Yea the article is drawing some bad conclusions IMO. GenZ is even worse of than Millenials in many ways, and it mostly boils down to suppressed definitions of what inflation is. My parents thought...
Exemplary
Yea the article is drawing some bad conclusions IMO. GenZ is even worse of than Millenials in many ways, and it mostly boils down to suppressed definitions of what inflation is. My parents thought it was astounding how I was making $60k well before they did age-for-age 15ish years ago...and it was, if you use the levels of CPI reporting that they were hearing about when I was earning that. But if we revert back to the inflation metrics that were used when they were my age at the time in the late 70s, it tells a very different tale.
And from my vantage point, the Shadowstats 1980 CPI more accurately reflects what I see anecdotally in my life.... that inflation across the board was closer to 10% than 2% when factoring all of my expenses during the "extended period of < 5% inflation."
We only have 2% inflation because we changed the definition of what inflation is. The public comment sums it up nicely:
Consumer Price Index Has Been Reconfigured Since Early-1980s
So As to Understate Inflation versus Common Experience
CPI no longer measures the cost of maintaining a constant standard of living.
CPI no longer measures full inflation for out-of-pocket expenditures.
With the misused cover of academic theory, politicians forced significant underreporting of official inflation, so as to cut annual cost-of-living adjustments to Social Security, etc.
Politicians look to expand further the concept of artificially-suppressed cost-of-living adjustments in current budget-deficit negotiations, through the use of the Chained-CPI (see Special C-CPI Supplement at end of this document).
Use of the CPI to adjust retirement benefits, private income or to set investment goals impairs the ability of retirees, income earners and investors to stay ahead of inflation.
Understated inflation used in estimating inflation-adjusted growth has created the illusion of recovery in reported GDP.
And I know this to be true, because using the official purchase power calculator to choose goods with the price I paid then and the price I pay now for equivalent sizes, there's a huge disparity:
Reeses, a standard 2-pack: $1 in 2000, CPI for $1 buying power is $1.83, price today is $2.15. Which comes out to about 4.7 cents increase per year, opposed to 3.4 cents that the "official inflation" shows. It doesn't seem like much, but 1.3% extra inflation on a random food item represents an annual decrease in standard of living if my annual cost of living raise only matches that 3.4% instead of the needed 4.7%. And during that long "2% inflation period" my employer was only giving 2%...which they also only gave during that 10% time but that's a separate issue.
Not to discount what you're saying. But CPI, and any sector specific CPI is going to be based on averages. When you compare against specific items there will be some that increased higher than CPI...
Reeses, a standard 2-pack: $1 in 2000, CPI for $1 buying power is $1.83, price today is $2.15. Which comes out to about 4.7 cents increase per year, opposed to 3.4 cents that the "official inflation" shows.
Not to discount what you're saying. But CPI, and any sector specific CPI is going to be based on averages.
When you compare against specific items there will be some that increased higher than CPI (your Reeses example) and others that didn't.
I have followed Shadowstats for, I think, decades. It makes excellent points about the official governmental calculations of inflation. Practically every Administration (both Parties) has taken...
I have followed Shadowstats for, I think, decades.
It makes excellent points about the official governmental calculations of inflation. Practically every Administration (both Parties) has taken the opportunity to "redefine" inflation and/or the CPI, to make their Admin look better. Some product makes the calculated inflation too high? Just exclude it from the package, or replace it with something similar-but-cheaper.
However, Shadowstats itself also seems to have gradually become less accurate, and so, less relevant, over the years.
The truth is somewhere else (I hesitate to say "in between" because I think it's too complicated for simple, straight-line analysis).
It's really crazy that the real inflation number is 8% but banks are willing to loan money out at 7%. How generous of them. Shadowstats's graph is a little suspicious
It's really crazy that the real inflation number is 8% but banks are willing to loan money out at 7%. How generous of them.
From the one comment in that thread, a very nice criticism, though had to find an archive for the link: Why is shadowstats beloved by followers but scored by economists I don't think Shadowstats...
I don't think Shadowstats is great per-se, and I certainly wouldn't pay for it. Heck, my arbitrary example I edited in shows that Shadowstats, as an actual stat, isn't that accurate, but also shows that the official CPI methodology is also flawed in its core purpose, which I think the Shadowstats public statement does a good job of explaining.
I very much like the table this author showed, how Shadowstats greatly overestimates things based on the 'historical ads' method, but CPI underestimates things, as well as his conclusion:
In my view, Williams alternative measure of inflation would be more convincing if he were to make this correction [explained above]. It would also be less likely to feed the anti-government paranoia of some of his followers, who allege that the BLS is falsifies source data and manipulates reported indicators in the way that Argentina and some other countries appear to do.
It is worth noting that Williams himself makes no such claim. He is a fierce critic of BLS methodology, but he acknowledges that the agency follows its own published methods. He argues that the BLS has adopted methods that produce low inflation indicators, but not for motives of short-term partisan politics. Rather, he sees the choice of methodology as driven by a longstanding, bipartisan desire to reduce the cost of Social Security and other inflation-indexed transfer payments. It would be hard to deny that he is at least partly right about that motivation.
It's not really a loss, since they can loan out far more dollars than the dollars they have in the bank courtesy of very low reserve requirements. Every $1 they get from the Fed, they can loan out...
It's not really a loss, since they can loan out far more dollars than the dollars they have in the bank courtesy of very low reserve requirements. Every $1 they get from the Fed, they can loan out something like $5. Even if their interest rate was 0%, so long as 2/5 of the people paid back that $1 they'd be profitable.
Also, a key phrase from my post:
anecdotally in my life
I am aware that anecdotes != data. That all sorts of other factors come into play. But they also are not to be ignored, as sufficient anecdotes become data, if you know where to look. I doubt many people see a different story than this one, short of utter economic collapse of the town:
My first apartment was $300 a month, well over a decade ago, in a small, semi-rural town in PA. Utilities included. It was a 2-story rowhome split vertically into a 1BR and 2BR. I had the 1 BR, which was a bathroom and open space for a bed where a dining room used to be. No interior doors other than bathroom and had to walk through bedroom to get from living room to kitchen. Place was falling apart with black mold in the basement.
Today are worse apartments than that less than three blocks away going for $700+, with no utilities.
That's pretty damn close to 10% inflation for something I spent 40% of my income on.
