
It takes now 53 weeks salary to earn same as 30 weeks in 1985 - miohtama
https://twitter.com/oren_cass/status/1230505649794166785
======
grawprog
>How to get higher wages? How to get lower costs?

Gee I wonder...

[https://www.epi.org/publication/ceo-
compensation-2018/](https://www.epi.org/publication/ceo-compensation-2018/)

>CEO compensation has grown 940% since 1978 Typical worker compensation has
risen only 12% during that time

>What this report finds: The increased focus on growing inequality has led to
an increased focus on CEO pay. Corporate boards running America’s largest
public firms are giving top executives outsize compensation packages. Average
pay of CEOs at the top 350 firms in 2018 was $17.2 million—or $14.0 million
using a more conservative measure. (Stock options make up a big part of CEO
pay packages, and the conservative measure values the options when granted,
versus when cashed in, or “realized.”)

>CEO compensation is very high relative to typical worker compensation (by a
ratio of 278-to-1 or 221-to-1). In contrast, the CEO-to-typical-worker
compensation ratio (options realized) was 20-to-1 in 1965 and 58-to-1 in 1989.
CEOs are even making a lot more—about five times as much—as other earners in
the top 0.1%.

>From 1978 to 2018, CEO compensation grew by 1,007.5% (940.3% under the
options-realized measure), far outstripping S&P stock market growth (706.7%)
and the wage growth of very high earners (339.2%). In contrast, wages for the
typical worker grew by just 11.9%.

~~~
maerF0x0
How do you recommend we go about telling someone they cannot earn what they
can convince someone to pay them, or that a company/board cannot pay the CEO
as much as they're willing to?

~~~
jrs235
"You can pay your CEO whatever amount you want so long as it isn't 50 times
more than the lowest hourly wage times 2080 that you pay any employee of
yours." ... Queue the gig economy...

~~~
ncallaway
"You can pay your CEO whatever amount you want so long as it isn't 50 times
more than the lowest hourly wage times 2080 that you pay any employee of
yours, any contractor of yours, or any of their subcontractors."

~~~
xigency
At a $10/hour minimum wage, that's a range between $20,000/year and
$1,000,000/year.

~~~
berbec
Which is much better gap than $20,000/year and $2,284,044,884/year. [1]

1: [https://www.insidermonkey.com/blog/10-highest-paid-ceos-
in-t...](https://www.insidermonkey.com/blog/10-highest-paid-ceos-in-the-world-
in-2019-796222/10/)

------
burlesona
That is a really good thread. I hate how clunky reading long stuff is on
Twitter, but, that’s beside the point.

The author wrote the same content here with more room to breathe:
[https://americanaffairsjournal.org/2020/02/the-cost-of-
thriv...](https://americanaffairsjournal.org/2020/02/the-cost-of-thriving/)

~~~
robocat
Important points from the link:

“I propose the following Cost-of-Thriving Index (COTI): the number of weeks of
the median male wage required to pay for rent on a three-bedroom house at the
40th percentile of a local market’s prices, a family health insurance premium
[without employer subsidy], a semester of public college, and the operation of
a vehicle.”

“To assign an annual cost of college to a family whose tuition payments will
be concentrated in a few years, the COTI uses the federal National Center for
Education Statistics esti­mate for half of one year’s tuition, fees, room, and
board at a four-year public institution. Two children pursuing four-year
degrees would require a combined sixteen semesters of college, so a household
preparing for those costs would need to save roughly one semes­ter’s worth of
cost per year before the children reached college-going age.”

”In 1985, the COTI stood at 30 [weeks] — the median male worker needed thirty
weeks of income to afford a house, a car, health care, and education. By 2018,
the COTI had increased to 53 [weeks] — a full-time job was insufficient to
afford these items, let alone the others that a family needs. A generation
ago, the worker could be confident in his ability to provide his family not
only with the basics of food, clothing, and shelter, but also with the middle-
class essentials of a house, a car, health care, and education. Now he
cannot.“

There is definitely something to his argument. In the past in a majority of
families, one person could work and provide for a family. At present in a
majority I think both parents must work to be able to cover necessities in New
Zealand. Many more hours work just to “live”.

~~~
justanotherc
This has been happening since women went to work after WWII. When you double
the size of the workforce and keep the population the same, you will have a
productivity boom at first, but then eventually things will come back into
equilibrium and the cost of labour is half (since the availability of workers
is double) of what it used to be. Looking at history in the macro this is
exactly what happened: economic boom in 50's, followed by gradual decrease in
labour wages starting from the 70's until today.

I'm not disparaging women working, I'm just saying wage stagnation is an
unforeseen side effect. If 1 of every working couple decided to stop working,
our economy would crash, but wage rates would increase dramatically.

~~~
kakwa_
I feel it's slightly more complex than that.

With a new significant portion of the workforce able to work, you enable on
one side, new economic needs (more transports, more kindergartens, etc) and on
the other side you enable more production of goods which in theory should
improve the material conditions of a society. Basically a society should be
more efficient if it stops excluding half its available workforce.

But a the same time, housewives where not passive actors in the economy, they
did had an economic impact (raising children, etc), just that this economic
impact was not measured previously. However it was probably not equivalent to
a paid job in term of economical impact, and for obvious emancipation reasons,
it's definitely not a state to return to.

~~~
justanotherc
I can't disagree with anything you said. But I think it goes without saying
that any bit of economics can't really be fully encapsulated in a couple
paragraphs. We're painting with broad strokes and of course there are more
variables at play.

------
nostromo
He talks a lot about cars costing more (and being better). But he neglects
that cars (and houses) are financed.

Financing a car decades ago was expensive. You are now paying the same monthly
price for a better and more expensive car. Fewer of your dollars go to the
bank for financing, because interest rates are so low, and more dollars go to
the car maker.

The same goes for a lot of people looking at housing sticker prices, and not
the actual cost people are paying for houses. When you look at how cheap
financing is today, a lot of the inflation of these goods declines, or
evaporates entirely.

