They also likely use inflation statistics that are problematic, at best.

When considering consumables, we've had pretty reasonable inflation and people are making more than their parents. But if you were to calculate inflation based on prices for things that don't benefit from advances in our production abilities (commodities, equities, housing, education, health care, etc), we'd be making nowhere near as much as previous generations when adjusted for inflation using that calculation.

Affording a car, TV, computer and food to feed ourselves isn't that difficult for many people. It's the life-altering purchases that are slipping farther and farther from the reach of the middle class.

Exactly. Low inflation doesn't help much if your salary increases get eaten up by housing, education hand healthcare. Rent, health care and education should be counted into inflation numbers.

Wait. Aren't rent, healthcare, AND education all included in the eight components of CPI? Isn't that how the government measures inflation?

I think one of the big things left off is housing prices. But I'm pretty sure rent, healthcare, and education are part of it:

https://www.bls.gov/cpi/factsheets/medical-care.htm

http://webapps.dol.gov/dolfaq/go-dol-faq.asp?faqid=94

The inflation rate does include rent, or "imputed rent" for home owners. However, it's an average of what people actually pay, including people who somehow got a sweet deal on housing costs, through rent control or buying their house a long time ago or whatever. It's not going to match the prices you see advertised when you're looking to move.

>However, it's an average of what people actually pay, including people who somehow got a sweet deal on housing costs

which is arguably the more accurate way of measuring consumer prices.

That not accurate because important information about the spatial distribution gets filtered out. Economists are pretending their statistics are filtering out 'noise' when they are really filtering out data they don't want people to see.

Inflation is an average. Newspapers usually report the national average, but there are a lot of other averages and they aren't being kept secret. This page has data for California:

http://www.dof.ca.gov/Forecasting/Economics/Indicators/Infla...

I don't think anyone is all that interested in a bunch of dry statistics. No conspiracy is needed.

The problem is while other statistics exist in practice policy makers, political leaders, businessmen, and economists in general have come ignore them. Rather than believing some small brained primate on the internet, here is Paul Volcker saying the same thing.

https://www.bloomberg.com/opinion/articles/2018-10-24/what-s...

> Economists are pretending their statistics are filtering out 'noise' when they are really filtering out data they don't want people to see.

You could really replace "Economist" with anything in this statement.

Wasn't that also the case historically though? Rent control has been around for a while.

Sure, it's not new.

Another way to put it is that housing costs used to calculate inflation will lag market prices, because the cost is often locked in for a while. When prices go up, people often don't immediately start paying the new price.

They may factor those things in, but that doesn't mean they factor them in correctly or that their calculation ends up matching the realities of many middle-class people these days. From medical-illness-caused bankruptcies to crippling student loan debt to declining home ownership (by equity and age of first purchase), there are common realities that don't mesh with the CPI statistics that are calculated/released. You can argue that the CPI deals with averages and for every horror story of un-repayable student loan, savings-zapping cancer or hot housing market that makes purchasing a pipe dream for the majority of residents there are people who graduate college, get a job that pays well enough to repay their loans in time to save up and buy a home before starting a family and avoiding serious illnesses, but then is that statistic really useful in the face of so many people struggling?

At a certain point, enough individual incedences of a problem becomes far more than isolated incidents and graduates to a problem for society.

This brings up a great point that many people overlook: Inflation is hyper-specific to the consumer.

If the price of bread (and only the price of bread) went up 10x in price, then only consumers of bread would really be affected by it. You could argue all the hands that "touch" the bread, yes, but in the end the person paying $40 for a loaf of bread is actually affected by the inflation of it; for them to consider "inflation" in the large sense to have screwed them over.

Similarly, people without student loan debt (or over-burdening student loan debt) couldn't really give two shits about the inflation of SLD.

For me, guitars are a big deal. And I bring that up because there's a regulation now that effectively bans a type of wood used for guitars for centuries. If I were to want to buy a guitar with this type of wood that already exists, the price of it would be super inflated as the remaining safe-to-buy stock are grabbed up. This certainly only affects guitarists who favor a certain kind of tonewood; but is akin to my bread example above in demand/price.

I am not an expert but the way I have read about is that they also factor in better quality of items so even if your car costs 10000 more it's not counted as inflation because it's a better car compared to years ago and therefore has more value. I think the same is going on in health care and other areas. And excluding house prices is also a very questionable.

Yes, it's Hedonic Quality Adjustment [1]. If you follow through the example on the link, you see the negative CPI component, even though a) you can't actually buy the old version anymore - so you can't reap the "real" price benefit and b) the subjective experience ultimately for lots of these things is the same. i.e. a mid-level TV from 40 years ago probably gave the same hedonistic pleasure as one today. Arguably the older one gave more because of less other gadgets!

