Ok, real median household income might have reached an all-time high. But what the author has failed to note is the amount of Americans living paycheck to paycheck.
After maxing out my 401(k) and paying down extra principal on my mortgage, there’s nothing left at the end of the month. It’s hard out here for us who are struggling!
I have when I was younger, and it’s quite stressful! I’m not poking fun at people who are struggling, I’m poking fun at people who think that a majority of Americans live paycheck to paycheck.
That may be true. But when my Buy Nothing group is mainly requests for food since SNAP was paused, it certainly doesn't feel that way. Psychologically, it probably feels worse because many people around you own cars, buy new clothes, and go on vacation, whereas in another place or time, you were less likely to have lots of contact with lots of people living the good life.
Social security is up 34% since 2019 and the price of a Chipotle chicken burrito is up 44%, just as an example.
I just came from a small town in NM with basically no real industry, and the diner in town has faced food and labor increases beyond what they can ask their (mostly retiree) customer base to pay, so they’re trying desperately to keep prices low and not go out of business.
What does"fixed income" mean. Wouldn't most of us love to be on a fixed income?
It's this "oh the poor boomers only get a guaranteed check that increases with inflation (aka NOT FIXED) " unlike the rest of us who can lose jobs at any time... (Not fixed in the opposite direction)
I could *sort of* defend someone saying this with a straight face for the 401k part. Like, most people should be saving ~15% for retirement, and if your 401k max isn't more than that, not being able to meet retirement standards and have anything left over is a bit concerning.
I've always lived paycheck to paycheck. First I get one paycheck, and then another. Never two at the same time. I guess dying in between payroll periods is one way not to live paycheck to paycheck, but at that point one has bigger concerns. Unless it happens at work, and then maybe it's worker's comp...? This is what I find so inspiring about the story of Hanukkah, with the miracle of moolah lasting eight days after Pharaoh cancelled SNAP benefits. Let my people go to the grocery store!
Very valid point. Even at times when I’ve had multiple jobs, their paychecks were generally not on the same day, and even when they were would always be some measurable interval of time between when they hit my account, probably because they used different payroll providers with ACH batches handled at different times. There’s just no escaping!
There's a real disconnect between what affluent guys think is going on in the country economically and what real people feel in their wallet every day, and Matt's post here is just the icing on that cake.
>...what real people feel in their wallet every day...<
Both affluent and non-affluent people are real. What's got your goat is that the available statistical information doesn't comport with your preconceptions.
I upvoted, but Blooming has a point that people are stubbornly ignoring. Aggregate statistics hide uneven distribution of benefits, and it isn't clear that the benefits actually make a difference, even if number is going up.
You're suggesting the anecdotes of a random, anonymous person on the internet have greater explanatory power than statistical information drawn from millions of data points?
I don't think anyone believes the economy is perfect. But on the narrow question of "are real wages declining or increasing" I'm gonna go with the statistics. Your mileage apparently varies.
If it’s obvious to you that the economy is worse than the statistics show, it’s not obvious to everyone. Why not share your argument instead of just snarking and treating it as self evident?
The question is not whether non-affluent people face difficulties, but how their situation compares in relative terms to what it's been historically. Non-affluent people always face some difficulties in life (pretty much by definition) but those difficulties are not unusually bad at this moment compared to the past.
Because averages hide pain points. Median incomes may be up, but essentials—housing, food, insurance, childcare—rose much faster in nominal terms than most people’s paychecks. People don’t live in inflation-adjusted charts; they live in cash flow. When rent, groceries, and car repairs eat more of each paycheck, “real income gains” feel meaningless.
How could it be the case that those essentials rose faster than most people’s paychecks but that this can’t be shown statistically? That seems like the kind of claim that could ONLY be shown statistically!
The elite tells me that the earth revolves around the sun, but in my gut I feel that the sun revolves around the earth and I will vote for the guy who respects my gut feeling.
I would note as I noted back in the Biden Days and Dem / Lefty Inflation Splaining / Inflation Denialism that structurally speaking there are some important consumption basket variances that overweight impact and stress lower-to-lower middle income wage earners which median data do not well capture.
Middle income to upper middle income (i.e. the Democrats now "core") face quite structurally different revenue constraints. And so Professional Class has a tendency to poo poo inflation impacts on psychological point for LI and LMI econ segments.
also the case that national aggregates are without doubt here deceptive.
All in all - the take away econometrically should be that for this kind of subject, national aggregates and national averages without close attention to the differing stress impacts on various income levels re inflation acceleration (change above all - people hate change)
This is part of why Biden Admin & Proggy Lecturing and Inflation Splaining was very dumb politics (even if the aggregates are at many levels correct and over time this equalises out).
I thought the data showed the exact opposite of what you're saying. That lower-income people did *better* under Biden than the median data showed, while upper middle income people did worse.
The closest I can come to steelmanning the inflation/affordability narrative (either under Biden or now) is that:
1. People get raises due to a) relatively predictable but low annual increases b) regional or industry-wide increased demand for specific types of labor c) personal circumstances like promotions, bonuses, and changing employers or industries
2. In a low-inflation environment, a) is usually enough to make sure that few people fall behind in real terms, even if b) or c) don’t apply to them
3. In a high inflation environment, a) doesn’t work. Overall wages may keep pace with or surpass inflation, as clearly has happened in recent years. But because b) and c) are inconsistent, some sizable percentage of people will fall behind in real terms.
4. Is it plausible, then, that 20% or so of people are worse off than in 2019? I think so. That doesn’t mean that “most people are struggling,” but it does mean that most people probably know someone who is. While social media doomerism doesn’t help, there is some reality to the narrative.
Mean vs median consumption may be behind some of the disconnect with Matt’s article vs some other things I’ve seen regarding the K shaped recovery and the tech industry employment crash — pretty sure I’ve seen a lot of coverage like this headline in the past 2 months, where higher higher-income spending offsets lower-income consumers tightening their belts and, in particular, experiencing a spike in debt default events:
And when was the last century when THAT was not true of most people? Even if you are paying dow a mortgage and putting something into a 401k, does it not still "feel" like living paychek to paycheck?
Matt’s doubling down on the technocrat’s belief that aggregate, estimated statistical measures are facts and reality that people should pay attention to instead of their personal circumstances. The problem is aggregate national statistics have and hide a lot of churn and variability under the surface not only at the individual level, but also locally and regionally. They are good for looking at trends, but that’s it.
It’s the same tone-deaf response Democrats had before the election trying to lecture people about how the economy was actually good, seemingly unaware of that churn and variability. People aren’t a modeled statistical average in reality.
At the same time “living paycheck to paycheck” is not a rigorous term with a clear and measurable definition. I’ve known, for example, a few people who are upper-middle class over the years say they live paycheck-to-paycheck and while that is true in the moment in some hand-wavy sense, it’s entirely because they chose to chase a lifestyle they can’t afford.
In short, and maybe it exists, but we need something that isn’t so subjective to measure who is actually on the brink in paycheck-to-paycheck terms and how many there are now compared to the pre-inflation era.
This is a joke right? Because the survey that statistic is from is junk (it counts people saving for retirement and investing as living paycheck to paycheck.)
I'm as big a fan as Matthew Darling (the guy on twitter who really pushed hard against this pay check to pay check measure) as anyone. And I agree that the SHED measure gets abused by doomer leftists.
But I'd also consider taking a look at Matthew Bruenig's writeup about the topic:
I remember when this came out, will give it a reread today. I remember thinking at the time that this was fair, but also didn't prove what the Bernie crowd was really saying. 60% of Americans are not struggling to get by.
Oh, absolutely. That SHED paycheck stat, as used in partisan politics, is obviously incorrect. One thing I like about the Bruenig article is that it highlights the weird fuzziness and complexity of what "paycheck to paycheck" even means - even if he ends up closer to the 60% figure than I would.
Yglesias works for the same ruling class that was telling us how great Bidenomics were working and that if we were struggling there was something wrong with us.
This is the fundamental problem with the Bernie/AOC wing. They keep talking about a problem that’s limited to a certain number of people. Even if they make progress on the overall economy, some people are still going to be in this situation. So, do you say that the mission has been accomplished or do you keep lying? If you keep lying, what did you achieve when you were in power?
If demanding that your unemployed friends spend $800 on your bachelorette party weekend is now considered to be OK, then things are somehow even worse than I thought they were.