~~~
lrem
True. But some of us are worried about what will happen if the rates increase.
Also, any kind of liquidity problem seems more grave if your debt, which cost
you the same despite 5x lower rates, is 5x more.

------
gfrangakis
> 10/ When we say "inflation-adjusted wages look good," we are actually saying
> "if you could take your wage back to 1970 and spend it, you'd be better off
> than you were at the time with a 1970 wage." I mean, maybe that's
> interesting. But it doesn't describe lived experience.

Isn't more like saying, you can buy more units of 2020 "consumer goods" with a
2020 wage than you could buy 1970 consumer goods with a 1970 wage? His point
is just the definition of inflation: $1,000 in nominal dollars more valuable
in 1970 than in 2020.

~~~
LeifCarrotson
The important part is the segmentation of inflation between the whole economy
(consumer goods, industry, and also the basics) and the price of just the
basics: housing, health care, transportation, education. If those basics were
the basket of goods used to define inflation, then the numbers would be very
different.

$1000 in 1985 dollars buys $2300 worth of consumer goods in 2020. But you'd
need $3,110 2020 dollars to buy the basics you could get for $1000 in 1985.

~~~
crooked-v
Or, in other words, inflation indexes are an average, and like all averages,
it's a bad idea to blindly trust it, because sub-groups of the overall data
may show much different results.

~~~
thedance
The problem is not averaging. The problem is these inflation measures
specifically exclude major expenses.

------
ikeboy
Cherry picking by looking at males only, which somehow didn't make it into the
title here in what I'm sure was an innocent oversight. It's also flat out
lying by saying "earn same" \- the tweet only claims earning enough to pay for
typical household expenses - the typical household buys a lot more things than
they did in 1985.

Title is heavily misleading and inaccurate and should be changed.

See
[https://twitter.com/Noahpinion/status/1230547825122889728](https://twitter.com/Noahpinion/status/1230547825122889728)
for some other comments on the thread

~~~
eanzenberg
In many ways, the advent of dual-income households has made everyone poorer

[https://www.vox.com/policy-and-
politics/2019/1/23/18183091/t...](https://www.vox.com/policy-and-
politics/2019/1/23/18183091/two-income-trap-elizabeth-warren-book)

~~~
ikeboy
Note that Warren isn't claiming that everyone is poorer, rather specifically
middle-class households that chose to buy expensive housing to get into better
school districts. Her argument can be read as saying that housing/education
inflation is higher for those families specifically (and therefore lower for
everyone else - if it's higher than average for some it must be lower for
others, that's the nature of averages).

Also this is unrelated to my point, which is that OP has a misleading and
borderline false title.

------
IanCal
I don't understand the point about the cars and inflation, don't your
inflation measures use a basket of goods and services that get updated looking
at current market shares? That's how it works in the UK.

Source:
[https://www.ons.gov.uk/economy/inflationandpriceindices/meth...](https://www.ons.gov.uk/economy/inflationandpriceindices/methodologies/consumerpricesindicestechnicalmanual2019)
(search vehicle)

~~~
vkou
The problem is that the basket of goods is not representative of a real
family's actual expenditures.

The basket of goods may include the price of gasoline, but does not include
the cost of car insurance, car tabs, toll roads, or a parking space.

The basket of goods may include the cost of an X-Ray, which doubled in 20
years, but does not the cost of buying a health insurance plan (Which
quintupled in 20 years).

In this way, the basket of goods is an accurate, but completely misleading
metric for inflation.

I don't care how much an X-ray costs, I care how much health insurance costs.
I don't care how much buying a new car costs, I care about the _total_ cost of
ownership of a car. I don't care about how much a 3-bedroom house in the Mid-
west costs, I care about how much I pay my landlord for a tiny apartment in a
coastal economic center. I don't care about how much the tuition-only part of
my degree costs, I care about the _total_ cost of going to college, which
includes unresellable textbooks, mandatory housing, mandatory meal plans, and
student fees that fund a new stadium. I don't care about how much an analog
land-line phone costs (About 29 bucks, lasts you for life), because everyone I
interact with expects me to have a $300 cellphone that breaks every 4 years.

But if you only look at a basket of goods which is based on the cost of an
X-ray, a bottle of aspirin, a monthly payment on a new car, rent for a house
on the outskirts of JoblessTown, Nowhere, the cost of a single credit-hour of
college, and the ammortized cost of an analog telephone, you get a _fantastic_
metric.

~~~
IanCal
> The basket of goods may include the price of gasoline, but does not include
> the cost of car insurance

Seems like CPI in the US does include motor vehicle insurance though.

> but does not the cost of buying a health insurance

It does according to the business insider article.

Seems to include wireless telephone services and telephone hardware so I'd be
surprised if that doesn't cover a mobile.

Where are you using for your list of the basket of goods?

[https://www.businessinsider.com/breakdown-of-consumer-
price-...](https://www.businessinsider.com/breakdown-of-consumer-price-index-
basket-2014-1?r=US&IR=T)

~~~
Rury
There's many things CPI doesn't factor. For example house prices:

[https://www.thebalance.com/consumer-price-index-cpi-index-
de...](https://www.thebalance.com/consumer-price-index-cpi-index-definition-
and-calculation-3305735)

"Note that the CPI does not include sales price of homes. Instead, it
calculates the monthly equivalent of owning a home, which it derives from
rents. That's misleading. Rental prices are likely to drop when there is a
high vacancy rate. It occurs when interest rates are low and housing prices
are rising. People are more likely to buy houses when the market is improving.
Conversely, home prices fall when interest rates rise. As the housing market
deteriorates, people move into apartments. That makes rents increase."