[1] https://www.bls.gov/cpi/quality-adjustment/questions-and-ans...

Also note that when you're a single earner household you may only need 1 car, eat out less, and don't need day care. Even if the cost of all those items remains the same, your cost of "living" goes up. Now add to that the need for education to maintain an "average" salary, and your costs increase faster than inflation to stay with the average.

They may not be calculating housing costs correctly.

For example, in Toronto house prices have seemed to go crazy. Industry reports agree. However housing inflation in Toronto measured by Statistics Canada does not show that.

Has anyone else noticed this or have an explanation? It's very strange.

https://www.reddit.com/r/AskEconomics/comments/9haj6h/does_t...

Rent is not in the CPI. That's what made Shiller's work useful (comparing housing costs and CPI).

Edit: Shiller was wrong (I asked him about this point after a lecture about his work on historical housing prices).

Rent is definitely included in the US CPI as "Rent of Primary Residence".

See all the weights here: https://www.bls.gov/cpi/tables/relative-importance/2017.pdf

I was wrong -- I see both rent and what appears to be ownership costs in there.

I think Shiller's work was useful because housing prices (if I'm not mistaken) are not part of CPI.

Housing prices go into much bigger bubbles than rent. If interest rates go up or down, it doesn't very much affect the average person's ability to pay rent. But it has a huge impact on how much the average person can borrow.

My understanding for the reason that housing prices aren't included in CPI is because nobody buys houses in cash. So including mortgage payments in theory makes sense -- but it' tricky -- because everyone's mortgage originated at different times and under different circumstances.

I think my original statement was wrong, but I may have misheard what he told me. Looking up references on housing and CPI I see a lot about how the housing component gives bad signal -- it was rising during the 2008 crash for example. It's easy to see how it lags since people usually only buy at multi-year intervals.

> My understanding for the reason that housing prices aren't included in CPI is because nobody buys houses in cash

But they should include the sale value of houses in CPI, otherwise its pointless. Just because the vast majority of people buy houses with a mortgage doesn't mean the sale price isn't a real price

They are. The BLS puts together a 'market basket' that includes those items. However, it is the proportion that matters. Necessities like rent and healthcare are a larger proportions of expenses for the poor than they are for the middle and upper classes. When the market basket is created it takes consideration of everyone's expenses and so the weighting for healthcare costs say, falls below what it is that poor people spend on average and above what rich people spend on average (as a percent). Because these are a few of the spending categories that are inflating the fastest it is in this way that the CPI understates inflation for the poor and overstates it for the rich.

Good point. Of these 3 which are truly free market? Zero.

What do people mean by truly free market? Can you provide an example of one?

Recently read someone also making an observation that smoothed statistics are hiding that 'life event' expenses hit all at once and threaten every last bit of accumulated savings.

Have a baby and either daycare or one spouse off work for a couple of years. Main bread winner out of work for a year. Sending kids to college. Parents need support or assisted living. Major illness. End of like expenses.

Anyone know if tuition costs are part of inflation?

Ummm... since at least the 1980's the number of 2 or more income households has actually fallen from 45% to 40%, not gone up.[1]

In terms of hours worked, it's about the same, 44 hours although has been trends down since the early 2000's.

[1]http://www.aei.org/publication/update-how-changing-household...

That is interesting. I confirmed those numbers looking at the actual census data. The changes you mention are much less pronounced if you remove no-income households from the data though. Perhaps no-income households should be included in the 2 or more stat - since one could make a case for that category being the people who "gave up" because they couldn't keep up with expenses. I wonder what other things might be unaccounted for that could make the data "seem" this way - or perhaps my anecdata is just wrong. Also, the data doesn't go back further than 1980. I wonder what it would show if we had it back to 1970.

[Edit] Just another thought - that data does not break down the households into percentiles for total household income. I would expect that the fraction of multi and no income households w.r.t. total households has increased more on the lower income side of the spectrum than the middle/upper end. It also doesn't account for how much each earner brings in - which is related to the weekly hours stat in your source - I'd expect this to be even more influenced by accounting for income quintiles (or quartiles).

I wonder if those single income households include maintenance and alimony. The nature of families has changed significantly since the 1970s with more divorce and more children being raised in one parent households. I doubt the single parent receiving money from the estranged parent is counted as a two earner household, even though in some senses it is.

Once you add the changing rate of marriage, increase in single person households since the 70s, and the fact that real inflation often varies depending on which income quintile you're in, I don't think enough data is available to let you pick it apart meaningfully. So we're left trading anecdotes or stats with gaps. :)

The number of traditionally shaped families, i.e. mum, dad, and 2.2 children has plummeted since the 70s and the number of singles, with or without children has rocketed from both increasing separation and later entry into relationships.

I'm in agreement with your main point, that it's far harder for a single earner family to thrive now than in the past. I doubt I can cite that in any sensible way.