I have a suspicion that the overlap between the audiences for Slow Boring and juicy wedding misbehavior might be low, but you see these sorts of stories all the freakin time on Reddit. Always questionable how true they are but... I've definitely known of some bachelor/bachelorette weekends that were WAY more than this. Remembering how little I was making in my 20s as a grad student and how I had to bail on these... fortunately my friends were understanding of that.
If you've never been through it, you would be amazed at the scope of the wedding-industrial complex, which exists because people are *extremely* willing to pay for things because it's a wedding and supposedly a once-in-a-lifetime event.
Sure, but also because there’s all this new disposable income sloshing around the system! People have funny ideas about this stuff. Where is the money supposed to go if not into extravagant weddings (and “baches” and the rest)? If you don’t like it (and I don’t) then you have a problem with the moral arc of the universe tending towards the masses getting rich.
I’m an old married lady but I had no dreams of a perfect wedding. My mother did all the work so as to have the wedding she had wanted but didn’t get. I was living in a different part of the country and mostly just showed up. My expectations of the event were *very* low but (probably for that reason) I ended up having a good time.
We got married at the court house and then I suggested to my parents they could cut me a nice check since I'd just saved them so much money. They did. (They had plenty, it wasn't an imposition.)
Some people get into a temporarily-crazy mindset where wedding-related costs become giffen goods: the high price is the point! If you're not spending a lot, then how do you know you're doing everything you can?
I’m of the opposite view. As the post details, there’s all this new disposable income sloshing around. What else are you gonna spend it on if not your “bach”? Spending $4k on your bach is equivalent to, what, a single house payment? So it’s not actually going to make a dent in your long-term savings as long as it’s a one-time thing.
My objection is that the sorts of things one spends on a $4k bachelorette party reflect tastes that don’t exactly scream refined.
I got married young, and we had a very small wedding with only immediate family then lunch ina nice restaurant. I thought I would regret it, but I never have, and I stress to my kids that I would be perfectly ok with them eloping.
Maybe not! The wife and I self-funded our wedding and were quite frugal about the whole thing. Everyone had a great time and still speak fondly of the wedding years and years later. My sister’s wedding cost $100k (of my parents money, of course) and she was stressed the whole time, says she regrets the whole thing (okay, not the actual marriage but the fancy destination venue and all the crazy stuff she had everyone running around doing).
My grad student-turned-postdoc gets invited to a handful of these (plus weddings) every summer. The most recent one in Sept. was in Italy! I keep telling her she doesn't have to go, but social etiquette demands it, apparently.
This kind of “social etiquette” makes me glad to be old (sitting on the big pile of money I have saved over the years by not spending on stupid stuff like this—planning your own vacation is great, spending money you’re not making to maintain agreeableness is, IMO, unwise).
Maybe I'm just a fancy upper middle class person as I didn't really get mad about this. Like I wouldn't do something that expensive, and if my friend needed an accomodations I'd certainly make it.
But $800 is just kinda the price of a big, fun, indulgent weekend. It's not exactly billionaire money. You consider a couple nights of reasonable hotel room, some gas, a couple of nice meals, an evening out at a some kind of event, and a few drinks, that's $800. This is a number that's less than a week of take home pay for the median person.
FWIW, the $800 was just for her portion of the vacation rental; total costs would probably end up being 1.5-2x that. I am an upper-middle class person, but I would be mad about someone putting those expectations on me (I guess that's why I don't get invited to bachelorette parties!).
It's $800 only for her share of the vacation rental. There's still food, drink, transportation and any associated activities. Then of course, there's the wedding itself which will involve buying a new dress, if she's a bridesmaid. I can see it being stressful for an unemployed person, for sure.
Perhaps median income/wages have gone up but MINE haven’t! So movie tickets go up, that’s real lack of affordability to me!
Two points I think you missed:
1. Median increases in wages still means there is a significant number of people in the bottom half of the curve who are not making more than inflationary rates, right?
2. A few months of progress doesn’t make up for the backsliding we’ve been experiencing for years.
Especially given that I doubt a lot of people have been getting raises such that their current job pays significantly better. Most people are lucky to get an annual raise that hasn't been entirely consumed by inflation and that just feels like sprinting to stand still.
I totally believe most people who took new jobs have gotten better starting pay than they would have, but that's not most people, and "get a better job" isn't something people can just throw into their household budgeting every six months.
There was a study recently which showed that (a) people have mostly increased their income by job switching and negotiating for higher pay, rather than regular raises and (b) that people hate doing that. Which I think is a big part of why people don't like the current economy.
I think it's even more real than people hating that shit. The people most concerned with affordability are specifically the people who are in the middle class and struggling to budget for a family. These things make people prioritize things like stable housing, job security, location/community, seniority linked benefits, etc, etc. They don't have the flexibility to drag their families around chasing better pay. And dramatic price increases put incredible strain on this kind of household budgeting.
This echos both my personal feelings on the "modern" economy and what I think folks like Kyla Scanlon and others have noted about modern pricing strategies.
Everything feels gamified and requires you do personally do optimization to get ahead. Whether its being a member of a billion different loyalty programs, having 200 apps downloaded on your phone so that you can harvest benefits from each one rather than pay the price on the menu, cycling through credit cards to get the sign-up bonuses before dipping, or whatever. It feels like you have to invest personal time and effort into every transaction or else you're getting screwed by someone.
So ya, there are ways to make it in this economy, but they all feel shitty. Whether that's constantly needing to jump from one employer to the next to maximize your salary or browsing 13 different apps to figure out the best one to get take-out from.
This ties into a general theory that I have (partially taken from @opinionhaver on Twitter) that modern society suffers from way too much optimization -- in sports, in relationships, in the economy.
Yes, exactly. A little coupon clipping around the margins is fine. But when you get into a retailer-vs.-consumer optimization arms race, the firms don't end up capturing much additional surplus, and most of the consumer surplus is nuked away in the form of wasted time.
As a personal anecdote, this is absolutely true - since 2020, I've been internally promoted once and I've received several above-average performance reviews. My salary, when adjusted for inflation, is basically the same as it was in 2020, while the cost of food, housing, and car insurance has gone up 20-40%. I'm still doing well financially, but it does absolutely feel like I'm working really hard and getting nowhere as a result. In talking with my coworkers, the ones that haven't changed jobs since the pandemic are in the same boat, and most all of them are quietly very frustrated about it.
I think this dynamic is a bigger deal than people realize. For those willing to assume bigger risks, change jobs, and move for jobs, they do better economically overall. But people who want to stay loyal to an employer and remain rooted in their community will comparatively lose. This is going to exacerbate the cosmopolitan vs localist divide, and feed into divisive national politics in a big way.
And this must not be true in many industries but in my industry when we’re reviewing resumes and see that someone has changed jobs every 1-3 years, it’s still seen as a red flag. It makes a person seem uncommitted and/or unreliable.
I should have dressed up for Halloween as a Nissan Altima with a missing bumper cover, a busted-out rear window covered with a trash bag, and Virginia plates - there is nothing scarier in the city of Baltimore...
I have seen a smoking Altima on Aliceanna. I have also seen one without a front wheel driving down President. Just the rim, sparks, and burning asphalt.
“Sir, we are going to impound your car and you are sentenced to corporal punishment from a Catholic nun with a yard stick.”
1) I had a major health crisis in 2020 that, once it was over, required strict surveillance for several years in case it came back. I was loath to change employers because I was afraid of losing access to the doctors & relationships I had built up in 2020 and 2021.
2) I was working on an advanced degree that my employer was paying for, and their requirement was that I reimburse them for the cost of the degree if I left within two years of finishing it.
3) I work in a fairly niche field, and most comparable jobs would have required relocating to cities with a much higher COL (Boston, Washington DC, Seattle, southern California, etc). While I'd have probably received a pretty great raise if I moved, I did some math on COL differences, and I'm not convinced that my standard of living would have grown commensurately.
"Everything in this inflationary economy is going up in price, except me".
I agree that a more relevant metric than median household income is what percentage of households' income grew slower than inflation over the last 3 years versus higher than inflation? That's potentially a better explanation for the affordability crisis than "vibes", if that number has grown significantly.
1) distributional effects- if 1/3 had flat (nominal) wages, 1/3 matched inflation, 1/3 beat inflation (by more than the inflation rate) it would mean median wage was keeping pace and the average would be going up. However, despite 2/3 of people doing the same or better, it would feel like 2/3 of doing the same or worse (also true)
Which combine with 2) the basket of goods show some high spikes, that look and sometimes are worse. For example, if food costs 1.5x more, and it is 20% of your pre-inflation spend. Your overall spending has only gone up 7%, which might be mitigated by a wage increase (spread out over a couple years). Yet mathematically, a 7% gain doesn’t feel like a 50% gain! Even if it is balanced out by other items getting cheaper in real terms.