Your arbitrary example does not show that the CPI methodology is flawed specifically because it is an arbitrary example. Measuring for inflation is an art (and there's multiple CPIs btw), but the...
Your arbitrary example does not show that the CPI methodology is flawed specifically because it is an arbitrary example. Measuring for inflation is an art (and there's multiple CPIs btw), but the gist is that we should try to figure out the change in price in a representative basket of goods. The basket of goods has to change over time because consumers will naturally change what they consume and the quantity of it. Maybe Reese's went up higher than inflation, but maybe the consumer went over to Snickers as a replacement. Or maybe they continued to buy Reese's, but Arizona Tea has stayed 99c this whole time so it counteracts that.
There's so many examples of things that have gotten cheaper in real terms that you can't cherrypick one thing that became more expensive and say that it shows that CPI > 2% or 3% or whatever %. It's too nuanced for that. I will just say that if the real inflation rate was 10% or 15%, we would not need to analyze numbers; you would feel that immediately and no one would doubt it and we'd be rioting in the streets right now.
But that 'transitive good' thing is exactly the criticized methodology. If everyone switches to snickers as a replacement, because it under-paced inflation, that's not because inflation was lower,...
But that 'transitive good' thing is exactly the criticized methodology.
If everyone switches to snickers as a replacement, because it under-paced inflation, that's not because inflation was lower, it's because the high inflation necessitated changing consumer behavior.
If inflation makes 2BR apartments unaffordable, and people switch to 1BR apartments, and we adjust the inflation metric to weight 2BR less and 1BR more, this has the primary affect of hiding the inflation of 2BR apartments and ignores the giant quality of life decrease moving from a 2BR to a 1BR.
Incidentally about the same QoL decrease as moving from Reeses to Snickers. :)
You are misunderstanding the example and the concepts I believe. Snickers did not under pace inflation in his example. Reeses out paced it and tried to turn a profit off of inflation, so consumers...
If everyone switches to snickers as a replacement, because it under-paced inflation, that's not because inflation was lower, it's because the high inflation necessitated changing consumer behavior.
You are misunderstanding the example and the concepts I believe.
Snickers did not under pace inflation in his example. Reeses out paced it and tried to turn a profit off of inflation, so consumers switched to snickers which is sticking close to inflation.
Almost y definition a company cannot survive if it's not keeping up with inflation. Every dollar they make is worth less, and so it's a flat rise on costs. It's a question of how much they adjust for it.
This is also affected by supply lines. Maybe the issue is that various parts of converting peanuts to peanut butter have seen a significant increase in cost, so reeses MUST go up higher, but shipping roasted peanuts is still cheap, so snickers can hold a lower cost.
The thing is, this feels backwards. We're trying to back-tick the decisions companies do to explain consumer behavior retroactively, because Hershey's and Mars both influenced CPI while...
Reeses out paced it and tried to turn a profit off of inflation
The thing is, this feels backwards. We're trying to back-tick the decisions companies do to explain consumer behavior retroactively, because Hershey's and Mars both influenced CPI while calculating "average candy bar" price or what have you.
This is more readily apparent in the adjustments to weights of more distinct but transitive things, like cuts of meat. We put less weight on beef steaks than we used to, and now more weight on ground beef. But the reason more people are buying ground beef isn't because they don't want steaks, it's because they can't afford them. So weighing the cost increases of steaks less and ground beef more "because consumers are buying more ground beef" is what causes this decoupling of CPI from actual-standard-of-living. Sure, ounce for ounce, I'm eating the same amount of meat as my great grandparents did...but I'm eating old color-sprayed 80% ground beef at $3.99/lb (on sale in a value pack) when they were buying fresh-sliced porterhouse steaks for $3.99/lb (wage inflation adjusted). And the current CPI methods go "yup this is fine, no need to adjust Social Security." If I bought steaks like they did, it'll cost me closer to $20/lb.
And that's really the biggest problem. Because things that are intimately tied to CPI, like Social Security payments, should have their adjustments according of equivalent standards of living, not perpetually chasing "whatever cheapest thing consumers are buying the most of because most people can't afford the thing they actually want."
You're right about that, but it comes down to did people's QoL decrease in order to meet a 2% inflation rate? Maybe? Hard to say. Housing became more expensive in some ways (higher prices) and...
You're right about that, but it comes down to did people's QoL decrease in order to meet a 2% inflation rate? Maybe? Hard to say. Housing became more expensive in some ways (higher prices) and cheaper in others (interest rates). Computers are way cheaper and more useful than they've ever been. Cars are safer for the same real dollars they've ever been. Maybe people didn't have to adjust their lifestyles downward to bear with increase in costs because other aspects of their lives became cheaper. I don't know. I just know that the chart you supplied feels wrong. If the inflation numbers in your chart were correct from 2003-2023, my parents would be homeless right now.
Are your parents eating the same quality of food that they did back then? Most everyone I know had to switch to lower-quality items or sacrifice elsewhere. Are they renting? Cause rent certainly...
Are your parents eating the same quality of food that they did back then? Most everyone I know had to switch to lower-quality items or sacrifice elsewhere.
Are they renting? Cause rent certainly seems to go up that much or more YoY. I mentioned elsewhere that circa 2009 my first apartement was $300/mo for a shithole. What I didn't mention is that they were increasing rent by $50/year, only ever decreasing when they started having huge vacancies.
Don't get me wrong: This data is hard to figure out tangibly. Probably would require another long-term wide survey study of 10,000+ people over the course of 20 years, but focusing on quality and quantity of goods alongside wages.
They probably eat better than they did 20 years ago. I remember having steak as a rarity growing up, but they seem to have it much more frequently now. They also buy from Costco for a lot of their...
They probably eat better than they did 20 years ago. I remember having steak as a rarity growing up, but they seem to have it much more frequently now. They also buy from Costco for a lot of their items now rather than buying from the ethnic grocery stores that have lower prices but less consistent goods.
I don't think the data doesn't exist. Inflation is studied hard in this country and every other developed country in the world. None of the ideas we spoke about are new and some great realization; it's just foreign to us who don't work with it every day.
That's not how banking works. Banks make money on the spread between their borrowing costs and their loans. The real inflation rate doesn't have any direct effect on that. What does matter,...
That's not how banking works. Banks make money on the spread between their borrowing costs and their loans. The real inflation rate doesn't have any direct effect on that.