Anyhow, the point is that CPI is largely cherry picked data, and the way it
factors things can be misleading. I wouldn't be surprised that it doesn't
accurately measure people being priced out certain assets entirely.

------
esoterica
This twitter thread is complete garbage. The headline statistic is cherry
picked to include the categories that have outpaced inflation the most. They
also double count health insurance, which for most full time employees is a
benefit they receive on top of their salary.

Contrary to what rose twitter tells you, real individual compensation has
increased over the past few decades, not decreased (albeit perhaps not by as
much as it should have, and a lot of the increase has been diverted to surging
healthcare costs).

------
mc32
Thank you globalization! Ross Perot was right. The Dems and Repubs both took
Corp money and left the workers behind. Cesar Chavez knee this too. No one
listened. And now we wonder how it happened.

It’s no wonder. The pols, the Koches and many other industrialists sold us all
out.

On the other hand we can afford heaps of cheap junk that doesn’t last longer
than it takes to ship it over cargo ship.

~~~
MuffinFlavored
> The Dems and Repubs both took Corp money and left the workers behind

I get that the statistics show billionaires owning the majority of the wealth
while the common-person in America makes $30k/yr but... there are plenty of
Americans doing a-ok too. Who is really to blame?

Take a trip down to South Florida. You'll see a lot of Bentley, Rolls-Royce,
Lamborghini, Ferrari. Lots of high fashion and packed restaurants. Workers are
getting left behind, sure. But some workers are making it too.

Especially those on HackerNews in IT who are fiscally savvy, packing away six-
figure salaries responsibly.

~~~
eli_gottlieb
How many homeless people are you stepping over to see those Ferraris?

~~~
thrower123
Outside of California, rich people keep their homeless swept out of sight, for
the most part.

~~~
eli_gottlieb
I see them plenty in Boston.

------
iamsb
I am not an expert on American car market by any stretch, but I was interested
to dig more into the claim about car prices of a certain. So I thought I will
ignore that specific car brand (grand caravan) and see what data comes up in
cars.com.

After few searches - to me it seems like SUVs have over taken as a preferred
choice and minivans have simply lost appeal. On cars.com for 90001 postcode
there are close to 20,000 options for SUVs compared to only about 700 for
minivan. And there are lot of SUVs available for less than 15K, where as the
grand caravan is from 20K onwards.

Essentially, I suspect market is working well in keeping cost of the cars
actually getting sold low and minivans are expensive as choices are limited.

Macro economics is hard. Author will get lot of different perception if they
compared long distance phone calls in 1980s compared to today for example.

------
awb
> But, if you're a family that needs to buy a minivan, while it's nice that
> the 2018 Grand Caravan ($26,300 in 2018) has many features the 1996 Grand
> Caravan ($17,900 in 1996) did not, you still face the problem that you need
> an extra $8,500 to buy one.

> A key assumption of our inflation-adjusted analyses is that old products are
> still available. Don't like / can't afford the $26K 2018 Grand Caravan, go
> buy the $18K 1996 one instead. Except you can't.

But you can.

Tons of used cars available within 50 miles of SF for under $15k
([https://www.cars.com/for-
sale/searchresults.action/?prMx=150...](https://www.cars.com/for-
sale/searchresults.action/?prMx=15000&rd=50&searchSource=QUICK_FORM&stkTypId=28881&zc=94110))
including a 2018 Dodge Caravan for $13,999.

There are certainly good points in the thread, but this isn't one of them.

~~~
entee
Right but there were tons of used cars in 1996 too that were available at a
similar discount. The tweets are incomplete in that they fail to fully explain
how CPI adjusts internally for quality improvement, but if we buy that (I
think it’s reasonable) then cars, new and used, would be relatively more
expensive today than in 1996

~~~
awb
But a used 2018 minivan is a lot better than a new 1996 minivan and costs less
even without adjusting for inflation. So, I can get a better car for less
money today than I could in 1996.

I think the issue might be status. Driving a brand new minivan in 1996 might
have felt like you were getting ahead in life. Driving a used minivan today
might feel like you're falling behind just because other newer and more
expensive cars carry much more status.

~~~
everdrive
Absolutely -- in fact, I think including cars in this discussion is a massive
red herring because car reliability and choice have improved so much. Yes, the
Caravan may be more expensive, but for sure there are much cheaper and more
reliable non-Caravan options out there.

~~~
defterGoose
| car reliability and choice have improved so much

Citation needed. I've worked on my cars a lot and this is not borne out by my
experience.

Edit: I feel we can leave EVs out of this discussion until they're in at least
50% of households' driveways.

~~~
everdrive
Fair to leave EVs out.

I probably wasn't specific enough, either. When I was a kid in the early 90s,
a car making it to 100k was still considered a (possibly then outdated)
achievement, whereas in the last 15 years, a car making it gracefully to 100k
miles is simply expected.

\- It's possible that I'm old enough such that this point no longer seems
novel.

\- I'll also concede that despite this, there are plenty of cars which aren't
reliable which people buy. If I'd clarified better, I might have said that
even if there are plenty of unreliable cars these days, consumers have a large
pool of reliable cars to choose from.

Cost, I hope is more self-evident. Consumers today have a absolutely amazing
choice of quality, reliable cars (Fiesta, Fit, Versa, Yaris, Rio, Accent, etc)
in the range of $15k.

\- A fair counterpoint would be that the median price of cars is actually
quite high: ~$30k.

\- Like before, I should have been more specific said that consumers have
really great low-cost options, rather than that "cars are [broadly] cheap
these days.