This second factor makes even those with increased incomes feel robbed. You combine that with those that genuinely did not see income increase - everyone is pissed.
One more interesting point to add from Derek Thompson's Plain English podcast, of which Matt was a guest. Restaurants like Chipotle and McDonalds have reported less purchases from low-income customers.
Here knowing Median and Mode - my recollection from looking at such data last year is the there's signficant distribution so averages - median - are quite deceptive - both as being national and as disguising important income-level variations (also that one needs to understand different consumption basket weighting - the macro aggregate is a useful thing BUT like all tools it has its limitations that bleed into visibility in political sense like now)
It would be interesting to create @Wallace’s “accessibility vibe” stat like the “percentage of households' income grew slower than inflation over the last 3 years versus higher than inflation” on a Congressional District-by-District basis. I bet @Matt could do that in his sleep.
I also bet it would tell us that urbanites are getting screwed so Trump couldn’t care less
One of the great divisions between Generation X and Millennials, of which Matt and I are right on the cusp, is whether or not one can remember the great inflation of the 1970s.
As such, I want to pose a question to Slow Borers older than us: how long did it take people to get over the fact that prices weren't going down from what they were before? And did the Fed's shock therapy of the early 1980s help speed up getting over that?
I am also on that cusp and a recurring topic of my (boomer) parents family lore is how difficult it was for them to buy their first house (a condo in approximately 1979) because interest rates were so high.
To that point here is a very interesting artifact from Ghostbusters:
Now obviously in context 19% is supposed to be really high even in 1984 but per Google common rates at the time were around 13%. This says to me it was still on people's minds enough to be part of a throwaway joke in a major film.
I was born in 77, but I remember inflation clipping along at 5% for much of the 80s and 90s and people were mostly chill about it because things like cost of living adjustments became standard.
The real issue is when raises are literally based on performance, then you have to perform well just to stay even. Even if your employer puts a thumb on the scale and gives average employees a raise equal to inflation, you are told that you got your 3% bump for performance and you feel like inflation took it from you.
Inflation really does give employers more leverage over ordinary employees, because it makes declining real wages the default. But if your union gets you a cola, it isn’t so bad.
As a small businessman, ai don’t mind inflation because the prices I can charge are highly sensitive to the nominal resources of my client. Inflation has put a dent into my trust fund, but it’s also put a dent in my mortgage. I’ve taken a net loss on those, but if your mortgage is bigger than the wealth you are forced to invest in bonds, it’s net positive.
How do you deal with health insurance rates? I just came back from a conference where a number of directors were worried about the increase in rates because many employees will end up with less money in their pockets despite recent raises
Thanks. I misunderstood. I thought you meant you owned a small business, and was asking how you dealt with insurance cost increases for your staff. But it sounds like you may be your only staff member.
The recession of 1981-1982 may be illustrative. Unemployment had been as high as 11% at that point, interest rates were in the double digits, and inflation had also hit double digits, and then fallen to between 5% and 8% during those years. My dad was a low level executive at an energy company, and my mom stayed home. Most of my friends and neighbors worked in factories, and were constantly on the cusp of being laid off, or had been laid off, etc., and prices were a huge source of stress. Everyone was worried all the time. But Reagan was re-elected in a landslide in 1984 - when interest rates were still in the double digits, unemployment was around 7%, and inflation averaged out just below 5%.
I don't know if that indicates people were just used to the higher prices, or felt better because unemployment had fallen, or "vibes" or what. I know that when I bought my first home in 2000-2001 my mortgage rate was over 8%, so when I hear people complaining about 5% rates I smirk; but then again, home values were much lower when I bought my first place, and I managed to buy two more houses (sequentially, I mean) over time when values were still pretty low and interest rates had dropped down in the 2% - 3% range, then sold my last house at a pretty big markup in one market, bought another house at a fairly low price in a more depressed market and still at a low interest rate. Now my house has doubled in value, and I have that low interest rate. So anyone coming along in the past few years is at a real disadvantage in terms of purchasing a house.
Inflation over the past few years, along with a big increase in my property taxes, have put a dent in our income, but we are in an upper-middle income range. My relatives making $25,000 to $50,000 per year definitely feel that pain much more acutely, so telling them that median incomes are up isn't going to convince them that they live in the best of times. My grandparents grew up in crushing rural poverty where most people didn't have electricity or indoor plumbing right through the 1930s, and they were just as likely to use horses as they were to use motor vehicles; my cousins and I were alive during the bad years of the 1970s/early 1980s, but somewhat insulated from it by our youth, and our adulthood has been years of relatively stable prices, low interest rates, and low unemployment. It probably feels pretty bad compared to what they are used to.
I was in high school and college during that period but I don't remember my parents complaining too much as their wages were climbing too. And they had a 4 percent mortgage from 1966 that got increasingly smaller relatively (I think their monthly payment was $170 a month for our house in Laguna Beach, yeah Laguna was cheap until South OC grew into a financial center. That same house was listed at $5 million last year). I do remember the price of bread going from 39 cents to over a dollar. I was living on $50 a month for food in college ---a lot of oatmeal and I don't remember many BBQs, lol.
My Democratic plan to promote affordability: a browser extension powered by AI* that converts all nominal dollar figures to inflation-adjusted real dollars. Stretch goal if a 2028 trifecta is achieved: make it into smart glasses, so all prices everywhere are always real. Keeping It Real: A Vote For Democrats Is A Vote For Affordability. You'll never see inflation again!
*"Don't tell me these kids can't learn to code!" -OpenAI substitute teacher in Waiting For Sam Altman, now debuting at Cannes and other fine film festivals
Per my memory of Zack Carter’s biography of JM Keynes, the is the same dynamic that felled multiple British governments during the 1920s. Of course, their solution to the nominal price issue was to try to reinstate the gold standard, which, while narrowly effective, had the same negative economy-wide impacts you’d expect.
A lot of the big political fights here in the US of A in the 19th century were also over whether we should have inflation or deflation — though they were not phrased that way. Gold standard vs bimetalism (and free silver vs not within the bi mentalists) and the more communism inflected folks calling for paper money etc.
While I don’t disagree that affordability is directly linked to inflation, I tie this more to the perceived affordability of large purchases as you grow through life. Most people‘s first big purchase is a car, then it could be a house, then it could be paying for kids college. Depending on where you are in life, these coming expenses become a huge part of your spending and seeing the sticker prices on some of these items can cause quite a shock. To me affordability is about being able to make these larger purchases while not losing the ability to continue living your current lifestyle at the time of the purchase. The sticker price of these items always seems to go up, and seemingly faster than any other price.
Even beyond the sticker price, I was shopping for a car recently and felt that even though the sticker price wasn’t up by that much the actual price paid was dramatically higher because dealers were not throwing in any discounts or freebies like they used to but were instead charging for things. Actual prices seem to have gone up more than sticker prices and this may be a cause of hard-to-measure hidden inflation as well (not only for cars but also things like Costco, where discounts seem a lot less frequent even compared to last year).
The old rule of them was to not spend more than a quarter of your income on housing, which you could do through the 90s. Now I hear it's half your income and some are paying even more. That may be at the root of a lot of the money worries, even if you had a low interest rate mortgage you still paid a much higher cost for a house in the last 20-25 years.
I do think consumer anger is in response to increased prices on day-to-day household goods. However, I suspect you are right that the big purchases play a critical role, in particular a psychological one. Seeing inflation at the grocery store feels very different if it happens in the context of being nervous about housing costs or college costs or childcare costs. Each increase in price on a minor purchase can then trigger that larger anxiety.
I think an underrated factor is the explosion of cheap, less durable, often low-quality consumer goods over the past half century. Buying lots of bargain-basement stuff all the time is how Americans live their lives. There are some real material positives that come with that (also some real negatives, I’d argue, materially and not) but it does skew how people absorb price increases? When you expect to be buying new things constantly, a modest rise in prices feels like the horn of plenty has dried up.
Cars are dramatically cheaper than they used to be. As an example a 1995 Honda Accord EX-L was $26k that's $53k today. The actual current price is $34,490.
A lot of things can be true at the same time. I agree that the average American is better off today than any other year ever and much better than the average person in other developed nations. I agree that when we adjust prices with incomes that actual affordability has tended to improve most years.