What does matter, though, is that they make long-term fixed-interest loans. These are financial assets whose price is determined by interest rates. They lost a lot of money when interest rates went up, and some banks became insolvent.
It was a very simplified dig, but it's somewhat how banking works. The inflation rate is not necessarily the cost to borrow, but the inflation rate impacts how the Fed thinks about yield on bonds,...
It was a very simplified dig, but it's somewhat how banking works. The inflation rate is not necessarily the cost to borrow, but the inflation rate impacts how the Fed thinks about yield on bonds, which ends up affecting banks. The point is that if there's secretly shadow inflation of 15% instead of 5%, we should expect that mortgage loans end up being closer to 15% than 5%.
But if it’s a secret inflation rate then the Fed wouldn’t know about it, so why would they raise rates? :) More seriously, there does seem to be some relationship, but I need to think it through...
But if it’s a secret inflation rate then the Fed wouldn’t know about it, so why would they raise rates? :)
More seriously, there does seem to be some relationship, but I need to think it through more.
From an international perspective, making loans using a currency with a price that’s rapidly declining seems like a very risky deal, so I wouldn’t expect much of it. I see that Argentina has cut interest rates to 70%.
The data shared in the article seems suggestive, but it’s pretty limited. It’s about income, rather than wealth as the headline implies. Also, statistical averages don’t tell us anything about how...
The data shared in the article seems suggestive, but it’s pretty limited. It’s about income, rather than wealth as the headline implies. Also, statistical averages don’t tell us anything about how much income varies. There are going to be rich and poor people within a generation. (And what’s with the song lyrics?)
FT had some interesting data on net housing wealth differences between Millenials and Boomers. Top 10% Millenials are slightly lagging Boomers at same age but their median was essentially flat at...
FT had some interesting data on net housing wealth differences between Millenials and Boomers. Top 10% Millenials are slightly lagging Boomers at same age but their median was essentially flat at 0 through the entire graph. Wealth might be increasing but it's the very few that drive those averages.
What is with all these articles about how genZ is rich, depressed, unstable, worry free... Who writes these articles? We have 3 or so main articles on this on tildes, I hate generational...
What is with all these articles about how genZ is rich, depressed, unstable, worry free... Who writes these articles? We have 3 or so main articles on this on tildes, I hate generational stereotypes anyways
I really don't think this has been written by a PR firm. It's not completely coincidental that so many articles about gen z are posted at the same time, I saw one posted here and decided to post...
I really don't think this has been written by a PR firm. It's not completely coincidental that so many articles about gen z are posted at the same time, I saw one posted here and decided to post another that made a counter point that I thought would generate some interesting discussion.
Archive link: https://archive.is/s07Xr per The Economist: — Gen-Z will soon pass Boomers in the US workforce — Gen-Z has higher home ownership level than Millennials at similar age — Median...
per The Economist:
— Gen-Z will soon pass Boomers in the US workforce
— Gen-Z has higher home ownership level than Millennials at similar age
— Median household income at 25 is higher than Millennials or Boomers
The article also admits that house prices and other costs have not simply kept up with inflation, but way surpassed it. So even though they might be "richer" in terms of their bank account, that...
The article also admits that house prices and other costs have not simply kept up with inflation, but way surpassed it.
So even though they might be "richer" in terms of their bank account, that doesn't necessarily translate to higher purchasing power.
I'm honestly surprised that needs to be said, but ask your parents how much they bought their house for, look up what it'd be worth on the market today, and compare that to the inflation-adjusted price.
I recognise the data may say otherwise, however it's not clear if they take wealth inequality into account. Since that phrase isn't mentioned, I assume not.
I think they do adjust for inflation. That will at least partially account for differences between generations. But the world has changed in a lot of ways. Inherited wealth is likely different,...
I think they do adjust for inflation. That will at least partially account for differences between generations.
But the world has changed in a lot of ways. Inherited wealth is likely different, for example. How much help do people get from their parents? Has that changed?
How have the places where people live changed? People moving to expensive cities and competing for the same housing will likely raise both income (due to better jobs) and expenses. People taking advantage of remote work and moving to the country might lower expenses.
A common way to lower expenses when single is to share an apartment or house. Is that more or less common? How has the amount of living space people have changed compared to previous generations?
Increasing house prices is a natural consequence of increasing real incomes. In other words, if income is increasing faster than the price of goods, people will just spend more on housing. In the...
Increasing house prices is a natural consequence of increasing real incomes. In other words, if income is increasing faster than the price of goods, people will just spend more on housing. In the US, the average household size has decreased over time, and the average home size has increased, which is a reflection of this. If the main problem was really the price of housing relative to the general inflation rate, people would be demanding smaller homes and more people would be living together, when it's actually the opposite.
Of course, low housing supply and wealth inequality are certainly problems we need to deal with. I'm just trying to explain why inflation-adjusted price is not meaningful when talking about housing.
People are starting to demand smaller homes though. The average size peaked in 2015 and has been decreasing since then. The number of adults living with one or more roommates has also increased....
People are starting to demand smaller homes though. The average size peaked in 2015 and has been decreasing since then. The number of adults living with one or more roommates has also increased. What leads you to think the opposite is true?
My understanding of inflation adjusted prices is that if my house price goes up, and my income doesn't, then essentially my income has decreased because a higher percent of it goes to the price increase. Wages are increasing right now, but cost of rent/buying a house has increased at a greater rate. Inflation adjustments are not the only thing to look at, but I disagree that they are "not meaningful". Just search home price to income ratio, you might be really unpleasantly surprised at the last few years.
Here are some sources for these assertions, in case anyone was doubtful. Home sizes: Another article on home sizes Roomates (I couldn't find a newer source)
People are starting to demand smaller homes though. The average size peaked in 2015 and has been decreasing since then. The number of adults living with one or more roommates has also increased.
Here are some sources for these assertions, in case anyone was doubtful.
Only very recently have home sizes started to shrink. The median home size peaked in 2015 at 2,467 square feet and has slowly declined each year since. Some experts say that smaller available lots and higher construction costs may point to the slight dip in the median new home size. These changes in new home sizes may also reflect the changing demographics of those occupying them.
First and foremost, I am not saying that there is nothing wrong with house prices. I feel like you are assuming that I am, and I am not. Just talking about details. The average household size has...