~~~
defterGoose
Yeah, there are definitely more entry level models now, but I feel like that
hasn't really brought prices down that much taking inflation into account.

Another issue not mentioned is that new cars have grown in complexity
(electronics) immensely and have therefore become less easy for one to repair
and less reliable at the same time.

Anecdotally, a friend of mine had an early '10s Fiesta that was a total lemon
(transmission issues were widespread with these).

------
RickJWagner
I wonder how much that 1985 worker paid for smart phones, cable or streaming
tv, and modern entertainment.

I think today's standard of living is simply higher. You could live on 1985
wages, but your family wouldn't be happy.

~~~
flukus
But that's the problem, we have more stuff but lower quality of life. And even
if you sacrifice the stuff you can't live on 1985 wages.

I'd gladly sacrifice a smart phone and streaming TV to live in a large house
with 3 kids on a single working class income like my father did, but the $200
phone and and $10 netflix wouldn't even cover a weeks rent.

~~~
RickJWagner
Hey, it can be done. I'm living in a fairly big house now, with 3 kids and a
stay-at-home wife.

I live in the central US, and work remote. (The company pays fair wages for
the northeast, which translates well to my locale.)

I know not everybody can be so lucky, but I wanted to mention it can still be
done.

------
maerF0x0
I used to say something to this effect about homelessness. That part of why we
have a housing shortage and other countries do not is because we have made
certain types of housing illegal and thus made the "bottom end" housing too
expensive for some.

Things like shanty towns etc.

Now, I'm not advocating for a society that houses people in shanty towns as an
end goal. But I am advocating that shantytown might be an upgrade for some and
we need to help people upgrade.

~~~
bronipstid
Large portions of the US populations arguably already live in shantytowns; run
down inner cities inhabited by great migration blacks, sprawling exurbs in the
south and south west inhabited by recent hispanic immigrants, many illegal,
and trailer parks in the rust belt where white factory workers layed off by
globalization are dying from opioids.

Its only in a few well insulated big cities that the true effects of
globalization are kept far enough away to not be immediately obvious.

~~~
maerF0x0
I agree that many live in sub-average and sub-human living standards.

What I'm trying to point out is that some home might be an upgrade from _no
home_

------
bfieidhbrjr
Well done:

[https://twitter.com/oren_cass/status/1230505794686373888](https://twitter.com/oren_cass/status/1230505794686373888)

The guy identified the 4 big government backed monopolies, all with government
backed debt, which all now eat a majority of income.

We've known since 1776 that the way prices come down is competition. You
should know that it's illegal to open a hospital or college without government
permission. It's illegal to build a building. It's so bad that in order to
open a hospital in most states, any nearby hospital can protest you license
application merely for being close to another hospital. Who in their right
mind would give an 18 year old $100k for college? Nobody. That's why the
government backs it and you can't default on it. Who backs your mortgage? The
government. It goes on and on and on.

There is no mystery here AT ALL if you studied economics. The answer is very
simple, allow competition.

Now to lay back and drown in the downvotes :-)

~~~
lidHanteyk
I don't see why you should get downvotes. You should get schooled instead.

For starters, you don't mean 1776. You mean one of the years from 1787-1789
when the Constitution was written and first used to instantiate our Federal
Government. You certainly don't mean 1776 because the attempt to create the
government in that year, the Articles of Confederation, was not at all the
current government, and it barely lasted a decade, depending on how one
measures it.

Opening a hospital, or any kind of medical practice, is generally regulated.
In particular, regulation is done by a dedicated guild of medical
professionals. Similar regulation covers legal advice, with bar associations
qualifying legal advisors. In both cases, there is a monopoly on service
providers. Two observations are important here. First, despite the monopoly,
alternative service providers exist in the marketplace; quacks, fly-by-night
veterinarians, alternative medicines, homebrew pharmacology, WebMD, etc.; or
for law, anything from a smart friend to r/legaladvice. Second, only one of
these practices seems to have had a cost disease. Perhaps the cost disease is
due to something else! In particular, perhaps it is due to the 1973 HMO Act.
You are right to be irritated at the government, but wrong to focus your ire
entirely there. HMOs are to blame, too; in fact, they are mostly to blame.

Exercise for you: Rerun the previous paragraph's logic with mail and USPS, and
double-check that it still holds.

I don't know where you live, but around where I live, it's legal to build a
building, but not inside city limits or on protected wetlands. If you have
title to the dirt below, then you can build things above. You might want to
consult with local authorities depending on exactly what you're building, but
you can generally build it. (Go ahead, I _dare_ you to rattle off all the
things that can't be built.)

Just like how banks can and do compete with Freddie and Fannie for securing
loans to homeowners, there are plenty of private sources for student loans.
Perhaps it is predatory cruel for the government to issue student loans;
perhaps student loans are predatory and cruel in general, like payday loans or
title loans, in which case we should outlaw them entirely.

It sounds like you might have studied economics. In that case, surely you
don't believe in the Efficient Market Hypothesis? Markets are clearly
inefficient and there's good theoretical reasons to believe that it takes
exponential time for an honestly-run market to find even one Nash equilibrium.

Finally, who cares about economics? You ought to study _history_. In
particular, remember Enron? [0] This is the sort of thing that makes your
position look like that of a stupid libertarian standing in the water with his
waders and wondering why there's no fish in the river for him.

[0]
[https://en.wikipedia.org/wiki/California_electricity_crisis](https://en.wikipedia.org/wiki/California_electricity_crisis)