But we still get pissed off when prices go up. They just seem too high. Day care, health insurance, rent, any kind of home or car service.
Perversely, the things that will (and clearly did) help keep prices from rising are more immigrants and more outsourcing production overseas. Between the 1990s and 2020, I was always amazed that prices on clothes and electronics seemed to never go up at all. It was great. Of course these create new sets of problems.
It seems like this topic could have a week of deep dive coverage as it's kinda endlessly fascinating. I think "people hate nominal price increases" is a compelling part of it, as is the relative price shifts between goods and child care; and the general lack of human well-being associated with cheaper streaming vs. child care.
But it also seems that there's not a situation where Americans would say "ok, things are affordable now", until you had a truly post-scarcity society. People will just keep adjusting their expectations. A lot people in their 20s today wouldn't dream of having a child until they have a separate bedroom for them in a house they own, and are ready to contribute $1000 a month to the college fund and other $1200 to the traveling soccer team. People in the hallowed 50s often had a family of five or six sharing a one bathroom, 1100 SQ ft tract house, and entertainment was "go throw rocks at the cranky old lady's mail box".
One of the ways people kept up with inflation in 2022-2024 was by changing jobs. That definitely feels more like your own effort than something you're going to credit to Bidenomics. It also probably for many people came with trade offs like longer commutes, more responsibility or hours.
My family is in exactly this situation, it's overall fine but it's not something we're doing victory laps over.
Yeah. My workplace has been giving out a standard raise of 2% per year, which is a real wage decrease. So if you want an increase you need to leave. Talking to friends it seems this is fairly normal.
Unemployment is low in part because inflation allows companies to decrease the wage bill without firing.
I just go to the grocery store and marvel. It's like every price is made up. That box of cereal costs how much? Are you sure? I remember when it was much less. At this store. Not that long ago. Am I being punked? It's a really strange experience. Soon bananas actually will be $10.
I wonder if it has to do with 12 years being long enough to move from one phase of life to another. If you go from 25 and single to married with kids at 37 it's harder to compare. Or to go from 37-49 and the kids are out of the house. 5 years is harder because your life phase is the same.
For me, I think it's that I still remember the prices for many things from 2008, so while I thought some things were expensive in 2019, now I look at them and some of the numbers just don't compute.
I think the actual answer is that affordability isn't really about anything in particular at all. Instead people are mad about the economy in general and have been since the financial crisis, and "affordability" is how that's currently expressed.
In that case isn't it about social media having a tremendous negativity bias? If you write an accurate story about how things are great and people are doing well - you get zero clicks.
I think a decent amount of people thought pre-covid economy was pretty good (usual welfare state is inadequate and why are we giving tax breaks to wealthy issues)
I'm anecdoting hard here, but my recollection was economy was good (we're out of the great recession) and it didn't have the same valence of everything sucks.
If you focus heavily on de industrialization as a concept maybe it was still everything sucks (but did the modal person have hope in Trump on this front if we grant more rural populations are now Republicans)?
Thanks for (perhaps accidentally?) answering my mailbag question, which was basically "is there a steelman case that 'affordability' is a useful and distinct economic concept?"
But this feels a bit more weak man than steelman to me. I'd think that before concluding that the "affordability crisis" is just everyone is being irrational, we'd want to (1) establish who, exactly, is angry about "affordability," and (2) address measurement issues, e.g., whether the real incomes of these angry people actually increased, taking into account that their consumption baskets might be different from the average.
A (non-exhaustive) list of points one could investigate.
1. It's actually not so clear that the *median change in real incomes* was positive during Biden's term. Note that this is a distinct measure from the *change in median real income*, and it's better suited to answer the question "did the median voter feel better off"?
During Biden's term, the median change in real income post taxes and transfers was actually negative, see here:
(Overall, this is a much better and more nuanced analysis than I've seen from generalist Substackers.)
2. We know most wage gains during inflationary periods accrue to those who change jobs or actively negotiate. What if these are costly actions for workers? Then people might be justifiably frustrated by inflation even if they end up consuming more, see here:
3. Much of the discussion of "affordability" is motivated by the conjecture that voters *swung* due to cost of living issues. Isn't it plausible that the most disgruntled voters (and therefore, those most likely to swing) would've disproportionately been those who experienced decreases in real income?
The main explanation is simpler: house prices and interest rates aren’t counted as part of the official inflation statistic but are extremely important to the actual level of inflation people face because housing and mortgages are most people’s biggest expense. This means that the actual inflation rate faced by non-homeowners (or homeowners looking to upgrade) is significantly higher than the official statistics and corresponding actual real incomes are lower. This is also true for people who finance cars or consumption via credit cards.
> It’s well known in the economics and political literature that voters are averse to inflation, even if nominal incomes rise faster than nominal prices. This is not rational, but it is very real.
A component of this aversion that is rational is that many price increases are smoother than income increases. The best way for an individual to realize the increase in prevailing wages is to get a new job. But the price of milk and gas goes up for everyone continuously. Housing is a big exception.
Ok, real median household income might have reached an all-time high. But what the author has failed to note is the amount of Americans living paycheck to paycheck.
After maxing out my 401(k) and paying down extra principal on my mortgage, there’s nothing left at the end of the month. It’s hard out here for us who are struggling!
Have you ever had to actually worry about making ends meet? It's not funny if you have.
I have when I was younger, and it’s quite stressful! I’m not poking fun at people who are struggling, I’m poking fun at people who think that a majority of Americans live paycheck to paycheck.
K hon
You should visit some towns where most people are on fixed incomes.
If you're from America and alive today you've already one of the luckiest people in human history.
That may be true. But when my Buy Nothing group is mainly requests for food since SNAP was paused, it certainly doesn't feel that way. Psychologically, it probably feels worse because many people around you own cars, buy new clothes, and go on vacation, whereas in another place or time, you were less likely to have lots of contact with lots of people living the good life.
Fixed incomes like SS that adjust for inflation? To what fixed income are you referring?
Social security is up 34% since 2019 and the price of a Chipotle chicken burrito is up 44%, just as an example.
I just came from a small town in NM with basically no real industry, and the diner in town has faced food and labor increases beyond what they can ask their (mostly retiree) customer base to pay, so they’re trying desperately to keep prices low and not go out of business.
What does"fixed income" mean. Wouldn't most of us love to be on a fixed income?
It's this "oh the poor boomers only get a guaranteed check that increases with inflation (aka NOT FIXED) " unlike the rest of us who can lose jobs at any time... (Not fixed in the opposite direction)
I could *sort of* defend someone saying this with a straight face for the 401k part. Like, most people should be saving ~15% for retirement, and if your 401k max isn't more than that, not being able to meet retirement standards and have anything left over is a bit concerning.
For principal payments, not so much.
I've always lived paycheck to paycheck. First I get one paycheck, and then another. Never two at the same time. I guess dying in between payroll periods is one way not to live paycheck to paycheck, but at that point one has bigger concerns. Unless it happens at work, and then maybe it's worker's comp...? This is what I find so inspiring about the story of Hanukkah, with the miracle of moolah lasting eight days after Pharaoh cancelled SNAP benefits. Let my people go to the grocery store!
Very valid point. Even at times when I’ve had multiple jobs, their paychecks were generally not on the same day, and even when they were would always be some measurable interval of time between when they hit my account, probably because they used different payroll providers with ACH batches handled at different times. There’s just no escaping!
Not me. I get direct deposits.
There's a real disconnect between what affluent guys think is going on in the country economically and what real people feel in their wallet every day, and Matt's post here is just the icing on that cake.
>...what real people feel in their wallet every day...<
Both affluent and non-affluent people are real. What's got your goat is that the available statistical information doesn't comport with your preconceptions.
I upvoted, but Blooming has a point that people are stubbornly ignoring. Aggregate statistics hide uneven distribution of benefits, and it isn't clear that the benefits actually make a difference, even if number is going up.
Yeah, stats show it all, for sure.
You're suggesting the anecdotes of a random, anonymous person on the internet have greater explanatory power than statistical information drawn from millions of data points?
I don't think anyone believes the economy is perfect. But on the narrow question of "are real wages declining or increasing" I'm gonna go with the statistics. Your mileage apparently varies.
If it’s obvious to you that the economy is worse than the statistics show, it’s not obvious to everyone. Why not share your argument instead of just snarking and treating it as self evident?
K hon
Stop that.
The question is not whether non-affluent people face difficulties, but how their situation compares in relative terms to what it's been historically. Non-affluent people always face some difficulties in life (pretty much by definition) but those difficulties are not unusually bad at this moment compared to the past.