But has it changed in recent years? Anecdotally, I was born in 1983 and when I was growing up in the 90s single-parents & working-mothers were already common.

>the number of 2 or more income households has actually fallen

Where in your citation is this claim supported? The /percentage/ has fallen which could either mean that the number has fallen or that the total population increase at a faster pace than the number.

The biggest manipulation is they divide household income by the square of household size, which makes the bigger families of the 60’s seem to earn a lot less than they did. The whole thing is based on two studies funded by the same institute based on the same biased dataset, and diving into how they get their numbers is enlightening.

Statistics people love squaring stuff! Why are they squaring the household size?

Because it makes the later salary per household look better.

Squaring explodes differences.

Ugh, which may be completely missing the causality. I’d argue that many people are having fewer kids (smaller households) soecifically because raising them has become so expensive.

That, to me, is what really seals it all as ridiculous. My parents had the standard of living they had with only my father working and in a fairly normal government job.

That as enough to support my mom and 2 children while also saving for retirement.

That standard of living now would require both parents working and being rather successful in their white collar careers. Even as a reasonably successful person in an advantaged field (tech), I can't imagine supporting an entire family.

That needs a citation.

If you cut out everything we have they didn't - cable TV, Netflix, computers, internet, cafes, restaurants, Kindle, better choices in grocery food and alcohol - and ate the sort of cheap food people lived on, things like meatloaf and crappy ingredient dishes, I reckon it would be entirely possible.

The only thing that is prohibitively expensive today vs 1980 is housing. The reasons for that are multiple, but mostly NIMBYism.

A quick look at education numbers finds that, since 1988, the cost of private four year college has doubled (in inflation-adjusted dollars), and the cost of state four year college has tripled.

Again in constant dollars, health care has seen a more than fivefold increase since 1970, from under $2000 to over $10,000 per capita. Constant dollars, mind you.

Health care and education costs are more or less fixed and unavoidable. They're more like fees than taxes, flat no matter the income.

>> Health care and education costs are more or less fixed and unavoidable. They're more like fees than taxes, flat no matter the income.

Flat if you are lucky enough to be healthy. Enormous once you actually have an issue, like a complicated pregnancy, or something that requires an MRI.

Health care is amazingly better now than it was for our parents.

It's too good.

You can't pay less to get the world class care of ten years ago. Name one other sector you can't pay less for lower quality

Health care in the US costs twice as much as any other modernized nation, for worse results in many key measures (particularly no universal coverage, and high financial risk to individuals even with good insurance).

It's interesting when you imagine the other person is doing cooking, grocery shopping, child care, etc - doing the things you pay an app an inflated price to do for you.

However, it's housing - in the bay area in particular - that makes it look very impossible. For a relatively modest 1 BR apartment in SF, I'm paying close to half my after tax, after-401(k) take home, as a senior engineer doing relatively well.

If I'd need to pay 50% more to have a 2BR (at a minimum) for a wife and a child or two, that leaves a very small amount (for what's now twice as many people) to live on; roughly 10% of my base salary. It looks nearly impossible.

If you are extremely frugal (no restaurants, no vacations), if you get really lucky in finding housing, and most of all if there are no big surprise expenses (e.g. medical ones), MAYBE.

But none of those caveats applied in the case of my father; his standard of living was higher than mine is now.

Of course, if I were to move to another market, it's quite possible. I might take a 20% pay cut but if real estate is a third the cost than suddenly it doesn't seem like an impossible scaling issue that it currently is. I might even be able to afford a car.

But then you'd need to include things that they have that we don't.

The cost of activities for children has skyrocketed beyond belief compared to 40 years ago.

Wasn't the primary activity for children 40 years ago "go play in the street with your friends"? Has that become any more expensive?

Yes, outside wandering has been replaced with, "here's an iPad".

But if you're talking about any sort of instruction I'd say the prices have tripled. If you're talking about something like organized hockey? Prices are astronomical.

Hockey is not a good measure of kids activities. Not really common outside of the north, and wayyyy more expensive than most other sports.

Kids basketball consists of 1) kid. 2) shoes. 3) ball. And you only need 1 ball per group of kids. Ditto for soccer (futbol) A jersey is optional.

Hockey requires a bunch of pads which will be changed out every year or two as the kid gets bigger. Hopefully they have a sibling that can make use of them otherwise it's a sunk cost. Then there are broken sticks, broken teeth, hockey bags, ice time -- non-trvial -- and it adds up.

Hell, the cost of replacement skate blades -- not including the yearly sharpening -- is more than the cost of a basketball and a cheapo pair of wal-mart athletic shoes: https://www.bladzskateshop.com/product/bauer-lightspeed-repl...

Education? Tuition bubble? Healthcare?