~~~
bfieidhbrjr
The wealth of nations was published in 1776. Maybe I'm not the one that needs
to study history.

~~~
lidHanteyk
Ah, you're one of _those_ fools. When you're finished with history, try
complexity theory [0].

[0] [https://arxiv.org/abs/1002.2284](https://arxiv.org/abs/1002.2284)

------
ryanyde
The original article (posted below) hits the nail on the head: regardless of
'inflation' or 'quality increases', a single breadwinner (assumed male in this
case) can't support basic parts of the 'American Dream'.

They could in 1985, with some money to spare.

That's a HUGE difference in social structure and the 'feeling' of society.

A part of the socialist mindset is the idea that people in fact _should_ be
able to live in an economic system and afford the things that everyone wants.
Socialism doesn't deliver that exactly (see Spain, Greece, France, etc.)
without huge amounts of natural resources, but it's similarly clear capitalism
has driven out most people's abilities to do that too in the past 30 years.

Thus the impasse (political and economic) the US finds itself in right now.

------
bmmayer1
OK...that's one side of the story. But is cost of living really being compared
fairly? One $200 smart phone now does the job that in 1985 required a clock
radio, a walkman, a CD player, a word processor, a printer, a fax machine, a
telephone, a calculator, an address book and a voice recorder. How does this
account for the multiplicative effect of technology on purchasing power?

~~~
eropple
And most people didn't have a word processor, a CD player, a printer, a fax
machine, or a voice recorder. Which--and this might be shocking!-- _was by and
large fine_ , as life had not been adapted to their presence.

"But society has stuck you with all this extra shit!" is not a good, moral, or
_acceptable_ response to "I am less able to pay my bills."

~~~
DiffEq
A large reason why wages have essentially "stagnated" is because the workforce
has doubled with the advent of women entering the workforce. Laws of Supply
and Demand say that wages should go down...it is to be expected. This is why
for many a two income household is now necessary for a family these days.

~~~
dane-pgp
Unfortunately it's more complicated than that:

[https://ourworldindata.org/uploads/2017/08/Labor-Force-
Parti...](https://ourworldindata.org/uploads/2017/08/Labor-Force-
Participation-of-women-in-the-US-1955-2005.png)

While the employment rate for "Married women, spouse present" doubled from
1955 to 1990 (which may be what you're referring to), the rate for "All women"
between 1985 and 2005 went from 55% to 60% (and falling).

~~~
DiffEq
Yes I was referring to that statistic; but I think it it more representative
of the cause of wage stagnation. We had a flood of people come into the
workforce in a few decades that were not there previously. Although the
statistic that you provided is interesting...I think maybe we should not be
looking at ALL women? I say this because many women may be in school still or
retired and don't want/need to work.

------
aussiegreenie
I hate the current method used to calculate the CPI.

I am boring I prefer to use oz of gold. Yes, gold is very volatile but the US
dollar is very volatile.

Gold 1985 USD 327 per oz, therefore, the car is $17,900/ 327 = 54.74 AU oz

Gold 2018 = $1320 per oz

Car $26,300 , therefore, car = $26,900/1320 = AU 20.37 oz

The car is dropped by 2/3 in terms of gold.

~~~
vanusa
That's neat but people don't get paid dollars, not gold.

------
dvt
> 5/ Fair enough. But, if you're a family that needs to buy a minivan, while
> it's nice that the 2018 Grand Caravan ($26,300 in 2018) has many features
> the 1996 Grand Caravan ($17,900 in 1996) did not, you still face the problem
> that you need an extra $8,500 to buy one.

$17,900.00 in 1996 is $28,647.64 in 2018. Doesn't take a genius to double-
check this work. It's factually untrue that the Grand Caravan went up in price
when adjusted for inflation. The rest would take a while to verify (graphs
have no source citations).

~~~
rm999
>It's factually untrue that the Grand Caravan went up in price when adjusted
for inflation.

He explicitly says that right before? "4/ For example, our inflation-adjusted
data say car prices have not increased since the mid-1990s."

I believe his argument is more around how we're calculating inflation, i.e.
that prices have actually gone up more than economists claim through
inflation. Looking at inflation adjusted numbers in the fifth thread would
lead to circular reasoning and is besides his point. That said I am not great
at dissecting these kinds of twitter threads and may be misinterpreting too; I
agree that the way he is arguing it is confusing.

~~~
dvt
Inflation is calculated via the Current Consumer Price collected by the Bureau
of Labor Statistics. if he has a problem with the methodology they use, he
should talk about that, but as far as (4) is concerned:

> 4/ For example, our inflation-adjusted data say car prices have not
> increased since the mid-1990s. Obviously, that's not remotely true. What
> economists are saying is that cars have gotten better so the higher sticker
> price doesn't reflect inflation, it reflects higher quality.

Wait, what's not remotely true? That inflation also affects car prices? Is he
being serious here? At the very least, can we agree that prices are
_comparable_?

~~~
o_nate
Actually it's the BLS that says inflation has not affected car prices. And,
yes, he is questioning their methodology.

~~~
NovemberWhiskey
Well, it's interesting.

If you wanted to buy a BMW with 250hp in 1996 that would run 0-60 in about
5.5s and seat four adults, you were going to be buying an M3 for about
$40,000.