How so?
Because averages hide pain points. Median incomes may be up, but essentials—housing, food, insurance, childcare—rose much faster in nominal terms than most people’s paychecks. People don’t live in inflation-adjusted charts; they live in cash flow. When rent, groceries, and car repairs eat more of each paycheck, “real income gains” feel meaningless.
That isn't true. If I was able to prove it wasn't true, would you change you mind?
I would like to see what you would post to change his mind.
No. Because you can't prove it with charts and graphs.
So your beliefs are unfalsifiable? That must be comforting.
How could it be the case that those essentials rose faster than most people’s paychecks but that this can’t be shown statistically? That seems like the kind of claim that could ONLY be shown statistically!
The elite tells me that the earth revolves around the sun, but in my gut I feel that the sun revolves around the earth and I will vote for the guy who respects my gut feeling.
I would note as I noted back in the Biden Days and Dem / Lefty Inflation Splaining / Inflation Denialism that structurally speaking there are some important consumption basket variances that overweight impact and stress lower-to-lower middle income wage earners which median data do not well capture.
Middle income to upper middle income (i.e. the Democrats now "core") face quite structurally different revenue constraints. And so Professional Class has a tendency to poo poo inflation impacts on psychological point for LI and LMI econ segments.
also the case that national aggregates are without doubt here deceptive.
All in all - the take away econometrically should be that for this kind of subject, national aggregates and national averages without close attention to the differing stress impacts on various income levels re inflation acceleration (change above all - people hate change)
This is part of why Biden Admin & Proggy Lecturing and Inflation Splaining was very dumb politics (even if the aggregates are at many levels correct and over time this equalises out).
I thought the data showed the exact opposite of what you're saying. That lower-income people did *better* under Biden than the median data showed, while upper middle income people did worse.
"60% of all people!"
Are you kidding? It was 60% during Obama. After 5 years of Trump it must be 80%!
The closest I can come to steelmanning the inflation/affordability narrative (either under Biden or now) is that:
1. People get raises due to a) relatively predictable but low annual increases b) regional or industry-wide increased demand for specific types of labor c) personal circumstances like promotions, bonuses, and changing employers or industries
2. In a low-inflation environment, a) is usually enough to make sure that few people fall behind in real terms, even if b) or c) don’t apply to them
3. In a high inflation environment, a) doesn’t work. Overall wages may keep pace with or surpass inflation, as clearly has happened in recent years. But because b) and c) are inconsistent, some sizable percentage of people will fall behind in real terms.
4. Is it plausible, then, that 20% or so of people are worse off than in 2019? I think so. That doesn’t mean that “most people are struggling,” but it does mean that most people probably know someone who is. While social media doomerism doesn’t help, there is some reality to the narrative.
We keep hearing about a K-shaped economy, which should be borne out in some of this data...
Mean vs median consumption may be behind some of the disconnect with Matt’s article vs some other things I’ve seen regarding the K shaped recovery and the tech industry employment crash — pretty sure I’ve seen a lot of coverage like this headline in the past 2 months, where higher higher-income spending offsets lower-income consumers tightening their belts and, in particular, experiencing a spike in debt default events:
https://www.reuters.com/business/us-firms-grapple-with-economic-divide-lower-income-struggles-mount-2025-10-24/
And when was the last century when THAT was not true of most people? Even if you are paying dow a mortgage and putting something into a 401k, does it not still "feel" like living paychek to paycheck?
Matt’s doubling down on the technocrat’s belief that aggregate, estimated statistical measures are facts and reality that people should pay attention to instead of their personal circumstances. The problem is aggregate national statistics have and hide a lot of churn and variability under the surface not only at the individual level, but also locally and regionally. They are good for looking at trends, but that’s it.
It’s the same tone-deaf response Democrats had before the election trying to lecture people about how the economy was actually good, seemingly unaware of that churn and variability. People aren’t a modeled statistical average in reality.
At the same time “living paycheck to paycheck” is not a rigorous term with a clear and measurable definition. I’ve known, for example, a few people who are upper-middle class over the years say they live paycheck-to-paycheck and while that is true in the moment in some hand-wavy sense, it’s entirely because they chose to chase a lifestyle they can’t afford.
In short, and maybe it exists, but we need something that isn’t so subjective to measure who is actually on the brink in paycheck-to-paycheck terms and how many there are now compared to the pre-inflation era.
This is a joke right? Because the survey that statistic is from is junk (it counts people saving for retirement and investing as living paycheck to paycheck.)
Ok, this article convinced me:
https://www.slowboring.com/p/this-economic-myth-needs-to-go-away
I'm as big a fan as Matthew Darling (the guy on twitter who really pushed hard against this pay check to pay check measure) as anyone. And I agree that the SHED measure gets abused by doomer leftists.
But I'd also consider taking a look at Matthew Bruenig's writeup about the topic:
https://www.peoplespolicyproject.org/2025/03/19/how-many-people-live-paycheck-to-paycheck/
I'm not a SHED believer, but more sympathetic towards the truth not being wholly monopolized by Darling.
I remember when this came out, will give it a reread today. I remember thinking at the time that this was fair, but also didn't prove what the Bernie crowd was really saying. 60% of Americans are not struggling to get by.
Oh, absolutely. That SHED paycheck stat, as used in partisan politics, is obviously incorrect. One thing I like about the Bruenig article is that it highlights the weird fuzziness and complexity of what "paycheck to paycheck" even means - even if he ends up closer to the 60% figure than I would.
https://i.imgur.com/sqKDHrK.png
Yglesias works for the same ruling class that was telling us how great Bidenomics were working and that if we were struggling there was something wrong with us.
Damn those pesky facts.
This is the fundamental problem with the Bernie/AOC wing. They keep talking about a problem that’s limited to a certain number of people. Even if they make progress on the overall economy, some people are still going to be in this situation. So, do you say that the mission has been accomplished or do you keep lying? If you keep lying, what did you achieve when you were in power?
So this was all a troll post all along?
If demanding that your unemployed friends spend $800 on your bachelorette party weekend is now considered to be OK, then things are somehow even worse than I thought they were.
I'm a lot angrier than I should be that "Bach" is now a normal shorthand for "bachelorette party" (presumably also "bachelor party"?).
How many of us read that as the composer till we saw the full context?
Hand up. I was baffled as to why Bach was in play....
I thought Matt was setting up to share an article from 1730
Raises hand
Bach was a rager, unlike that lamewad Beethoven.
I sincerely thought that's what was being referred to at first.
Me too, hence my confusion!
Bach was a natalist champion: 20 kids!
Ain’t no party like a Bach party.
So what does that make Brahms?
Lullaby guy, he stays in!
I was *extremely* confused by that at first.
Also, yuck.
At first I thought her friend was upset she couldn't attend her concert.
I have a suspicion that the overlap between the audiences for Slow Boring and juicy wedding misbehavior might be low, but you see these sorts of stories all the freakin time on Reddit. Always questionable how true they are but... I've definitely known of some bachelor/bachelorette weekends that were WAY more than this. Remembering how little I was making in my 20s as a grad student and how I had to bail on these... fortunately my friends were understanding of that.
I…can’t believe this is a thing. Just have a wedding, spend your money on more sensible things and let your friends do the same.
If you've never been through it, you would be amazed at the scope of the wedding-industrial complex, which exists because people are *extremely* willing to pay for things because it's a wedding and supposedly a once-in-a-lifetime event.
Sure, but also because there’s all this new disposable income sloshing around the system! People have funny ideas about this stuff. Where is the money supposed to go if not into extravagant weddings (and “baches” and the rest)? If you don’t like it (and I don’t) then you have a problem with the moral arc of the universe tending towards the masses getting rich.
I’m an old married lady but I had no dreams of a perfect wedding. My mother did all the work so as to have the wedding she had wanted but didn’t get. I was living in a different part of the country and mostly just showed up. My expectations of the event were *very* low but (probably for that reason) I ended up having a good time.
We got married at the court house and then I suggested to my parents they could cut me a nice check since I'd just saved them so much money. They did. (They had plenty, it wasn't an imposition.)
Ever the romantic, that's me.
Some people get into a temporarily-crazy mindset where wedding-related costs become giffen goods: the high price is the point! If you're not spending a lot, then how do you know you're doing everything you can?
I’m of the opposite view. As the post details, there’s all this new disposable income sloshing around. What else are you gonna spend it on if not your “bach”? Spending $4k on your bach is equivalent to, what, a single house payment? So it’s not actually going to make a dent in your long-term savings as long as it’s a one-time thing.
