Life is Harder

[novaman]

This was up on MSNBC. Sorry if it has already been posted.

Life is harder now, experts say - Gut_Check - MSNBC.com

So what do you guys think?

 

[MasterBlaster]

When I was young life was tough !

I had to walk all of the way accross the living room just to change the channel on the TV. Kids today have it easy. They have no idea of how tough it was just to change the channel.

Ditto for Garage doors.

My family of 5 had 1 car when I was young. Now between my wife and I (no kids) we have three cars. Boy life is tough now. When I used to buy gasoline, I had to go to the bank to get some cash, go inside the hut, wait in line to pay the man for the gas. Then when I was done filling up I had to go wait in line again for my change. Now I zip in use the credit card and I'm out in no-time.

As I recall, the average house size when I was a kid was something like 1200 square feet. Now we have to have a kitchen that large or else we just couldn't show our faces in public.

When I was a kid, vacation was a week in the local mountains camping. Now you haven't really had a vacation unless you have spent a couple of days inside of a large aluminim tube flying between continents.

and so on, and so on.

 

[Razor]

Life is more complicated now....harder? I don't think so.

 

[justin]

I skimmed the article. My take is that it is a rehashing/recycling of Elizabeth Warren's book "The Two-income trap" which noted that middle class families are worse off today than they were a generation ago (in the 1970's). I disagree with her basic premise.

If middle class families today were to live like a stereotypical family of the 70's, I estimate they would be better off today, not worse off. Ms. Warren illustrates how much more houses cost and how much more childcare and a second car costs (because you have to have two cars, since the wife now works, too). She doesn't acknowledge the greater benefits of nicer housing, more living space, increased mobility w/ a second car, social and professional satisfaction of the (now) working woman, benefits of socialization w/ preschool, etc.

If there aren't real benefits to living the 21st century lifestyle, then each family not enjoying the benefits should elect to go back and live a 1970's lifestyle.

 

[W2R]

The article isn't very convincing, but I looked briefly at the numbers and they look like they might be correct.

 

[Gumby]

I skimmed the article. My take is that it is a rehashing/recycling of Elizabeth Warren's book "The Two-income trap" which noted that middle class families are worse off today than they were a generation ago (in the 1970's). I disagree with her basic premise.

If middle class families today were to live like a stereotypical family of the 70's, I estimate they would be better off today, not worse off. Ms. Warren illustrates how much more houses cost and how much more childcare and a second car costs (because you have to have two cars, since the wife now works, too). She doesn't acknowledge the greater benefits of nicer housing, more living space, increased mobility w/ a second car, social and professional satisfaction of the (now) working woman, benefits of socialization w/ preschool, etc.

If there aren't real benefits to living the 21st century lifestyle, then each family not enjoying the benefits should elect to go back and live a 1970's lifestyle.

Don't they call these "hedonic adjustments" when they calculate the CPI? And does that mean that they are already priced into the equation?

 

[FinanceDude]

Interesting, but I think most things are relative, yeah, gas was 40 cents a gallon, and houses were $25,000, but a lot of my dad's friends didn't make a whole lot of money, and most had 4-6 kids in a 1300 sq ft house.........

However, I believe we had a POSITIVE savings rate back then..........

 

[samclem]

If there aren't real benefits to living the 21st century lifestyle, then each family not enjoying the benefits should elect to go back and live a 1970's lifestyle.

I don't know about "real" benefits, it might be more accurate to say "perceived" benefits. But, I agree with your point.

Also, note in the "2004" family budget chart that the Mom works full time for a net gain of about $8K per year (after her tax bill and the bills for daycare). Take out the money for car number two and they aren't making much progress as a result of her employment.

Regardless, the way the author has bundled the expenses of the 1970s family and the 2004 family is misleading. Let's compare the square footage of an average 1970s house with a house today. Also, some of the spending depicted as nondiscretionary is clearly not: does anybody really need to spend $4300 per year to have a reliable car?

An interesting factoid from The Clark Howard show from a few days ago (emphasis is mine) (http://clarkhoward.com/shownotes/2007/10/12/). I think the "household debt" figures probably refer to installment credit.

"Money magazine recently ran a story about how debt has risen so much over just one generation. The story adjusted figures for inflation and found that the average household debt one generation ago was $600. Today it's up to $7,300 -- a 1,200 percent increase. Mortgage debt has risen 50 percent, while the average size of a home has risen 50 percent! Think about that for a moment. Our expectations have grown so much that we're taking on 50 percent higher debt for a 50 percent larger house -- even though the average family size has shrunk."

