Thread by @Noahpinion

1/Today's @bopinion post is about the question of whether the cost of living has really risen faster than workers' paychecks.

The answer is: It's complicated.

bloomberg.com/opinion/articl…

2/You all probably saw this viral chart making the rounds the other day.

This chart has many major problems, but tells an important story.

First we'll go through the reasons the chart's numbers are wrong. Then we'll go through why the basic story it tells is right.

3/First of all, health care.

The chart counts health insurance premiums in "costs", but doesn't count employer premium contributions in "income". Thus, it makes it seem as if many workers are paying for something they're not actually paying for.

4/If you subtract employer premium contributions from health costs - so that the health cost line reflects the out-of-pocket costs that workers actually have to pay - the chart looks less scary.

Here's that modified chart, by @CaptainTako:

5/The second problem with that chart is "college". The chart assumes that the median worker is always paying full college tuition, every day of his working life. But that's obviously a big mistake.

vox.com/2020/2/25/2115…

6/The third big problem with the graph is that it focuses entirely on men. That ignores half of the population.

Women's earnings have gone up substantially.

7/Higher earnings for women means:
A) much more independence for women who choose not to be economically dependent on a man
B) more income and higher standards of living for dual-earner couples

The chart just ignores that entirely!

8/There have been many critiques of that viral chart, from both the left and the right.

Here's my colleague @MichaelRStrain, who leans more to the right:
bloomberg.com/opinion/articl…

9/But OK, even though the chart contains many large errors, the basic story it tells is important and valuable. It almost certainly DOES seem harder to get into the middle class, or stay in the middle class, than in past decades.

10/Thanks to rising inequality and slower growth, the chances that an American will earn more than their parents has fallen from a near-certainty to a coin flip.

nber.org/papers/w22910

11/Americans' houses have gotten steadily bigger.

But their commutes have gotten longer:
washingtonpost.com/transportation…

Zoning regulations and poor public transit are probably forcing many Americans to live in big houses in exurbs, where they'd rather not be.

12/Americans work fewer hours than they used to. For many, this is a good thing; more leisure time is good.

But for some, it's just a case of underemployment: bloomberg.com/opinion/articl…

13/And perhaps the biggest reason why it feels hard to be middle-class these days is "positional goods". Also known as "keeping up with the Joneses".

investopedia.com/terms/p/positi…

14/Middle-class living standards have risen in absolute material terms.

The median worker has a bigger house, more cars, etc.

But what if the standard of what it means to be a middle-class person has risen even faster?

15/As inequality has widened, the standard of a middle-class life may now be defined not by the median, but by the UPPER middle class.

Going from making $40k to making $50k is great, unless "success" is now defined by the lifestyles of people making $150k.

16/Out-of-pocket health costs, college tuition, and big-city rent are rising even as mobility falls, inequality rises, and keeping up with the Joneses gets harder.

Under these circumstances, pointing to rising median incomes is like saying "Let them eat cake".

17/So although viral charts showing doom and gloom are usually wrong, there's a reason they're going viral. People really do feel squeezed, and aggregate statistics can't change that.

(end)

bloomberg.com/opinion/articl…