My objection is that the sorts of things one spends on a $4k bachelorette party reflect tastes that don’t exactly scream refined.
I spent too much on my wedding. I got yelled at so much for pointing out costs and trade offs, only for my wife to agree with me after the fact.
Now my sister in law’s wedding is going to be even more expensive….
I got married young, and we had a very small wedding with only immediate family then lunch ina nice restaurant. I thought I would regret it, but I never have, and I stress to my kids that I would be perfectly ok with them eloping.
Or the opposite. Get married at city hall and then have a joint bachelor and bachelorette party.
The arms race factor is out of control.
I am sceptical about ragebait things posted on Reddit, I think quite a lot are just fake.
They're good fiction, though. And the comments are fun.
Maybe not! The wife and I self-funded our wedding and were quite frugal about the whole thing. Everyone had a great time and still speak fondly of the wedding years and years later. My sister’s wedding cost $100k (of my parents money, of course) and she was stressed the whole time, says she regrets the whole thing (okay, not the actual marriage but the fancy destination venue and all the crazy stuff she had everyone running around doing).
There were quails at my wedding. It was funny, they just popped in at the end.
Yglesias is on the case:
https://www.vox.com/2014/7/25/5884435/wedding-planning-tips-from-economics
My grad student-turned-postdoc gets invited to a handful of these (plus weddings) every summer. The most recent one in Sept. was in Italy! I keep telling her she doesn't have to go, but social etiquette demands it, apparently.
This kind of “social etiquette” makes me glad to be old (sitting on the big pile of money I have saved over the years by not spending on stupid stuff like this—planning your own vacation is great, spending money you’re not making to maintain agreeableness is, IMO, unwise).
I'm just imagining Matt casually reading Wedding Etiquette posts between NBER papers to come up with this example.
People don’t plan their leisure around impecunious friends. It will always be socially awkward to have less money than your friends.
Maybe I'm just a fancy upper middle class person as I didn't really get mad about this. Like I wouldn't do something that expensive, and if my friend needed an accomodations I'd certainly make it.
But $800 is just kinda the price of a big, fun, indulgent weekend. It's not exactly billionaire money. You consider a couple nights of reasonable hotel room, some gas, a couple of nice meals, an evening out at a some kind of event, and a few drinks, that's $800. This is a number that's less than a week of take home pay for the median person.
FWIW, the $800 was just for her portion of the vacation rental; total costs would probably end up being 1.5-2x that. I am an upper-middle class person, but I would be mad about someone putting those expectations on me (I guess that's why I don't get invited to bachelorette parties!).
Fair, I didn't read carefully enough. That's getting pretty steep.
Lyn has a shit friend
I actually was surprised it was that low an amount at issue.
It's $800 only for her share of the vacation rental. There's still food, drink, transportation and any associated activities. Then of course, there's the wedding itself which will involve buying a new dress, if she's a bridesmaid. I can see it being stressful for an unemployed person, for sure.
I cringed so hard reading that. Even accounting for the likelihood of making shit up, wedding culture seems out of control.
Mike Leach was a national treasure on this subject. Damn I miss him.
https://www.youtube.com/watch?v=GUSKmzzh-X8
https://www.youtube.com/watch?v=gGIap2_tmng
Yeah I'm pretty sure when I planned my friend's bachelor party it was $100 at most.
Hah...
Perhaps median income/wages have gone up but MINE haven’t! So movie tickets go up, that’s real lack of affordability to me!
Two points I think you missed:
1. Median increases in wages still means there is a significant number of people in the bottom half of the curve who are not making more than inflationary rates, right?
2. A few months of progress doesn’t make up for the backsliding we’ve been experiencing for years.
Especially given that I doubt a lot of people have been getting raises such that their current job pays significantly better. Most people are lucky to get an annual raise that hasn't been entirely consumed by inflation and that just feels like sprinting to stand still.
I totally believe most people who took new jobs have gotten better starting pay than they would have, but that's not most people, and "get a better job" isn't something people can just throw into their household budgeting every six months.
There was a study recently which showed that (a) people have mostly increased their income by job switching and negotiating for higher pay, rather than regular raises and (b) that people hate doing that. Which I think is a big part of why people don't like the current economy.
I think it's even more real than people hating that shit. The people most concerned with affordability are specifically the people who are in the middle class and struggling to budget for a family. These things make people prioritize things like stable housing, job security, location/community, seniority linked benefits, etc, etc. They don't have the flexibility to drag their families around chasing better pay. And dramatic price increases put incredible strain on this kind of household budgeting.
This echos both my personal feelings on the "modern" economy and what I think folks like Kyla Scanlon and others have noted about modern pricing strategies.
Everything feels gamified and requires you do personally do optimization to get ahead. Whether its being a member of a billion different loyalty programs, having 200 apps downloaded on your phone so that you can harvest benefits from each one rather than pay the price on the menu, cycling through credit cards to get the sign-up bonuses before dipping, or whatever. It feels like you have to invest personal time and effort into every transaction or else you're getting screwed by someone.
So ya, there are ways to make it in this economy, but they all feel shitty. Whether that's constantly needing to jump from one employer to the next to maximize your salary or browsing 13 different apps to figure out the best one to get take-out from.
This ties into a general theory that I have (partially taken from @opinionhaver on Twitter) that modern society suffers from way too much optimization -- in sports, in relationships, in the economy.
Yes, exactly. A little coupon clipping around the margins is fine. But when you get into a retailer-vs.-consumer optimization arms race, the firms don't end up capturing much additional surplus, and most of the consumer surplus is nuked away in the form of wasted time.
Costco is such a breath of fresh air
As a personal anecdote, this is absolutely true - since 2020, I've been internally promoted once and I've received several above-average performance reviews. My salary, when adjusted for inflation, is basically the same as it was in 2020, while the cost of food, housing, and car insurance has gone up 20-40%. I'm still doing well financially, but it does absolutely feel like I'm working really hard and getting nowhere as a result. In talking with my coworkers, the ones that haven't changed jobs since the pandemic are in the same boat, and most all of them are quietly very frustrated about it.
I think this dynamic is a bigger deal than people realize. For those willing to assume bigger risks, change jobs, and move for jobs, they do better economically overall. But people who want to stay loyal to an employer and remain rooted in their community will comparatively lose. This is going to exacerbate the cosmopolitan vs localist divide, and feed into divisive national politics in a big way.
And this must not be true in many industries but in my industry when we’re reviewing resumes and see that someone has changed jobs every 1-3 years, it’s still seen as a red flag. It makes a person seem uncommitted and/or unreliable.
Maryland stopped ticketing people and they have let so many uninsured drivers operate on the roads.
I should have dressed up for Halloween as a Nissan Altima with a missing bumper cover, a busted-out rear window covered with a trash bag, and Virginia plates - there is nothing scarier in the city of Baltimore...
I have seen a smoking Altima on Aliceanna. I have also seen one without a front wheel driving down President. Just the rim, sparks, and burning asphalt.
“Sir, we are going to impound your car and you are sentenced to corporal punishment from a Catholic nun with a yard stick.”
Why the reluctance to change jobs during one of the strongest labor markets in history?
A few reasons:
1) I had a major health crisis in 2020 that, once it was over, required strict surveillance for several years in case it came back. I was loath to change employers because I was afraid of losing access to the doctors & relationships I had built up in 2020 and 2021.
2) I was working on an advanced degree that my employer was paying for, and their requirement was that I reimburse them for the cost of the degree if I left within two years of finishing it.
3) I work in a fairly niche field, and most comparable jobs would have required relocating to cities with a much higher COL (Boston, Washington DC, Seattle, southern California, etc). While I'd have probably received a pretty great raise if I moved, I did some math on COL differences, and I'm not convinced that my standard of living would have grown commensurately.
Most people with families don't have the flexibility to chase higher pay all the time.
"Everything in this inflationary economy is going up in price, except me".
I agree that a more relevant metric than median household income is what percentage of households' income grew slower than inflation over the last 3 years versus higher than inflation? That's potentially a better explanation for the affordability crisis than "vibes", if that number has grown significantly.
I think there are two metrics that hide it.