If you want to do the same thing in 2020, you're going to buy a 330i for
almost the exact same money only with a bunch more safety tech, 50% better
fuel economy, more luggage space, more passenger space ...

------
soapboxrocket
I would like to see the impact of the dollar in terms of the environment in
2020 vs 1985. I hope that the impact of my dollar is less, and I bet most
people today are willing to pay more for a smaller environmental impact.

------
ecoled_ame
I think if there were less people there would be more resources to go around.

~~~
theandrewbailey
Resource creation requires work, and technology increases the rate that
resources can be created. More people means more available work and better
technology. We aren't at the point where less people means more resources.

~~~
ecoled_ame
I don’t really believe that; it’s also weird how many people argue in favor of
a larger population. And anyhow the resources I want most are space, peace,
and silence - all of which increase with a smaller population.

~~~
AnimalMuppet
"I don't really believe that" is a pretty weak response to a post that had at
least some logical argument in it.

> the resources I want most are space, peace, and silence - all of which
> increase with a smaller population.

Sure, it was great when you could just find a place you like, break out your
axe, build yourself a cabin, and just live there. You still needed an axe,
though. Even if you were a blacksmith, the iron came from someone else -
several someone elses, in fact.

But that's not enough these days. Now you want a solar-powered cabin.
Producing those solar panels takes people. And you want to not die in your
cabin unnecessarily, so on occasion you need people like a good cardiologist.

Many of us want space, peace, and silence. We just don't want to live in the
kind of world where we could get it, because we _also_ want chunks of modern
civilization available on demand.

~~~
ecoled_ame
a cardiologist brings little resource to my life if i can’t bring him in on a
100 mile horse drawn carriage ride to my estate before dawn to treat me before
i get ready to teleport to my underground laboratory in new michigan for work
in the morning.

------
rayiner
The title isn't supported by the underlying data. The key chart in the Tweet
thread is this:
[https://twitter.com/oren_cass/status/1230505794686373888/pho...](https://twitter.com/oren_cass/status/1230505794686373888/photo/1)

This looks at "major household expenditures" versus "median male income."
Right off the bat, that should be a red flag--why are we looking at just male
income? The percentage of women working since 1985 has only increased a little
bit. But women's wages have gone up 50% adjusted for inflation.

Of course, when women have been bringing more money into the family, people
will spend more. For example, the chart shows expenditure on housing
increasing. But the average American house today has twice as much square
footage per person than in 1985: [https://azgolfhomes.com/wp-
content/uploads/2016/07/American-...](https://azgolfhomes.com/wp-
content/uploads/2016/07/American-Enterprise-Institute-Housing-Data.jpg).
Expenditures on housing are increasing--but the number of vehicles per
household has also gone up since 1985. The cost of college has gone up, but
the percentage of people attending college has also doubled in that time
frame. Colleges, moreover, are far more luxurious than in 1985. (The community
college where my mother in law works now has far nicer facilities than Georgia
Tech did when I attended just 15 years ago.) College itself has become
something of a luxury consumption good--with large numbers of young people
attending, drinking and having fun for four years, but getting degrees of
questionable utility.

There are a lot of sound bites (and Twitter-level analysis) on this subject,
but it's actually extremely hard to figure out how to precisely measure
changes in standard of living over time. For example, even just looking at the
"median" is misleading. In 1990, when I came to America, the percentage of
foreign-born people was 7%. Today it's double that. Even in an economy that
provides tremendous upwards mobility for immigrants, doubling the share of the
immigrant population is going to make the median income seem lower. The median
household is also much smaller than in 1985, and less likely to be comprised
of married couples. Since 1985, the percentage of people 18-34 living with a
spouse has decreased by 2/3\. (That observation is particularly significant
because the percentage of women participating in the workforce hasn't changed
significantly since then.)

Accounting for these differences is important. When people think of the
"median" they think they're comparing like with like. "Two-income middle class
American-born family with two kids in 1985 versus 2015." They don't think
you're comparing a married young couple from 1985, where both spouses work and
share household expenses, to unmarried individuals maintaining two separate
households in 2015. But unless you account for changing demographics, that's
exactly what you're doing.

~~~
clairity
> "But the average American house today has twice as much square footage per
> person than in 1985... Expenditures on housing are increasing--but the
> number of vehicles per household has also gone up since 1985. The cost of
> college has gone up, but the percentage of people attending college has also
> doubled in that time frame. Colleges, moreover, are far more luxurious than
> in 1985."

> "...it's actually extremely hard to figure out how to precisely measure
> changes in standard of living over time."

indeed, those kinds of increases are of "questionable utility", and thus not
relevant to the standard of living discussion.

rather than the fed's definition of inflation, it's important to look at the
basket of essential goods (and more house and more cars ain't it) when we
consider the economic tide for the majority of americans.

~~~
rayiner
It's highly relevant to the author's specific methodology. The author is _not_
"look[ing] at the basket of essential goods" and comparing their cost over
time. He's comparing household expenses to a single man's earnings over time.
That overlooks that, as women's earning power increases, couples might choose
to spend that money on more housing, more cars, etc.