First and foremost, I am not saying that there is nothing wrong with house prices. I feel like you are assuming that I am, and I am not. Just talking about details.
You said "inflation adjusted" and then started talking about price to income ratio. I think affordability is worth discussing, but not by using averages like CPI for all items. Things change in relative price all the time, and that's ok. What's not ok is if homes are unaffordable for most people, which is the current state.
I did make inferences from your statement about increasing housing costs being a natural consequence of increasing incomes, sorry for jumping to a conclusion. It's difficult for me to understand...
I did make inferences from your statement about increasing housing costs being a natural consequence of increasing incomes, sorry for jumping to a conclusion. It's difficult for me to understand the relationships between some of these data points. Your comment made me do some additional research so thanks for that! I have a better understanding now I think.
It's probably my fault for not being more clear. I was writing all that on my phone. There are all sorts of issues with supply and whatnot that are probably more relevant, but I just don't feel...
It's probably my fault for not being more clear. I was writing all that on my phone. There are all sorts of issues with supply and whatnot that are probably more relevant, but I just don't feel like discussing. I would like to be able to just talk about one detail at a time, but I end up thinking I have to write a whole book so people don't get the wrong idea about me and switch to arguing things I'm not even talking about. Unfortunately, if you refute something that comes from one "side" then it naturally sounds like you're on the "other side." But then if I try to put all sorts of qualifiers in my comment, it dilutes the point and people start responding to those parts rather than the point I'm trying to make. Economics ends up being a hard subject to discuss, I guess. Kind of a rant, but yeah, It's still on me that I wasn't clearer, and I'm still trying to figure out how to make just one point without giving the impression that I'm making another point.
People aren't necessarily asking for larger homes. That's just what regulations encourage and allow in the US (studios and even Levitton sized homes are often illegal or impractical). Also,...
People aren't necessarily asking for larger homes. That's just what regulations encourage and allow in the US (studios and even Levitton sized homes are often illegal or impractical). Also, household size has a different meaning from number of roommates. Roommates increasing and household size decreasing actually makes sense.
Here's the definition I'm referring to: So, increased number of roommates would increase the household size.
Here's the definition I'm referring to:
According to the U.S. Census Bureau, a household is considered to be all persons living within one housing unit. This includes apartments, houses, or single rooms, and consists of both related and unrelated people living together. For example, two roommates who share a living space but are not related would be considered a household in the eyes of the Census.
So, increased number of roommates would increase the household size.
Really? I'm fairly sure today's 40 years amortization mortgages weren't a thing in the 80s. I think borrowing, and borrowing more for longer, coupled with insane rental prices, are the likelier...
Increasing house prices is a natural consequence of increasing real incomes.
Really? I'm fairly sure today's 40 years amortization mortgages weren't a thing in the 80s. I think borrowing, and borrowing more for longer, coupled with insane rental prices, are the likelier reasons behind increasd prices.
FHA just started offering 40 year mortgage in 2023. I'm trying to talk about trends longer than a year or two. As far as I know, most lenders don't offer 40 year mortgages, and they are very...
FHA just started offering 40 year mortgage in 2023. I'm trying to talk about trends longer than a year or two. As far as I know, most lenders don't offer 40 year mortgages, and they are very rarely used.
Im just a little surprised that the median income of gen Z and boomers in the US is just over 40k. I dont know if any discussion about income should include the word "wealth" with that income...
Im just a little surprised that the median income of gen Z and boomers in the US is just over 40k. I dont know if any discussion about income should include the word "wealth" with that income level. Thats barely above subsistence level wages - about $21/hr for full time work.
Edit: Just noticed thats after taxes and transfers (whatever that is) so likely more like $26-30 an hour.
But yeah, wages/salary aren't very important compared to buying power. My kids (millennials) all make more than I did at their age, but I bought a 3 bd house in 1985 for 60k when I was making 35k a year. That same house now lists for 540k, so 9x the price but Im pretty sure the buyers aren't making 9x my salary at 315k a year.
Curiosity: did you also have student loans and aging parents who need care? A lot of folks used to make okay income but were debt free, vs college kids these days who spent years taking on loans...
Curiosity: did you also have student loans and aging parents who need care?
A lot of folks used to make okay income but were debt free, vs college kids these days who spent years taking on loans and paying rent and have family obligations on top.
And also that 3 bedroom was probably decently new, located in a prime location with jobs and necessities nearby? These days you can't even get a 3 bedroom in rural Nova Scotia or middle of literal tundra Canada for 60k * "reported inflation".
Well, the house was about 6 yrs old and yes in a decent sized city, and I did have student loans from university and I did have to care for my mom when my parents split. In fact that house was...
Well, the house was about 6 yrs old and yes in a decent sized city, and I did have student loans from university and I did have to care for my mom when my parents split. In fact that house was only 900 sf and our family of 5 lived all moved upstairs so I could build out the basement into a suite that my mother lived in for a time. We lived VERY frugally though, still do and thats what got us ahead.
You cant get a house for that in MOST places but you can in rural Alberta. I bought one 2.5 years ago as a rental property. It was exactly 60k. A very tiny 700 sf bungalow that was a quick remodel on a very old home. Its been rented consistently. Its a town with a small college and lots of agricultural services so not a TON of jobs but hey, if your house only costs 60k, you dont need much to pay your total bills.
That's really good to know and note to self, having a small college brings in young people who need temporary housing. I've been on the lookout for something like that in Nova Scotia no dice :)
That's really good to know and note to self, having a small college brings in young people who need temporary housing. I've been on the lookout for something like that in Nova Scotia no dice :)
Yeah, the college students are always on the look out for housing, but surprisingly, two of my renters have been health care workers and the other was a young couple just getting established in...
Yeah, the college students are always on the look out for housing, but surprisingly, two of my renters have been health care workers and the other was a young couple just getting established in life, so no students at all, yet. But its good to be in a college town because its unlikely the college will fold up and leave, unlike a lot of small towns that have no reason to keep young people around and they slowly die out.
I believe "transfers" means that it includes government benefits like social security? Not looking at wealth for retirees is especially weird because they're living on their investments. The Gen Z...
I believe "transfers" means that it includes government benefits like social security?
Not looking at wealth for retirees is especially weird because they're living on their investments. The Gen Z average is the same as boomers over 70 who likely own their own home and aren't working.