1) distributional effects- if 1/3 had flat (nominal) wages, 1/3 matched inflation, 1/3 beat inflation (by more than the inflation rate) it would mean median wage was keeping pace and the average would be going up. However, despite 2/3 of people doing the same or better, it would feel like 2/3 of doing the same or worse (also true)
Which combine with 2) the basket of goods show some high spikes, that look and sometimes are worse. For example, if food costs 1.5x more, and it is 20% of your pre-inflation spend. Your overall spending has only gone up 7%, which might be mitigated by a wage increase (spread out over a couple years). Yet mathematically, a 7% gain doesn’t feel like a 50% gain! Even if it is balanced out by other items getting cheaper in real terms.
This second factor makes even those with increased incomes feel robbed. You combine that with those that genuinely did not see income increase - everyone is pissed.
One more interesting point to add from Derek Thompson's Plain English podcast, of which Matt was a guest. Restaurants like Chipotle and McDonalds have reported less purchases from low-income customers.
Article link: https://abcnews.go.com/Business/restaurant-chains-sounding-alarm-consumers/story?id=127291717
Podcast link: https://www.theringer.com/podcasts/plain-english-with-derek-thompson
Here knowing Median and Mode - my recollection from looking at such data last year is the there's signficant distribution so averages - median - are quite deceptive - both as being national and as disguising important income-level variations (also that one needs to understand different consumption basket weighting - the macro aggregate is a useful thing BUT like all tools it has its limitations that bleed into visibility in political sense like now)
It would be interesting to create @Wallace’s “accessibility vibe” stat like the “percentage of households' income grew slower than inflation over the last 3 years versus higher than inflation” on a Congressional District-by-District basis. I bet @Matt could do that in his sleep.
I also bet it would tell us that urbanites are getting screwed so Trump couldn’t care less
One of the great divisions between Generation X and Millennials, of which Matt and I are right on the cusp, is whether or not one can remember the great inflation of the 1970s.
As such, I want to pose a question to Slow Borers older than us: how long did it take people to get over the fact that prices weren't going down from what they were before? And did the Fed's shock therapy of the early 1980s help speed up getting over that?
I am also on that cusp and a recurring topic of my (boomer) parents family lore is how difficult it was for them to buy their first house (a condo in approximately 1979) because interest rates were so high.
To that point here is a very interesting artifact from Ghostbusters:
https://youtu.be/N5C8C1WAywU?si=-L6s71TZSkOVR62T
Now obviously in context 19% is supposed to be really high even in 1984 but per Google common rates at the time were around 13%. This says to me it was still on people's minds enough to be part of a throwaway joke in a major film.
I was born in 77, but I remember inflation clipping along at 5% for much of the 80s and 90s and people were mostly chill about it because things like cost of living adjustments became standard.
The real issue is when raises are literally based on performance, then you have to perform well just to stay even. Even if your employer puts a thumb on the scale and gives average employees a raise equal to inflation, you are told that you got your 3% bump for performance and you feel like inflation took it from you.
Inflation really does give employers more leverage over ordinary employees, because it makes declining real wages the default. But if your union gets you a cola, it isn’t so bad.
As a small businessman, ai don’t mind inflation because the prices I can charge are highly sensitive to the nominal resources of my client. Inflation has put a dent into my trust fund, but it’s also put a dent in my mortgage. I’ve taken a net loss on those, but if your mortgage is bigger than the wealth you are forced to invest in bonds, it’s net positive.
How do you deal with health insurance rates? I just came back from a conference where a number of directors were worried about the increase in rates because many employees will end up with less money in their pockets despite recent raises
I get insurance through my wife’s job and comp her for the after tax hit she takes on that.
Thanks. I misunderstood. I thought you meant you owned a small business, and was asking how you dealt with insurance cost increases for your staff. But it sounds like you may be your only staff member.
I’ve never offered insurance to employees, most of my assistants have been under 26 and gotten it through their family, otherwise the exchanges
The recession of 1981-1982 may be illustrative. Unemployment had been as high as 11% at that point, interest rates were in the double digits, and inflation had also hit double digits, and then fallen to between 5% and 8% during those years. My dad was a low level executive at an energy company, and my mom stayed home. Most of my friends and neighbors worked in factories, and were constantly on the cusp of being laid off, or had been laid off, etc., and prices were a huge source of stress. Everyone was worried all the time. But Reagan was re-elected in a landslide in 1984 - when interest rates were still in the double digits, unemployment was around 7%, and inflation averaged out just below 5%.
I don't know if that indicates people were just used to the higher prices, or felt better because unemployment had fallen, or "vibes" or what. I know that when I bought my first home in 2000-2001 my mortgage rate was over 8%, so when I hear people complaining about 5% rates I smirk; but then again, home values were much lower when I bought my first place, and I managed to buy two more houses (sequentially, I mean) over time when values were still pretty low and interest rates had dropped down in the 2% - 3% range, then sold my last house at a pretty big markup in one market, bought another house at a fairly low price in a more depressed market and still at a low interest rate. Now my house has doubled in value, and I have that low interest rate. So anyone coming along in the past few years is at a real disadvantage in terms of purchasing a house.
Inflation over the past few years, along with a big increase in my property taxes, have put a dent in our income, but we are in an upper-middle income range. My relatives making $25,000 to $50,000 per year definitely feel that pain much more acutely, so telling them that median incomes are up isn't going to convince them that they live in the best of times. My grandparents grew up in crushing rural poverty where most people didn't have electricity or indoor plumbing right through the 1930s, and they were just as likely to use horses as they were to use motor vehicles; my cousins and I were alive during the bad years of the 1970s/early 1980s, but somewhat insulated from it by our youth, and our adulthood has been years of relatively stable prices, low interest rates, and low unemployment. It probably feels pretty bad compared to what they are used to.
As GenX I would say... people complained through the 80s. Ghostbusters reference cited below is useful.
Gen-Xer here. I think that inflation was different because there was a big recession with really high unemployment. That reset expectations.
>how long did it take people to get over the fact that prices weren't going down from what they were before?<
Realistically? They never got over it.
Ask people who worked for Jimmy Carter.
My parents and grandparents are still upset about it
I was in high school and college during that period but I don't remember my parents complaining too much as their wages were climbing too. And they had a 4 percent mortgage from 1966 that got increasingly smaller relatively (I think their monthly payment was $170 a month for our house in Laguna Beach, yeah Laguna was cheap until South OC grew into a financial center. That same house was listed at $5 million last year). I do remember the price of bread going from 39 cents to over a dollar. I was living on $50 a month for food in college ---a lot of oatmeal and I don't remember many BBQs, lol.
My Democratic plan to promote affordability: a browser extension powered by AI* that converts all nominal dollar figures to inflation-adjusted real dollars. Stretch goal if a 2028 trifecta is achieved: make it into smart glasses, so all prices everywhere are always real. Keeping It Real: A Vote For Democrats Is A Vote For Affordability. You'll never see inflation again!
*"Don't tell me these kids can't learn to code!" -OpenAI substitute teacher in Waiting For Sam Altman, now debuting at Cannes and other fine film festivals
"Your savings account earned -3.14% interest this year"
Add in an automatic sales-tax converter... Wal*mart isn't allowed to lie to me anymore!
This is incredible especially the end
Per my memory of Zack Carter’s biography of JM Keynes, the is the same dynamic that felled multiple British governments during the 1920s. Of course, their solution to the nominal price issue was to try to reinstate the gold standard, which, while narrowly effective, had the same negative economy-wide impacts you’d expect.
A lot of the big political fights here in the US of A in the 19th century were also over whether we should have inflation or deflation — though they were not phrased that way. Gold standard vs bimetalism (and free silver vs not within the bi mentalists) and the more communism inflected folks calling for paper money etc.
While I don’t disagree that affordability is directly linked to inflation, I tie this more to the perceived affordability of large purchases as you grow through life. Most people‘s first big purchase is a car, then it could be a house, then it could be paying for kids college. Depending on where you are in life, these coming expenses become a huge part of your spending and seeing the sticker prices on some of these items can cause quite a shock. To me affordability is about being able to make these larger purchases while not losing the ability to continue living your current lifestyle at the time of the purchase. The sticker price of these items always seems to go up, and seemingly faster than any other price.
Even beyond the sticker price, I was shopping for a car recently and felt that even though the sticker price wasn’t up by that much the actual price paid was dramatically higher because dealers were not throwing in any discounts or freebies like they used to but were instead charging for things. Actual prices seem to have gone up more than sticker prices and this may be a cause of hard-to-measure hidden inflation as well (not only for cars but also things like Costco, where discounts seem a lot less frequent even compared to last year).
