Why a $100k income no longer buys the American Dream in most places

https://www.cnbc.com/2024/04/16/why-a-100000-salary-no-longer-buys-the-american-dream-in-most-places.html

by paulpauper • 2 years ago

23 51 2 years ago

mikece• 2 years ago

"Unfortunately, what has happened is that wages haven’t kept up with the cost of living, by and large, for the last 50 years or so"

That's putting it mildly. I lived better 15 years ago making $40k less than I do now. Price increases for consumer goods, energy, food, and property taxes in the last four years have been especially brutal!

pleasantpeasant2• 2 years ago

Until we reverse Reagan's disastrous Trickle-Down Theory(Voodoo Economics), we won't see this changing.

Even in the '80s they knew this current world would be the outcome. This isn't a surprise to the Fed or the Reaganites.

no_wizard• 2 years ago

This is the trouble with 'infinite inflation' which is the economic model in which we exist (most central banks target 2% inflation), you combine this modeling with what that doesn't cover - things like housing, that up many multiples higher than the official inflation rate.

Now many argue "well raises should be higher than inflation" but data continues to show that this isn't the case, as mentioned in the top of the article, for the last 50 years or so, raises have not kept pace with real cost of living increases. I have seen an argument that raises have evened out somewhat to beat the official inflation rate, but this is dubious, because the reported government inflation rate has exclusions to its calculation and doesn't capture the real cost of living increases faced across the US, due to inflation rate calculation exclusions and approaches.

I've long argued we need some kind of deflation in real costs, what that would look like is hard for me to say. I know its complicated, however I think a good place to start is perhaps returning to pre Reagan era economic 'reforms' is a good first step, as I've seen mentioned elsewhere (on HN or otherwise), as so called 'Reaganomics' hasn't really panned out for the average American over the long term.

slowmovintarget• 2 years ago

We haven't had "Reaganomics" at play since Bush senior. Repeal of Glass-Steagall under Clinton, ACA, and Dodd-Frank puts us in a completely different economic regime than 'Reaganomics.' Include alternative definitions for both CPI and unemployment which paint rosier but untrue pictures of the system. These have been in place starting with the Obama administration and continue today.

The admonition from the Reagan administration on economics was fairly simple: Lower the rates, broaden the base. We've not been doing that for a long time.

verteu10• 2 years ago

But the median wage is up 40% in the last 15 years... If your pay has been constant, you're getting salary decreases in real terms.

_mlbt2• 2 years ago

That's great, but how much has the price of housing, food, cars, energy, and a college education increased during that time frame?

richwater• 2 years ago

Government expenditure in 1960 was $77 Billion/year.

Adjusted for inflation that would be $820 Billion/year today.

Actual spending today is $6,180 Billion/year, a ~7.5x multiplier above inflation.

Your income is being stolen through taxes and spent at an alarming rate.

pleasantpeasant2• 2 years ago

Reaganomics. We should try to slowly go back to a pre-Reagan economic world.

drewcoo• 2 years ago

The shift to neoliberalism happened under Carter.

https://www.salon.com/2011/02/08/lind_reaganism_carter/

Nixon was our last New Deal President.

https://isi.org/modern-age/richard-nixon-new-deal-nationalis...

Silly as it may seem, you probably want a more Nixonian world.

fxd1238• 2 years ago

You are mistaken. Reagan's tax cuts, which included cuts for the lower class, decreased tax revenue and put more money in the average person's pockets.

Presidents after Reagan started to pillage the lower and middle class for more tax revenue. Notably George H.W. [1]

[1] https://en.wikipedia.org/wiki/Omnibus_Budget_Reconciliation_...

JohnFen2• 2 years ago

The population is also a lot higher now. Taking your figures and computing it on a per capita basis in the respective eras gives a 3.72 multiplier, not 7.5.

Not saying 3.72 is great, of course, but it's more accurate in terms of actual impact on people.

But I don't think the expenditure increase supports the argument that people's income is being stolen. Whether or not you consider taxation as theft is an ideological stance.

xbpx• 2 years ago

Really? The situation isn't so simple. High income earners are paying historically low taxes. Not to mention cuts in inheritance taxes from the 80s onward. You'll need to explain your data more carefully than claiming it is all being stolen by taxes.

https://www.wolterskluwer.com/en/expert-insights/whole-ball-...

sethammons• 2 years ago

Your argument supports that tax burden has increased for the majority - if the high income folks are proportionally paying less while the total burden has increased, this a disproportionate increase has hit everyone else harder

fxd1238• 2 years ago

So you agree with his statement? A larger proportion of the average person's income is taken by taxes.

freitzkriesler25• 2 years ago

We have too many asset owners who are trading amongst themselves, leaving real workers in the dust.

It's time to cut down real estate investors by restricting ownership to real people and heavily taxing multiple property ownership.

Yes, building more helps but until the landed gentry is removed as a demand pressure then affordability will not get better.

MichaelMug• 2 years ago

Which real estate investors? Because it’s a spectrum. From the mom and pop trying to supplement their income to the investment firms that bought tens of thousands of properties. The latter being a bigger problem here.