(Also, at that age, it's fine to be spending your retirement savings.)
Maybe on the coasts and HCOL areas $21/hr is just subsistence level wages, but making that much money in most of the US is completely fine. Not extravagant or anything; just a reasonable standard...
Maybe on the coasts and HCOL areas $21/hr is just subsistence level wages, but making that much money in most of the US is completely fine. Not extravagant or anything; just a reasonable standard of living.
Kind of a bad article, in my opinion. If you take what it says at face value, and their chart, you'd expect that zoomers are more wealthy at their age than millennials were, who were more wealthy...
Kind of a bad article, in my opinion. If you take what it says at face value, and their chart, you'd expect that zoomers are more wealthy at their age than millennials were, who were more wealthy than boomers were...so on each generation in their chart....but that's not the case. Ignoring costs and purchasing power doesn't paint the realistic picture, ignoring debt doesn't help either. I don't know the real figure, but I'd be shocked if zoomers are actually better off than millennials at the same age (ignoring the ages during the global financial crisis) and almost certainly both are worse off than boomers were, who had extremely cheap education and housing costs, while being exposed to some of the best bull runs and ZIRP. I don't see any point in this article narrowing in on wages, except to undercut zoomers who bemoan their economic conditions
All income data. Wealth building is a very different tale. Edit: Moved my previous edit of expansion to its own top-level, as I think it warrants its own discussion.
All income data. Wealth building is a very different tale.
Edit: Moved my previous edit of expansion to its own top-level, as I think it warrants its own discussion.
Problem being that a substantial portion of Gen Z is just now at the ages where that happened for Millennials. Having a major economic downturn every 7-12 years puts a real hamper on being able to...
ignoring the ages during the global financial crisis
Problem being that a substantial portion of Gen Z is just now at the ages where that happened for Millennials.
Having a major economic downturn every 7-12 years puts a real hamper on being able to build wealth, regardless of income.
For people who aren't already wealthy, that is. If you've already got wealth, you can use economic downturns to snatch up the assets of less wealthy people at depressed prices and come through the...
Exemplary
Having a major economic downturn every 7-12 years puts a real hamper on being able to build wealth, regardless of income.
For people who aren't already wealthy, that is. If you've already got wealth, you can use economic downturns to snatch up the assets of less wealthy people at depressed prices and come through the thing much better off than you were before. If you're super lucky, the feds will even subsidize whatever losses you do incur with public funds/debt.
My guess is dying Silent/Boomers leaving houses to their GenZ grandkids rather than their X/Millenial kids since they probably already have their own. That's what I'm seeing from my...
My guess is dying Silent/Boomers leaving houses to their GenZ grandkids rather than their X/Millenial kids since they probably already have their own.
That's what I'm seeing from my inlaws...assets being skipped past the 60+ kids down to the 30something grandkids or childhood great grandkids in the form of trusts.
I know that when my tail-Boomer parents kick the bucket sometime 15ish years from now, when I'm in my mid-50's, my Millenial siblings in their late 40s or early 50s (probably minus me given estrangement) are gonna get quite a payday in the form of selling or owning a $1mil+ property plus a small fortune in 401k leftovers.
If they choose to split the house direct to the 3 Alpha grandkids instead of their direct children whom already mostly paid down their mortgages, that'd give them $300k+ to put towards a down payment on a house from the ripe old age of 15-23 (depending on kid).
OT: Appreciate the interesting article but it's generally a good idea to throw some tags on your submission to serve at least as a starting point otherwise someone else has to at least skim the...
OT: Appreciate the interesting article but it's generally a good idea to throw some tags on your submission to serve at least as a starting point otherwise someone else has to at least skim the content and categorize for you. In this case there's several other gen z stories on the front page to serve as an example but usually I will search similar articles if I'm submitting something.
Yea we really need you two to write a 'suggested tags' feature, would save substantial effort. :) Half of my submissions I get like 2-3 tags and I'm like "To hell with it, they'll do a better job...
Yea we really need you two to write a 'suggested tags' feature, would save substantial effort. :)
Half of my submissions I get like 2-3 tags and I'm like "To hell with it, they'll do a better job than me anyhow".
Yea the article is drawing some bad conclusions IMO. GenZ is even worse of than Millenials in many ways, and it mostly boils down to suppressed definitions of what inflation is. My parents thought it was astounding how I was making $60k well before they did age-for-age 15ish years ago...and it was, if you use the levels of CPI reporting that they were hearing about when I was earning that. But if we revert back to the inflation metrics that were used when they were my age at the time in the late 70s, it tells a very different tale.
Shadowstats shows the 1980-based inflation metrics. You'll notice that 1980 CPI didn't really deviate from modern CPI until the housing inflation definitions changed substantially in in the mid-late 80's.
And from my vantage point, the Shadowstats 1980 CPI more accurately reflects what I see anecdotally in my life.... that inflation across the board was closer to 10% than 2% when factoring all of my expenses during the "extended period of < 5% inflation."
We only have 2% inflation because we changed the definition of what inflation is. The public comment sums it up nicely:
And I know this to be true, because using the official purchase power calculator to choose goods with the price I paid then and the price I pay now for equivalent sizes, there's a huge disparity:
Reeses, a standard 2-pack: $1 in 2000, CPI for $1 buying power is $1.83, price today is $2.15. Which comes out to about 4.7 cents increase per year, opposed to 3.4 cents that the "official inflation" shows. It doesn't seem like much, but 1.3% extra inflation on a random food item represents an annual decrease in standard of living if my annual cost of living raise only matches that 3.4% instead of the needed 4.7%. And during that long "2% inflation period" my employer was only giving 2%...which they also only gave during that 10% time but that's a separate issue.
Not to discount what you're saying. But CPI, and any sector specific CPI is going to be based on averages.
When you compare against specific items there will be some that increased higher than CPI (your Reeses example) and others that didn't.
I have followed Shadowstats for, I think, decades.
It makes excellent points about the official governmental calculations of inflation. Practically every Administration (both Parties) has taken the opportunity to "redefine" inflation and/or the CPI, to make their Admin look better. Some product makes the calculated inflation too high? Just exclude it from the package, or replace it with something similar-but-cheaper.
However, Shadowstats itself also seems to have gradually become less accurate, and so, less relevant, over the years.