 

[justin]

Don't they call these "hedonic adjustments" when they calculate the CPI? And does that mean that they are already priced into the equation?

Simply stated: No. Having 2 cars is twice as many as having 1 car. Having a backup in case 1 car breaks down is a nice benefit. The 1970's stay at home mom w/o car would rely on her feet and back to carry her and her two kids to the store during the day when Dad is at work. That or wait till Dad is home from work to shop or go on the weekends. Or drop Dad off at work and pick him up in order to have the use of the car during the day.

Houses today are way bigger and nicer than the 1970's split level w/ wood grain paneling. I don't think the real doubling of mortgage payments factors in the niceties of a bigger, more technologically advanced house.

Whether bigger, more, nicer, better is really any benefit is a matter of opinion. I'm personally skeptical, but I'll give millions of rational consumers the benefit of the doubt and say that they do receive greater utility from today's bigger houses and owning more (nicer) cars.

 

[justin]

The article isn't very convincing, but I looked briefly at the numbers and they look like they might be correct.

I did a quick back of the envelope analysis on the tax burden for the 2004 family. Warren's numbers are off by about $9,400. I arrived at a tax burden of approximately $12,900* vs. Warren's $22,300. Child care expenses are huge, but probably realistic for the 3 y.o. Not sure why the 7 y.o. child care is that expensive, but either way, these expenses, although large, will decrease in a few more years and go away in another 7-8 (once the kids can ride da bus home and stay there by themselves at age 10-11?). What about all the folks that have help from family to take kids for a couple hours after school? Or a number of flex jobs that allow getting in early and leaving early?

Also, car expenses seem really high, unless they are buying brand new cars every few years. Seems like they could get by with a cheaper, less reliable car for one of their vehicles. For $8500/yr, they could almost buy a brand new chevy aveo or kia every year, and sell it for scrap at the end of two years and buy a new one. Never do any maintenance or upkeep and don't insure it (I'm assuming liability insurance will be obtained for both parents in 1970 and 2004, so it is a wash).

Any way you slice it, I can't help but see more extra money left at the end of the month today than in the 1970's.




* $5643 FICA, $3731 federal income tax (don't forget the child tax credits and child care tax credits!), and $3567 state income tax

 

[brewer12345]

If there aren't real benefits to living the 21st century lifestyle, then each family not enjoying the benefits should elect to go back and live a 1970's lifestyle.

And by and large, we do. House was built around 1950, DW stays home with the kids, we have a CRT-based TV, and pay $3 a gallon for heating oil.

 

[justin]

And by and large, we do. House was built around 1950, DW stays home with the kids, we have a CRT-based TV, and pay $3 a gallon for heating oil.

Hehe, same here! Well, house built in 1972, painted over the wood grain paneling. DW works, so we have two cheap, reliable imported economy cars 7-8 years old (w/ safety features and reliability unheard of in the 1970's). CRT tv's (although they are all in color and we probably have 5-6 at least). In-law's take care of the kids for much less than $1000/mo/kid daycare (otherwise DW would stay at home w/ kids). This also explains why we don't really pinch pennies any more yet maintain a savings rate of around 1/2 our gross income.

The difference is we have a bunch of computers, video games, high speed internet, cable, all kinds of telecom for under $25/month (cell phone plus landline w/ free international calling and free domestic long distance), dining out 5 times/week on average, and the list goes on. Plus we never have to go to the disco or wear polyester bell bottoms.

 

[brewer12345]

The difference is we have a bunch of computers, video games, high speed internet, cable, all kinds of telecom for under $25/month (cell phone plus landline w/ free international calling and free domestic long distance), dining out 5 times/week on average, and the list goes on. Plus we never have to go to the disco or wear polyester bell bottoms.

But I missed out on all the pot and other stuff.

 

[justin]

But I missed out on all the pot and other stuff.

There's always FIRE, right?

 

[NinjaPigeon]

Personally, I believe that life may be harder. I'm not saying I agree with reasons in the articles cited, though.

The increase in costs of housing has outpaced the increase in wagers. At the same time, pensions have all but disappeared, and people now must fund their own retirements. Healthcare expenses are also continuing to rise faster than wages.