I grew up in an 1,100 square foot house with 1 car. My mom was a stay-at-home
wife and my family could afford to live on just my dad's income. My wife and
I, by contrast, earn about the same amount. But we can't afford to live on
just my income. We have chosen to spend my wife's income to increase our
standard of living. So we have a 3,000 square foot house and 3 cars. Under the
author's methodology, my earning power has gone backward compared to my dad.
But his analysis completely misinterprets the situation.

~~~
clairity
i'll just point to the last paragraph of the introductory section of the
author's (oren cass's) companion article[0]:

> "In 1985, the COTI stood at 30—the median male worker needed thirty weeks of
> income to afford a house, a car, health care, and education. By 2018, the
> COTI had increased to 53—a full-time job was insufficient to afford these
> items, let alone the others that a family needs. A generation ago, the
> worker could be confident in his ability to provide his family not only with
> the basics of food, clothing, and shelter, but also with the middle-class
> essentials of a house, a car, health care, and education. Now he cannot.
> Public programs may provide those things for him, a second earner may work
> as well, or his family may do without, while his television may be larger
> than ever. The implications of each are surely worth pondering. But the fact
> that he can no longer provide middle-class security to a family is an
> unavoidable economic reality of the modern era."

what i called "basket of essential goods" is his COTI (cost of thriving
index). more housing and more cars are exactly beside the point. he's making
an argument about what it takes to be secure and solidly middle class in the
US, not about having more stuff, which is beyond the "thriving point".

and he also encompasses your point that the average american (male) can no
longer reach that "thriving point", because the average american (male) would
need more than a year's wages in a year. but he's not actually talking about
you, an upper- (or possibly upper-middle-) income earner, but rather the
solidly middle class american (male).

[0] [https://americanaffairsjournal.org/2020/02/the-cost-of-
thriv...](https://americanaffairsjournal.org/2020/02/the-cost-of-thriving/)

~~~
rayiner
The author isn’t using a basket of goods approach because he’s not even
attempting to keep the basket the same. The author isn’t looking at what it
costs to “provide middle class security” he is looking at what people actually
spend.

------
eanzenberg
That's great, welcome to 1980 healthcare efficacy and college built to train
for 1980 careers. Enjoy!

------
dcolkitt
> In 1985, the typical male worker could cover a family of four's major
> expenditures (housing, health care, transportation, education) on 30 weeks
> of salary. By 2018 it took 53 weeks.

The author has clearly never heard of Baumol's cost disease. The primary
reason that households now expend more on housing, healthcare and education is
because they expend a significantly smaller fraction of their income on food,
electronics, entertainment, energy, clothes, appliances, telephone service,
automobiles, and furniture. All of which have seen strong deflationary
pressures.

Households ultimately need to expend their wages on some category. As the cost
of certain goods fall relative to incomes, most consumers will allocate more
of their expenditures on the goods that fell at slower rates. For example the
average Nigerian or Indian spends a much lower percent of their wages on
education or healthcare viz-a-viz the average Swiss or Singaporean. Only a
fool would conclude that Switzerland's wealth has made it "fall backwards"
relative to Nigeria. Instead the explanation is much simpler: the Swiss can
feed and cloth themselves using a small fraction of their income. That leaves
more left over to spend on comparative luxuries like better medical care and
longer educations.

This dovetails into the second fundamental flaw with the author's analysis.
He's simply comparing the total expenditures on
housing/healthcare/education/transport between 2020 and 1985. That's making
the implicit assumption that people in 1985 were consuming the same basket of
these goods as people in 2020. He explicitly eschews measures of inflation,
because inflation reveals the fact that the items themselves have not seen
price increase. Expenditures rose because households are using their higher
incomes (including more two income families) to buy _more_ of these goods with
more premium qualities.

For example one major reason housing expenditures have gone up is because the
average home is 50% larger than it was in 1985[0]. Another reason is because
of major quality improvements like central AC, attached garages, higher
ceilings, better fire safety, higher capacity electrical circuits, and
swimming pools. Adjusted for CPI, the median cost per square foot for housing
only rose by 5% between 1990 and 2010[1] (which doesn't even adjust for
significantly lower mortgage rates).

Similarly expenditures on transportation has gone up because compared to 1985,
Americans travel 25% more miles per capita, and have 20% more vehicles per
capita[2]. Automobile fatality rates were nearly 200% higher in 1985[3]. And I
don't think I even need to tell you how much more reliable and comfortable
cars are today than in the 1980s.

Healthcare and education probably have shown more true cost disease. However
without a doubt Americans have also seen significant increases in their
consumption levels. College enrollment rates have increased by more than 100%
since 1985. Healthcare consumption has soared over the same period, not least
because the country is significantly older and more obese, both of which
require many more medical interventions. Compared to 1985, 100% higher
proportion of the population works in the healthcare sector.

All of which goes to show that the author is plain wrong about his
conclusions. The trends he shows are easily explainable by the fact that real
household incomes have grown significantly since 1985 (not least because many
women entered the full-time workforce). It now takes a significantly smaller
percent of household incomes to satisfy basic needs with regards to food,
apparel, utilities, appliances and furniture. So people have much more money
left over to spend on comparative luxuries like bigger homes, safer and more
reliable cars for both adults in the household, more medical treatment with
advanced techniques, more home healthcare, and longer post-secondary
educations. That's not a story of American households struggling, that's a
story of the incredible consumer growth.