The truth is somewhere else (I hesitate to say "in between" because I think it's too complicated for simple, straight-line analysis).
It's really crazy that the real inflation number is 8% but banks are willing to loan money out at 7%. How generous of them.
Shadowstats's graph is a little suspicious
From the one comment in that thread, a very nice criticism, though had to find an archive for the link: Why is shadowstats beloved by followers but scored by economists
I don't think Shadowstats is great per-se, and I certainly wouldn't pay for it. Heck, my arbitrary example I edited in shows that Shadowstats, as an actual stat, isn't that accurate, but also shows that the official CPI methodology is also flawed in its core purpose, which I think the Shadowstats public statement does a good job of explaining.
I very much like the table this author showed, how Shadowstats greatly overestimates things based on the 'historical ads' method, but CPI underestimates things, as well as his conclusion:
I mean...by that logic Gary's point is that it means that banks are making loans at a loss, which I highly highly doubt?
It's not really a loss, since they can loan out far more dollars than the dollars they have in the bank courtesy of very low reserve requirements. Every $1 they get from the Fed, they can loan out something like $5. Even if their interest rate was 0%, so long as 2/5 of the people paid back that $1 they'd be profitable.
Also, a key phrase from my post:
I am aware that anecdotes != data. That all sorts of other factors come into play. But they also are not to be ignored, as sufficient anecdotes become data, if you know where to look. I doubt many people see a different story than this one, short of utter economic collapse of the town:
My first apartment was $300 a month, well over a decade ago, in a small, semi-rural town in PA. Utilities included. It was a 2-story rowhome split vertically into a 1BR and 2BR. I had the 1 BR, which was a bathroom and open space for a bed where a dining room used to be. No interior doors other than bathroom and had to walk through bedroom to get from living room to kitchen. Place was falling apart with black mold in the basement.
Today are worse apartments than that less than three blocks away going for $700+, with no utilities.
That's pretty damn close to 10% inflation for something I spent 40% of my income on.
Your arbitrary example does not show that the CPI methodology is flawed specifically because it is an arbitrary example. Measuring for inflation is an art (and there's multiple CPIs btw), but the gist is that we should try to figure out the change in price in a representative basket of goods. The basket of goods has to change over time because consumers will naturally change what they consume and the quantity of it. Maybe Reese's went up higher than inflation, but maybe the consumer went over to Snickers as a replacement. Or maybe they continued to buy Reese's, but Arizona Tea has stayed 99c this whole time so it counteracts that.
There's so many examples of things that have gotten cheaper in real terms that you can't cherrypick one thing that became more expensive and say that it shows that CPI > 2% or 3% or whatever %. It's too nuanced for that. I will just say that if the real inflation rate was 10% or 15%, we would not need to analyze numbers; you would feel that immediately and no one would doubt it and we'd be rioting in the streets right now.
But that 'transitive good' thing is exactly the criticized methodology.
If everyone switches to snickers as a replacement, because it under-paced inflation, that's not because inflation was lower, it's because the high inflation necessitated changing consumer behavior.
If inflation makes 2BR apartments unaffordable, and people switch to 1BR apartments, and we adjust the inflation metric to weight 2BR less and 1BR more, this has the primary affect of hiding the inflation of 2BR apartments and ignores the giant quality of life decrease moving from a 2BR to a 1BR.
Incidentally about the same QoL decrease as moving from Reeses to Snickers. :)
You are misunderstanding the example and the concepts I believe.
Snickers did not under pace inflation in his example. Reeses out paced it and tried to turn a profit off of inflation, so consumers switched to snickers which is sticking close to inflation.
Almost y definition a company cannot survive if it's not keeping up with inflation. Every dollar they make is worth less, and so it's a flat rise on costs. It's a question of how much they adjust for it.
This is also affected by supply lines. Maybe the issue is that various parts of converting peanuts to peanut butter have seen a significant increase in cost, so reeses MUST go up higher, but shipping roasted peanuts is still cheap, so snickers can hold a lower cost.
The thing is, this feels backwards. We're trying to back-tick the decisions companies do to explain consumer behavior retroactively, because Hershey's and Mars both influenced CPI while calculating "average candy bar" price or what have you.
This is more readily apparent in the adjustments to weights of more distinct but transitive things, like cuts of meat. We put less weight on beef steaks than we used to, and now more weight on ground beef. But the reason more people are buying ground beef isn't because they don't want steaks, it's because they can't afford them. So weighing the cost increases of steaks less and ground beef more "because consumers are buying more ground beef" is what causes this decoupling of CPI from actual-standard-of-living. Sure, ounce for ounce, I'm eating the same amount of meat as my great grandparents did...but I'm eating old color-sprayed 80% ground beef at $3.99/lb (on sale in a value pack) when they were buying fresh-sliced porterhouse steaks for $3.99/lb (wage inflation adjusted). And the current CPI methods go "yup this is fine, no need to adjust Social Security." If I bought steaks like they did, it'll cost me closer to $20/lb.
And that's really the biggest problem. Because things that are intimately tied to CPI, like Social Security payments, should have their adjustments according of equivalent standards of living, not perpetually chasing "whatever cheapest thing consumers are buying the most of because most people can't afford the thing they actually want."
You're right about that, but it comes down to did people's QoL decrease in order to meet a 2% inflation rate? Maybe? Hard to say. Housing became more expensive in some ways (higher prices) and cheaper in others (interest rates). Computers are way cheaper and more useful than they've ever been. Cars are safer for the same real dollars they've ever been. Maybe people didn't have to adjust their lifestyles downward to bear with increase in costs because other aspects of their lives became cheaper. I don't know. I just know that the chart you supplied feels wrong. If the inflation numbers in your chart were correct from 2003-2023, my parents would be homeless right now.
Are your parents eating the same quality of food that they did back then? Most everyone I know had to switch to lower-quality items or sacrifice elsewhere.
Are they renting? Cause rent certainly seems to go up that much or more YoY. I mentioned elsewhere that circa 2009 my first apartement was $300/mo for a shithole. What I didn't mention is that they were increasing rent by $50/year, only ever decreasing when they started having huge vacancies.
Don't get me wrong: This data is hard to figure out tangibly. Probably would require another long-term wide survey study of 10,000+ people over the course of 20 years, but focusing on quality and quantity of goods alongside wages.
