it deserves at least a little bit of critical thought... But because it confirms some previous biases (even if at a completely different and more extreme scale), more than I expected are acting as if this is true.

nerdponx5• 4 years ago

Why should hackers have any idea about economics? Not everyone can be a subject matter expert on everything, and it's easy to be swayed on topics like this where emotions run high (rightly so) and anecdotal evidence is everywhere.

As for the actual number being outlandish, I don't think most people have a sense of what "86% less purchasing power" even means. People see "<surprisingly big number> + less purchasing power" and that gets the eyeballs. "Hackers" are just as susceptible to this as any other non-experts.

Plus, plenty of people here do know what they're talking about, enough to call out the obvious problems in the article and charts.

topynate• 4 years ago

This article is complete bullshit because it effectively corrects for inflation twice. The CPI is a measure of the nominal change in cost of a basket of goods. This should be compared, like for like, to nominal income, not inflation-adjusted income. The CPI was already used to adjust the income to which it's compared in this article!

modeless• 4 years ago

The fact that this got upvoted to the top despite being complete bullshit just shows how desperately people want this to be true. 170+ people clearly upvoted the headline and didn't understand the article. And everyone in the comments is knee-jerk posting their own personal rants about finance with only a tangential connection to the article. What a dumpster fire of a post.

rrrrrrrrrrrryan2• 4 years ago

Thank you for summing this up so succinctly. I knew they comparing these two numbers was wrong, but I couldn't quite articulate it.

shard• 4 years ago

Other ways to say this: Baby boomers have 86% less purchasing power than the greatest generation had in their seventies. Gen-X have 86% less purchasing power than the silent generation had in their fifties.

amelius• 4 years ago

On top of that, boomers use the money they have against the people who don't have the money (e.g. by buying real estate, and also by speculating with it). So the problem is compounded.

jscipione• 4 years ago

It seems obvious that the cost of living is much higher today than it was in the 1970s when a family could be supported by a single income while today given the cost of house, car, and commodities even two incomes does not compare to the buying power of a single income then.

The dollar has inflated to the point that it will soon be worthless. I wondered how the fed planned to pay its massive multi-trillion dollar debt once the dollar crashes but the Inflation Reduction Act has answered that question. Democrats are planning to extract the wealth of the American people at gunpoint held by 87k new militarized IRS agents.

fleddr• 4 years ago

It's a simplified conclusion, but the era in which a mail man could support an entire family with ease was a historical anomaly.

You can pinpoint the timeline exactly, where the above wealth stagnates or declines whilst the rest of the world is rapidly catching up, industrializing.

You can locally optimize but not even taxing the rich for 90% will fix this.

My other simplified conclusion is that everything that you need seems to be getting ever more expensive whilst everything that you do not necessarily need becomes dirt cheap.

We should probably spend some more time thinking about that. Everything becomes cheaper due to spectacular advances, but not housing, healthcare, energy, education, tax levels.

I mean, it's almost as if some invisible force blocks this progress, benefiting from artificial scarcity. Almost as if we're not supposed to have it good.

Panzer043• 4 years ago

What's with the title? The article itself does not make this claim (even if it has some outlandish presentations of information) - it claims that dollars have 86% less purchasing power, not that we have 86% less purchasing power. The article does everything it can to make you think this without actually saying it, but it doesn't say it.

It's a terrible article, but that title is somehow worse.

(Honestly, I don't think this really deserves a submission, it's just wrong..)

EVa5I7bHFq9mnYK• 4 years ago

You should compare things that didn't change between then and now.

BigMac, for example, cost 65c in 1970, and $5 today. Average income (from the first graph) was $3.68k vs $44.2k today. So you had to work x1.5 more time for a bigmac in 1970 than today.

A return flight from NY to London cost $550 in 1970, about the same today. So you had to work 10 times more for that flight in 1970 than today.

Gen Z have 86% less purchasing power compared to baby boomers in their twenties

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