[0] [https://www.propertyshark.com/Real-Estate-
Reports/2016/09/08...](https://www.propertyshark.com/Real-Estate-
Reports/2016/09/08/the-growth-of-urban-american-homes-in-the-last-100-years/)
[1]
[https://www.census.gov/const/C25Ann/soldmedavgppsf.pdf](https://www.census.gov/const/C25Ann/soldmedavgppsf.pdf)
[2] [https://www.ssti.us/2014/02/vmt-drops-ninth-year-dots-
taking...](https://www.ssti.us/2014/02/vmt-drops-ninth-year-dots-taking-
notice/) [3]
[https://en.wikipedia.org/wiki/Motor_vehicle_fatality_rate_in...](https://en.wikipedia.org/wiki/Motor_vehicle_fatality_rate_in_U.S._by_year)
[4] [https://www.statista.com/statistics/183995/us-college-
enroll...](https://www.statista.com/statistics/183995/us-college-enrollment-
and-projections-in-public-and-private-institutions/) [5]
[https://randomcriticalanalysis.com/why-conventional-
wisdom-o...](https://randomcriticalanalysis.com/why-conventional-wisdom-on-
health-care-is-wrong-a-primer/)

~~~
jdmichal
I can get behind your theory. But I don't know how well it holds for housing,
because of the technique described in the longer article posted in another
thread. [0] Specifically, housing is 40% fair market rent on a three-bedroom
apartment. So while it's certainly possible that the things you talk about
housing are true for apartments, it's a different argument to make. Certainly
at least some of the things you discuss are applicable, like central AC. Some
others, like size, are probably less applicable.

> Adjusted for CPI, the median cost per square foot for housing only rose by
> 5% between 1990 and 2010

Minor nit, but it seems like poor form to take someone who's arguing against
CPI, and then to use CPI-adjusted numbers in a counter-argument.

[0]
[https://news.ycombinator.com/item?id=22378311](https://news.ycombinator.com/item?id=22378311)

~~~
dcolkitt
> Minor nit, but it seems like poor form to take someone who's arguing against
> CPI, and then to use CPI-adjusted numbers in a counter-argument.

That's fair enough. But let's use the author's preferred denomination of
nominal median household income. From 1985 to 2018 this number rose 21% faster
than CPI.[1] Given this it means the median cost per square foot _fell_ by 15%
over the period.

> Specifically, housing is 40% fair market rent on a three-bedroom apartment.

Thanks for linking that. That article found a 172% increase in nominal terms
for its "typical example" of a 3 bedroom apartment in Raleigh, NC.

In nominal terms, median real household incomes at a national level rose by
196%[1]. Data for Raleigh specifically doesn't go back to 1985. But since
2006, Raleigh incomes have risen 0.5% faster than the national average.[2]
Therefore using the author's preferred metric rental housing has actually
become 8-19% _more_ affordable.

Finally focusing on rent ignores the fact that 65% of American households are
owner-occupied. Over the same period the cost of rent has risen substantially
faster than the cost of ownership, not least because mortgage rates fell 12.5%
to 4.5%[3]. If you take a weighted average of renters and owners, you'll find
housing costs grew at substantially slower rates than simply picking a single
metro's rental costs over time.

[1]
[https://fred.stlouisfed.org/series/MEHOINUSA672N](https://fred.stlouisfed.org/series/MEHOINUSA672N)
[2] [https://www.deptofnumbers.com/income/north-
carolina/raleigh/](https://www.deptofnumbers.com/income/north-
carolina/raleigh/) [3] [https://www.valuepenguin.com/mortgages/historical-
mortgage-r...](https://www.valuepenguin.com/mortgages/historical-mortgage-
rates)

------
vorpalhex
Talk about burying the lede. TLDR, the amount of time you have to work in
order to buy some things, such as a car or some kinds of medical care, is
greater now.

In 1985, if you crashed your minivan going 50 mph, you were probably dead. You
probably also killed whoever you hit.

Yesterday, I was witness to an accident where a car going 50 mph t-boned a car
and went through a fence. Both drivers were walking around and exchanging
information after a few minutes.

Some things have gone the opposite way. A basic computer was quite expensive
in 1985 and took quite some time of diligent saving to afford if at all
possible. Today, you can get a basic mediocre laptop for less than a weeks
wages for low income earners.

Yes, cars are just absolutely more expensive today, as is medical care. That's
not some great economics argument, it's just how technology works.

~~~
einr
_A basic computer was quite expensive in 1985 and took quite some time of
diligent saving to afford if at all possible._

A C64 was $149 in 1985.

~~~
NovemberWhiskey
>A C64 was $149 in 1985

And a 13" color monitor was $200, and the 1541 floppy disk drive was another
$160.

Even if you just bought the Commodore cassette deck and connected the computer
up to your existing television, you were looking at $200 for a usable
configuration.

Walmart will sell you a Lenovo Ideapad 130s (laptop with a 14" LCD, dual-core
Celeron, 4GB RAM and 64GB solid-state storage) for $189.

~~~
einr
_Even if you just bought the Commodore cassette deck and connected the
computer up to your existing television, you were looking at $200 for a usable
configuration._

Yes, that would be a _basic_ configuration. Disk drives and color monitors are
luxuries if we're talking about the lowest of low end here. In fact, the C64
is a bad example because it was not the cheapest system available, and many
other low-end systems allowed you to use the standard cassette deck you
already had as storage.

The point is: Yes, you're right, a basic computer is _cheaper_ today, but the
price is roughly comparable and not anywhere near the realm of "unattainable
except through years of saving up".

------
aaronschroeder
How much of this is due to the growth in labor force in general and the
prevalence of dual income families. See:
[https://www.dol.gov/agencies/wb/data/facts-over-
time/women-i...](https://www.dol.gov/agencies/wb/data/facts-over-time/women-
in-the-labor-force#civilian-labor-force-by-sex).

If you go further back (50s - 60s), it was very common for a household to
survive on a single income. Even 30-40 years ago when I grew up, our family of
6 lived off a single income from a non-college graduate.

That's very hard to do now, except for certain fields like tech.

~~~
duderific
That's pretty much the exact premise of the OP. Specifically, the growth in
labor force/prevalence of dual income families was driven by the increase in
costs, not the other way around.