What I’ve seen lately is mega apartment complexes being built and funded by private equity. That’s not good either. Things will end up like Europe where no one owns their flat they just rent in perpetuity.

bryanlarsen• 2 years ago

Almost all low income earners rent from an investment firm. Any tax on investment firms will be passed down to the renters. Taxing those investment firms is a tax on the poor.

Taxing short term rentals, OTOH...

freitzkriesler25• 2 years ago

All of them from Mom and Pop to black rock.

A small leach is the same as a big leach.

fxd1238• 2 years ago

heavily taxing multiple property ownership

Which would harm the development of multi-family housing and increase the cost of living. Remember that "real workers" do not build and own 100+-unit dwellings

freitzkriesler25• 2 years ago

This is utterly false. Unless those developers are selling their units they are part of the problem. Ban renting and force the sale of units in those multi new builds and it eliminates the problem .

Doubly so once you've forced the sale of multi unit owners, now you have a gkut of available properties on the market and reduced demand which lowers the price.

The fact that this farce keeps getting perpetuated is why the problem will never go away.

_akhe2• 2 years ago

Wouldn't building more houses solve the problem without having to increase taxes and create programs?

A house wouldn't be at these incredible prices of $500,000 or $1 million if there were more of them available (supply/demand), real estate investing would in general be less incentivized, where today it's a major channel for loans and investment.

It's fine that it is - of course investors should be able to trade housing and properties like anything else - but it's wrong and cruel to stop building them, as the population continues to increase. They're making people homeless so a much smaller group can make millions of dollars off the scarcity.

It's not a great future if the average person can't afford to own a shelter, and if the price to rent one continues to be thousands of dollars every 30 days in relation to these wages - nobody can realistically pull away when the house price and the rent rate both are rising so fast. My Sacramento midtown apartment in 2010 was $660/mo, my first place in SF was $900/mo the next year. The same places are both over $3k/mo now, yet I made less money in 2023 than I did back in 2010, doing the same job and working more hours.

Meanwhile those who inherited a house for free, or bought it for a lot less money than they cost today can make hundreds of thousands from refinancing (doing nothing) or millions from selling it. That so-called value was created out of intentional scarcity and nothing else - out of depriving other people of homes.

Even the average homeowner can make out like a rockstar investor year-after-year without even having to try because houses are just increasing in value as supply diminishes, there's a problem - it's a real estate bubble that will burst the moment people start building houses and neighborhoods again.

I agree we have to cut down real estate investors, I just think you can solve it in a productive way rather than battling them in politics.

nine_zeros• 2 years ago

This is what happens when the fiat economic system is based on constant inflation without any moderation.

The next recession - without adequate drop in prices - is literally going to create third-world-esque homelessness in vast majority of the country.

TrackerFF• 2 years ago

I think it's crazy how $100k seriously can't cut it in the US?

Here where I live, in Norway, $100k is more than enough to live very comfortably almost anywhere in the country. Only exceptions would be certain expensive parts of Oslo, and some other high-income areas/towns around Oslo.

And if you're two people earning that kind of money? Early retirement would be a viable option in as little as 10-15 years, if you have a sober lifestyle.

But, then again, I have friends and ex-colleagues that live in the US - and I'm not talking about expensive places like NYC, SF, etc. - bur rather medium sized cities in flyover country, and even there people are paying rents (or purchasing homes) that feel pretty stiff to me.

fxd1238• 2 years ago

$100k absolutely can cut it in most of the US- even in expensive cities. The median income in New York City is $76k [1].

The article uses a wild definition of "American Dream" where 50% of income has to be able to be spent on non-essential things. I really don't think most people will actually spend like that.

[1] https://www.census.gov/quickfacts/fact/table/newyorkcitynewy...

anotherhue• 2 years ago

Rents are still $3.5k though. I guess everyone has roommates and that doesn't show up in the data.

https://www.renthop.com/average-rent-in/new-york-ny

verteu10• 2 years ago

"Unfortunately, what has happened is that wages haven’t kept up with the cost of living, by and large, for the last 50 years or so"

Not sure about 50 years, but from 2001-2020 (period where data is most easily available for me) things seem fine?

CPI: 175.1->257.971 (2.1%/yr)

Median wage: $27060 -> $46310 (2.9%/yr)

Mean wage: $34020 -> $61900 (3.2%/yr)

Bottom 10% wage: $18140 -> $27340 (2.2%/yr)

Rent burden (median_wage / median_rent): 25% -> 28% (and it's now back down to 27%)

[1] https://data.bls.gov/cgi-bin/surveymost?bls [2] eg https://www.wolframalpha.com/input?i=median+US+wage+2022

riku_iki6• 2 years ago

median_rent

I am wondering if it is low because people simply downsizing..

verteu10• 2 years ago

It barely seems possible (much less likely) for everyone (in aggregate) to downsize. Probably someone is buying or moving into their old (newly-vacant) property?

Why a $100k income no longer buys the American Dream in most places

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