I think they had cafes and restaurants etc. in the 70's...

Also Netflix is really, really cheap and my computer cost me approx 800 USD and has lasted 5 years.

Housing (and in the USA, healthcare and college I suppose) are by far the most expensive things for most people and have soared in price.

All the other things are negligible in comparison - it's like the people going on about avocado toast.

Death by 1000 cuts exists, though.

Assume $120 annually for Netflix. A cost almost everyone assumes now, and most people have (58M subscribers in the US/~120M households in the US). $120 compounded yearly at an 8% rate over 18 years is almost ~$5k. Depending on the year attended that's anywhere between 2/3 years of a degree and half of a semester at a public institution (in today's dollars).

Point is, it all adds up. And taking your example; the most expensive things we spend money on are also inflating at an abnormally high rate. The money has to come from somewhere, and when it's leaking out $10/month at a time, it's sometimes hard to find and easy to overlook.

I think people will stop being NIMBY when people stop being inconsiderate to others and I only see that trend skyrocketing right now.

Tons of people support whole families on a tech salary. I myself do it, as do 3 people on my team.

Another problem is that discretionary spending as a percent of household expenses went down over the same period. Households are much less financially secure than they used to be as a result.

In the 1970s, a single income household could more or less make ends meet when the primary bread winner couldn't work. The other spouse would find a job, the household would consume however much less, and life continued.

Nowadays, it's not unheard of for non-discretionary spending (mortgage or rent, other loans, taxes, health insurance, etc.) to constitute over half of a household's spending. If either of the two spouses can't work, things can rapidly go to hell.

Then again, your counterpoint completely ignores amount of household work needed in 1970 versus 2018.

Cooking, cleaning, washing dishes and cloth now are incomparable to 1970. Changing diapers is a lot less work now too.

Some things have become more difficult since then too. Free range parenting is very frowned upon - and micro-managing kids takes a lot of time and effort.

That is not needed the way washing cloth and ironing was. Which is why the micromanagement trends are not domain of working classes as much as upper classes.

Micromanaged kids don't need parent at home a lot of it is outsourced to schools and clubs. And parent at home wishing to be needed or useful may be contributing to the perceived need for micromanagement (plus those who want women at home for emotional or ideological reasons want to see all that mecessary).

I have four kids and several friends with kids, and I can tell you that the amount of effort+time it takes to not get CPS called on you (depending on where you live) can be very substantial.

Is this actually true, though? Do you have cases you can point to which establish that lower bound (parents who have had CPS called and CPS actually did something) or is this just the normal evolution of keeping up with the Joneses.

The reason I ask is that I hear this sentiment from parents a lot, and I got curious so I talked with actual CPS officials who laughed heartily at the things the parents thought.

Out of curiosity, what does get CPS called on you in your area? Second question: how much of it is a need of the child and how much serves more of "social mores controll" function?

For the record, I don't actually want to return to 1970 standards. However, I suspect that the extreme micromanagement has multiple reasons, but child's needs are not really the driver.

I agree with your last point. Anecdotally, as a kid I hated having a full schedule of mandatory activities, constant regiment, always getting ready. My friends who were the most stressed and unhappy were the ones with the most extracurricular responsibilities. Yet their parents were always pleased that they took on 4 AP classes, did 3 seasons of sports, lead role in the play, stem program after classes, etc. just to build up a college resume rather than improve a child’s happiness.

A kid can do sport, AP, have lead role in play, have stem club without parent doing micromanagement or spending a lot of time on it.

Perhaps more time is spent driving kids to activities, but a counterpoint is that kids have never had more video games or TV than the present.

Before kids were staying up late playing video games, they were staying up late with a comic book. I think there’s a fallacy in this notion that technology has changed how much time is spent by a child being productive or not. The medium might have changed, but I expect the mean amount of time goofing off (be it book, radio, tv, video game, or internet) to be constant throughout generations of children and teenagers.

We already had more tv and video games than we can handle when i was growing up in the 90s.

Wouldn't this be addressed by the fact that, as you said, we now have a new standard of multi-income households?

If everyone in America was in a single-income household, and then we all became, for instance, two-income households, wouldn't it make sense for individual incomes to drop by half?

Two-income households caused wages to drop due to labor oversupply.

Yes, exactly, and that shouldn't be a factor in the argument that wages are decreasing because the rich are capturing all economic gains. Looking at household income can (very roughly) remove that from factoring into the data.

Only if GDP remained constant. Inflation-adjusted GDP increase from ~5 trillion in the 70's to ~18 trillion today. Much larger than 2x, and not every household is dual-income.

Wouldn’t you want to adjust this for household growth too? Not saying it wouldn’t be larger than 2x, but population has grown and households I believe are growing even faster, so maybe it’s actually closer to 2x?