They probably eat better than they did 20 years ago. I remember having steak as a rarity growing up, but they seem to have it much more frequently now. They also buy from Costco for a lot of their items now rather than buying from the ethnic grocery stores that have lower prices but less consistent goods.
I don't think the data doesn't exist. Inflation is studied hard in this country and every other developed country in the world. None of the ideas we spoke about are new and some great realization; it's just foreign to us who don't work with it every day.
That's not how banking works. Banks make money on the spread between their borrowing costs and their loans. The real inflation rate doesn't have any direct effect on that.
What does matter, though, is that they make long-term fixed-interest loans. These are financial assets whose price is determined by interest rates. They lost a lot of money when interest rates went up, and some banks became insolvent.
It was a very simplified dig, but it's somewhat how banking works. The inflation rate is not necessarily the cost to borrow, but the inflation rate impacts how the Fed thinks about yield on bonds, which ends up affecting banks. The point is that if there's secretly shadow inflation of 15% instead of 5%, we should expect that mortgage loans end up being closer to 15% than 5%.
But if it’s a secret inflation rate then the Fed wouldn’t know about it, so why would they raise rates? :)
More seriously, there does seem to be some relationship, but I need to think it through more.
From an international perspective, making loans using a currency with a price that’s rapidly declining seems like a very risky deal, so I wouldn’t expect much of it. I see that Argentina has cut interest rates to 70%.
The data shared in the article seems suggestive, but it’s pretty limited. It’s about income, rather than wealth as the headline implies. Also, statistical averages don’t tell us anything about how much income varies. There are going to be rich and poor people within a generation. (And what’s with the song lyrics?)
FT had some interesting data on net housing wealth differences between Millenials and Boomers. Top 10% Millenials are slightly lagging Boomers at same age but their median was essentially flat at 0 through the entire graph. Wealth might be increasing but it's the very few that drive those averages.
What is with all these articles about how genZ is rich, depressed, unstable, worry free... Who writes these articles? We have 3 or so main articles on this on tildes, I hate generational stereotypes anyways
Paul Graham put out a post over 20 years ago about how these articles come about. Somebody is paying for this, some sort of PR firm...
I really don't think this has been written by a PR firm. It's not completely coincidental that so many articles about gen z are posted at the same time, I saw one posted here and decided to post another that made a counter point that I thought would generate some interesting discussion.
Election year good news team?
Archive link: https://archive.is/s07Xr
per The Economist:
— Gen-Z will soon pass Boomers in the US workforce
— Gen-Z has higher home ownership level than Millennials at similar age
— Median household income at 25 is higher than Millennials or Boomers
The article also admits that house prices and other costs have not simply kept up with inflation, but way surpassed it.
So even though they might be "richer" in terms of their bank account, that doesn't necessarily translate to higher purchasing power.
I'm honestly surprised that needs to be said, but ask your parents how much they bought their house for, look up what it'd be worth on the market today, and compare that to the inflation-adjusted price.
I recognise the data may say otherwise, however it's not clear if they take wealth inequality into account. Since that phrase isn't mentioned, I assume not.
I think they do adjust for inflation. That will at least partially account for differences between generations.
But the world has changed in a lot of ways. Inherited wealth is likely different, for example. How much help do people get from their parents? Has that changed?
How have the places where people live changed? People moving to expensive cities and competing for the same housing will likely raise both income (due to better jobs) and expenses. People taking advantage of remote work and moving to the country might lower expenses.
A common way to lower expenses when single is to share an apartment or house. Is that more or less common? How has the amount of living space people have changed compared to previous generations?
Increasing house prices is a natural consequence of increasing real incomes. In other words, if income is increasing faster than the price of goods, people will just spend more on housing. In the US, the average household size has decreased over time, and the average home size has increased, which is a reflection of this. If the main problem was really the price of housing relative to the general inflation rate, people would be demanding smaller homes and more people would be living together, when it's actually the opposite.
Of course, low housing supply and wealth inequality are certainly problems we need to deal with. I'm just trying to explain why inflation-adjusted price is not meaningful when talking about housing.
People are starting to demand smaller homes though. The average size peaked in 2015 and has been decreasing since then. The number of adults living with one or more roommates has also increased. What leads you to think the opposite is true?
My understanding of inflation adjusted prices is that if my house price goes up, and my income doesn't, then essentially my income has decreased because a higher percent of it goes to the price increase. Wages are increasing right now, but cost of rent/buying a house has increased at a greater rate. Inflation adjustments are not the only thing to look at, but I disagree that they are "not meaningful". Just search home price to income ratio, you might be really unpleasantly surprised at the last few years.
Here are some sources for these assertions, in case anyone was doubtful.
Home sizes:
Another article on home sizes
Roomates (I couldn't find a newer source)
First and foremost, I am not saying that there is nothing wrong with house prices. I feel like you are assuming that I am, and I am not. Just talking about details.
The average household size has decreased over time, even since 2015. Household size defined as number of people living in the same housing unit.
You said "inflation adjusted" and then started talking about price to income ratio. I think affordability is worth discussing, but not by using averages like CPI for all items. Things change in relative price all the time, and that's ok. What's not ok is if homes are unaffordable for most people, which is the current state.
I did make inferences from your statement about increasing housing costs being a natural consequence of increasing incomes, sorry for jumping to a conclusion. It's difficult for me to understand the relationships between some of these data points. Your comment made me do some additional research so thanks for that! I have a better understanding now I think.
It's probably my fault for not being more clear. I was writing all that on my phone. There are all sorts of issues with supply and whatnot that are probably more relevant, but I just don't feel like discussing. I would like to be able to just talk about one detail at a time, but I end up thinking I have to write a whole book so people don't get the wrong idea about me and switch to arguing things I'm not even talking about. Unfortunately, if you refute something that comes from one "side" then it naturally sounds like you're on the "other side." But then if I try to put all sorts of qualifiers in my comment, it dilutes the point and people start responding to those parts rather than the point I'm trying to make. Economics ends up being a hard subject to discuss, I guess. Kind of a rant, but yeah, It's still on me that I wasn't clearer, and I'm still trying to figure out how to make just one point without giving the impression that I'm making another point.
People aren't necessarily asking for larger homes. That's just what regulations encourage and allow in the US (studios and even Levitton sized homes are often illegal or impractical). Also, household size has a different meaning from number of roommates. Roommates increasing and household size decreasing actually makes sense.