Purely empirical evidence here, but when I polled a few coworkers to figure out how they could afford a home in Atlanta (one of the cheapest of the big cities in the US), I found out they did so by cutting back on saving for retirement.

And while bigger houses have become the norm, it's what is being built. The small houses in Atlanta are in neighborhoods I would not want to raise a family in. I'm not willing to risk their safety to save money on my mortgage.

While many people's problems could be mitigated or even solved by LBYM, it appears it is getting more expensive to get the equivalent things of a generation ago.

 

[73ss454]

Hey, you guys are all too young. I'd love to go back and live in the 60's.

Muscle cars, drag racing and just playing stupid in general.

 

[twaddle]

I'm already off the treadmill, but when I was working, I was thrilled with how easy my life was.

Due to those newfangled computers, I had a job that required no manual labor. I was able to invest in the stock market using online discount brokers. I could job-hop with ease, and use online job boards to help find new gigs. I could start a company without needing a brick-and-mortar office. I could sell my worthless crap on eBay.

How much easier could life get?

 

[NinjaPigeon]

How much easier could life get?

I was under the impression we were using "harder" to describe the difficulty in getting ahead financially. But yes, I agree - I love not having to do manual labor

Besides, can you imagine a work day with no internet? (Contemplates this as he posts from work.)

 

[FIREd]

In-law's take care of the kids for much less than $1000/mo/kid daycare (otherwise DW would stay at home w/ kids)

That's a good point. Both my parents worked all their lives yet they never paid a cent in child care. My grand parents, stay at home aunts or neighbors used to take care of us for free because that's what people did for each other back then! I don't think it works this way anymore for most people. Grandpa golfs, grandma takes dancing lessons, they don't got time anymore, plus they live thousand of miles away...

 

[twaddle]

I was under the impression we were using "harder" to describe the difficulty in getting ahead financially.

Yeah, job hopping, starting a business, and investing in the stock market did have quite a bit to do with how well I got ahead financially. Even selling my old crap on eBay helped a bit.

 

[HFWR]

But I missed out on all the pot and other stuff.

Yeah, me too...

There's always FIRE, right?

Medical marijuana...

 

[FIREd]

I personally love to go back to Europe some time to time to remind myself of how middle class people in other rich countries live. My mom has high speed internet, 82 TV stations and unlimited phone, all for $39 a month. I pay over $200 for the same (unreliable) services. People live in smaller houses, they drive smaller, energy-efficient cars... I think that in America people now have an unrealistic expectation about what a middle class lifestyle is supposed to be. They all want the house, the 2 cars, the big screen TV... And I think that's why people are getting frustrated.

 

[MasterBlaster]

And I think that's why people are getting frustrated

People see what kind of lifestyle they are supposed to live on TV.

Shows about the problems of rich people are evidently what people want to watch.

That sets the "normal" American lifestyle in everyone's mind

 

[Nords]

Warren redux ad nauseum. She must have a new book coming out.

She's claimed ever since "The Two-Income Trap" that families have bid up real estate near good schools, and even more so since mortgage money has become so cheap. (Some of you may remember in the 1970s when mortgage companies wouldn't count a married woman's income and held the line at 26% mortgage debt, 38% total debt. No such things as zero-option ARMs!) What used to be a mortgage that could be paid out of one income has become a "requirement" that can barely be handled out of two. And if one of those two is laid off, there's no safety margin.

Let's not forget that the halcyon 1970s were generally applicable to middle-income white families. Blacks, Hispanics, and other minorities shared in this prosperity at a much lower rate.

We also got to that 1970s standard of living by destroying the infrastructure of most of Europe, western Russia, and Japan during WWII and then ramping up the military-industrial complex to support the Korean & Vietnam wars. Jobs were plentiful because we'd essentially wiped out a generation of workers (and perhaps the necessities of daily life) and then had to build it all back up. No wonder we had it "so good" back then...

No nostalgia for me... I'll stick with the tougher 21st century.

 

[MasterBlaster]

We also got to that 1970s standard of living by destroying the infrastructure of most of Europe, western Russia, and Japan during WWII and then ramping up the military-industrial complex to support the Korean & Vietnam wars. Jobs were plentiful because we'd essentially wiped out a generation of workers (and perhaps the necessities of daily life) and then had to build it all back up. No wonder we had it "so good" back then...

So Are you suggesting that this is a bad thing ?