The old rule of them was to not spend more than a quarter of your income on housing, which you could do through the 90s. Now I hear it's half your income and some are paying even more. That may be at the root of a lot of the money worries, even if you had a low interest rate mortgage you still paid a much higher cost for a house in the last 20-25 years.
I do think consumer anger is in response to increased prices on day-to-day household goods. However, I suspect you are right that the big purchases play a critical role, in particular a psychological one. Seeing inflation at the grocery store feels very different if it happens in the context of being nervous about housing costs or college costs or childcare costs. Each increase in price on a minor purchase can then trigger that larger anxiety.
I think an underrated factor is the explosion of cheap, less durable, often low-quality consumer goods over the past half century. Buying lots of bargain-basement stuff all the time is how Americans live their lives. There are some real material positives that come with that (also some real negatives, I’d argue, materially and not) but it does skew how people absorb price increases? When you expect to be buying new things constantly, a modest rise in prices feels like the horn of plenty has dried up.
Cars are dramatically cheaper than they used to be. As an example a 1995 Honda Accord EX-L was $26k that's $53k today. The actual current price is $34,490.
A lot of things can be true at the same time. I agree that the average American is better off today than any other year ever and much better than the average person in other developed nations. I agree that when we adjust prices with incomes that actual affordability has tended to improve most years.
But we still get pissed off when prices go up. They just seem too high. Day care, health insurance, rent, any kind of home or car service.
Perversely, the things that will (and clearly did) help keep prices from rising are more immigrants and more outsourcing production overseas. Between the 1990s and 2020, I was always amazed that prices on clothes and electronics seemed to never go up at all. It was great. Of course these create new sets of problems.
It seems like this topic could have a week of deep dive coverage as it's kinda endlessly fascinating. I think "people hate nominal price increases" is a compelling part of it, as is the relative price shifts between goods and child care; and the general lack of human well-being associated with cheaper streaming vs. child care.
But it also seems that there's not a situation where Americans would say "ok, things are affordable now", until you had a truly post-scarcity society. People will just keep adjusting their expectations. A lot people in their 20s today wouldn't dream of having a child until they have a separate bedroom for them in a house they own, and are ready to contribute $1000 a month to the college fund and other $1200 to the traveling soccer team. People in the hallowed 50s often had a family of five or six sharing a one bathroom, 1100 SQ ft tract house, and entertainment was "go throw rocks at the cranky old lady's mail box".
One of the ways people kept up with inflation in 2022-2024 was by changing jobs. That definitely feels more like your own effort than something you're going to credit to Bidenomics. It also probably for many people came with trade offs like longer commutes, more responsibility or hours.
My family is in exactly this situation, it's overall fine but it's not something we're doing victory laps over.
Yeah. My workplace has been giving out a standard raise of 2% per year, which is a real wage decrease. So if you want an increase you need to leave. Talking to friends it seems this is fairly normal.
Unemployment is low in part because inflation allows companies to decrease the wage bill without firing.
I mean, it IS kind of wild that prices are up 25% since Jan 2020 (which I will call "pre-pandemic").
25% is a lot and quite noticeable, especially when we had such a long period of pretty stable prices in the 2010s (after the GFC)
source: https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=100&year1=200001&year2=202509
[note: apologies, initially 2020 was typo-ed as 2000! fixed.]
I just go to the grocery store and marvel. It's like every price is made up. That box of cereal costs how much? Are you sure? I remember when it was much less. At this store. Not that long ago. Am I being punked? It's a really strange experience. Soon bananas actually will be $10.
I think prices from before 911 have gone up more than 25%
Prices are up 25% since Jan 2020. They're up 92% since Jan 2000.
oh , correct! shoot, let me see if I can fix it
"25% is a lot and quite noticeable, especially when we had such a long period of pretty stable prices in the 2010s (after the GFC)"
Inflation was 23% from 2008 to 2020.
I agree with the number but I can't tell if you are agreeing with me or not re how it felt! :)
For me, inflation in that 2008-2020 period was so slow that I didn't even notice.
I wonder if it has to do with 12 years being long enough to move from one phase of life to another. If you go from 25 and single to married with kids at 37 it's harder to compare. Or to go from 37-49 and the kids are out of the house. 5 years is harder because your life phase is the same.
For me, I think it's that I still remember the prices for many things from 2008, so while I thought some things were expensive in 2019, now I look at them and some of the numbers just don't compute.
That’s roughly 1.7% which doesn’t seem very high.
The M2 money supply:
https://fred.stlouisfed.org/series/M2SL
Obligatory Simpsons Meme:
https://frinkiac.com/meme/S05E20/287369.jpg?b64lines=IFdIWSwgVEhFUkUncyBubyBvbmUgSEVSRSAKV2hvIHVuZGVyc3RhbmRzIHJlYWwgdnMuIApOb21pbmFsIHByaWNlcyBhbmQgaW5jb21lCkVpdGhlci4gCgoKCiBBTSBJIFNPIE9VVAogT0YgVE9VQ0g_CgpObywgaXQncyB0aGUgdm90ZXJzIHRoYXQKQXJlIHdyb25nLg==
Alongside compound interest, we need to find a way to intuitively teach in school the concept or adjusting for inflation.
I think the actual answer is that affordability isn't really about anything in particular at all. Instead people are mad about the economy in general and have been since the financial crisis, and "affordability" is how that's currently expressed.
In that case isn't it about social media having a tremendous negativity bias? If you write an accurate story about how things are great and people are doing well - you get zero clicks.
I think it's genuine, people hate how the economy works now even though most people are doing well income-wise.
What parts do they hate?
Personally I think it's the end of Fordism but actual research is needed.
I think a decent amount of people thought pre-covid economy was pretty good (usual welfare state is inadequate and why are we giving tax breaks to wealthy issues)
Isn't that just nostalgia bias? I don't recall anyone thinking it was particularly good c. 2019.
I'm anecdoting hard here, but my recollection was economy was good (we're out of the great recession) and it didn't have the same valence of everything sucks.
If you focus heavily on de industrialization as a concept maybe it was still everything sucks (but did the modal person have hope in Trump on this front if we grant more rural populations are now Republicans)?
People liked the economy in 2019 and 2021.
I don't think that's really true about 2021
Thanks for (perhaps accidentally?) answering my mailbag question, which was basically "is there a steelman case that 'affordability' is a useful and distinct economic concept?"
But this feels a bit more weak man than steelman to me. I'd think that before concluding that the "affordability crisis" is just everyone is being irrational, we'd want to (1) establish who, exactly, is angry about "affordability," and (2) address measurement issues, e.g., whether the real incomes of these angry people actually increased, taking into account that their consumption baskets might be different from the average.
A (non-exhaustive) list of points one could investigate.
1. It's actually not so clear that the *median change in real incomes* was positive during Biden's term. Note that this is a distinct measure from the *change in median real income*, and it's better suited to answer the question "did the median voter feel better off"?
During Biden's term, the median change in real income post taxes and transfers was actually negative, see here:
https://jzmazlish.substack.com/p/yes-inflation-made-the-median-voter
(Overall, this is a much better and more nuanced analysis than I've seen from generalist Substackers.)
2. We know most wage gains during inflationary periods accrue to those who change jobs or actively negotiate. What if these are costly actions for workers? Then people might be justifiably frustrated by inflation even if they end up consuming more, see here:
https://jadhazell.github.io/website/draft_conflicts.pdf
3. Much of the discussion of "affordability" is motivated by the conjecture that voters *swung* due to cost of living issues. Isn't it plausible that the most disgruntled voters (and therefore, those most likely to swing) would've disproportionately been those who experienced decreases in real income?
https://jzmazlish.substack.com/p/yes-inflation-made-the-median-voter
This was a great piece, thanks for sharing
The main explanation is simpler: house prices and interest rates aren’t counted as part of the official inflation statistic but are extremely important to the actual level of inflation people face because housing and mortgages are most people’s biggest expense. This means that the actual inflation rate faced by non-homeowners (or homeowners looking to upgrade) is significantly higher than the official statistics and corresponding actual real incomes are lower. This is also true for people who finance cars or consumption via credit cards.
OER is included, but I think the inability to buy an affordable new home of the preferred type is a MAJOR driver.
> It’s well known in the economics and political literature that voters are averse to inflation, even if nominal incomes rise faster than nominal prices. This is not rational, but it is very real.
A component of this aversion that is rational is that many price increases are smoother than income increases. The best way for an individual to realize the increase in prevailing wages is to get a new job. But the price of milk and gas goes up for everyone continuously. Housing is a big exception.