See this Atlantic article from 2013: https://www.theatlantic.com/business/archive/2013/09/how-roommates-replaced-spouses-in-the-20th-century/279210/
Here's the definition I'm referring to:
So, increased number of roommates would increase the household size.
Really? I'm fairly sure today's 40 years amortization mortgages weren't a thing in the 80s. I think borrowing, and borrowing more for longer, coupled with insane rental prices, are the likelier reasons behind increasd prices.
FHA just started offering 40 year mortgage in 2023. I'm trying to talk about trends longer than a year or two. As far as I know, most lenders don't offer 40 year mortgages, and they are very rarely used.
Im just a little surprised that the median income of gen Z and boomers in the US is just over 40k. I dont know if any discussion about income should include the word "wealth" with that income level. Thats barely above subsistence level wages - about $21/hr for full time work.
Edit: Just noticed thats after taxes and transfers (whatever that is) so likely more like $26-30 an hour.
But yeah, wages/salary aren't very important compared to buying power. My kids (millennials) all make more than I did at their age, but I bought a 3 bd house in 1985 for 60k when I was making 35k a year. That same house now lists for 540k, so 9x the price but Im pretty sure the buyers aren't making 9x my salary at 315k a year.
Curiosity: did you also have student loans and aging parents who need care?
A lot of folks used to make okay income but were debt free, vs college kids these days who spent years taking on loans and paying rent and have family obligations on top.
And also that 3 bedroom was probably decently new, located in a prime location with jobs and necessities nearby? These days you can't even get a 3 bedroom in rural Nova Scotia or middle of literal tundra Canada for 60k * "reported inflation".
Glad you'll have something for your kids.
Well, the house was about 6 yrs old and yes in a decent sized city, and I did have student loans from university and I did have to care for my mom when my parents split. In fact that house was only 900 sf and our family of 5 lived all moved upstairs so I could build out the basement into a suite that my mother lived in for a time. We lived VERY frugally though, still do and thats what got us ahead.
You cant get a house for that in MOST places but you can in rural Alberta. I bought one 2.5 years ago as a rental property. It was exactly 60k. A very tiny 700 sf bungalow that was a quick remodel on a very old home. Its been rented consistently. Its a town with a small college and lots of agricultural services so not a TON of jobs but hey, if your house only costs 60k, you dont need much to pay your total bills.
That's really good to know and note to self, having a small college brings in young people who need temporary housing. I've been on the lookout for something like that in Nova Scotia no dice :)
Yeah, the college students are always on the look out for housing, but surprisingly, two of my renters have been health care workers and the other was a young couple just getting established in life, so no students at all, yet. But its good to be in a college town because its unlikely the college will fold up and leave, unlike a lot of small towns that have no reason to keep young people around and they slowly die out.
I believe "transfers" means that it includes government benefits like social security?
Not looking at wealth for retirees is especially weird because they're living on their investments. The Gen Z average is the same as boomers over 70 who likely own their own home and aren't working.
(Also, at that age, it's fine to be spending your retirement savings.)
Maybe on the coasts and HCOL areas $21/hr is just subsistence level wages, but making that much money in most of the US is completely fine. Not extravagant or anything; just a reasonable standard of living.
Kind of a bad article, in my opinion. If you take what it says at face value, and their chart, you'd expect that zoomers are more wealthy at their age than millennials were, who were more wealthy than boomers were...so on each generation in their chart....but that's not the case. Ignoring costs and purchasing power doesn't paint the realistic picture, ignoring debt doesn't help either. I don't know the real figure, but I'd be shocked if zoomers are actually better off than millennials at the same age (ignoring the ages during the global financial crisis) and almost certainly both are worse off than boomers were, who had extremely cheap education and housing costs, while being exposed to some of the best bull runs and ZIRP. I don't see any point in this article narrowing in on wages, except to undercut zoomers who bemoan their economic conditions
Figure 4 does plot all the data for each generation in 2019 dollars.
All income data. Wealth building is a very different tale.
Edit: Moved my previous edit of expansion to its own top-level, as I think it warrants its own discussion.
Problem being that a substantial portion of Gen Z is just now at the ages where that happened for Millennials.
Having a major economic downturn every 7-12 years puts a real hamper on being able to build wealth, regardless of income.
For people who aren't already wealthy, that is. If you've already got wealth, you can use economic downturns to snatch up the assets of less wealthy people at depressed prices and come through the thing much better off than you were before. If you're super lucky, the feds will even subsidize whatever losses you do incur with public funds/debt.
This is the interesting one to me because it's a much harder statistic to fudge than things like median household income.
My guess is dying Silent/Boomers leaving houses to their GenZ grandkids rather than their X/Millenial kids since they probably already have their own.
That's what I'm seeing from my inlaws...assets being skipped past the 60+ kids down to the 30something grandkids or childhood great grandkids in the form of trusts.
I know that when my tail-Boomer parents kick the bucket sometime 15ish years from now, when I'm in my mid-50's, my Millenial siblings in their late 40s or early 50s (probably minus me given estrangement) are gonna get quite a payday in the form of selling or owning a $1mil+ property plus a small fortune in 401k leftovers.
If they choose to split the house direct to the 3 Alpha grandkids instead of their direct children whom already mostly paid down their mortgages, that'd give them $300k+ to put towards a down payment on a house from the ripe old age of 15-23 (depending on kid).
OT: Appreciate the interesting article but it's generally a good idea to throw some tags on your submission to serve at least as a starting point otherwise someone else has to at least skim the content and categorize for you. In this case there's several other gen z stories on the front page to serve as an example but usually I will search similar articles if I'm submitting something.
Oh dang, good to know! I didn't realize tags were manually set... tbh I thought they were done by AI or some kind of NLP (I'm not even joking haha)
It’s done through natural natural language processing.
Yeah, all the tags on this post were set by @cfabbro and @mycketforvirrad.
🫡
Yea we really need you two to write a 'suggested tags' feature, would save substantial effort. :)
Half of my submissions I get like 2-3 tags and I'm like "To hell with it, they'll do a better job than me anyhow".
Some kind of tag association graph maybe? Auto suggest tags based on tags you've already added plus autocomplete suggestions when typing tags.
There is autocomplete for used ones. I'm envisioning a web scraper after submission with a followup submission: "Do you want to add these tags?"