The Cheapest Generation(theatlantic.com)
theatlantic.com
The Cheapest Generation
http://www.theatlantic.com/magazine/archive/2012/09/the-cheapest-generation/309060/
41 comments
Also think about how much easier it is to buy used vehicles. All the car buying websites have changed the auto sales industry in the last 10 years. The used car market is much bigger now and more selection, meanwhile consumers are more informed as ever on the value of new cars.
Though as much as the article talks about cultural preferences of Gen Y, I think the "cheapness" is being driven solely by Gen Y having no money. Sure you can say you don't need your car as a status symbol, but if you were making 40% more in salary and didn't have $100k in student debt, you'd get a nicer car.
We all entered college as tuition skyrocketed and yet the real value of a degree is shrinking, and we all graduated into a decade of zero economic growth. We're masking our (relative) poverty by being content with all are parents old used stuff and calling it "cool".
Though as much as the article talks about cultural preferences of Gen Y, I think the "cheapness" is being driven solely by Gen Y having no money. Sure you can say you don't need your car as a status symbol, but if you were making 40% more in salary and didn't have $100k in student debt, you'd get a nicer car.
We all entered college as tuition skyrocketed and yet the real value of a degree is shrinking, and we all graduated into a decade of zero economic growth. We're masking our (relative) poverty by being content with all are parents old used stuff and calling it "cool".
I don't have £100,000 in student debt - because I didn't go to university. I'm not rich, but I'm financially independent. The only thing that would push me to get a nicer car would be better reliability, or better gas mileage - which both save you money (in gas, and repair bills / wasted time) in the long run. Car ownership is purely financial for me.
> younger generations don't see a house or a car as a symbol of status or wealth, merely as something to be used, as a necessity
And then there are fixies - impractical bikes that cost 700 euro simply because they are cool. Whereas you can get a practical bike for less than 200 euro.
Maybe it is that we are cheap, so those things that cost beyond a certain threshold (like cars and housing) just need to work, whereas things under a threshold need to work and be cool.
iPhones also strike me as an example of this. Ray Ban glasses as well. A lot of clothing stuff ... actually pretty much everything but houses, cars and the big expenses must be cool enough to be bought.
And then there are fixies - impractical bikes that cost 700 euro simply because they are cool. Whereas you can get a practical bike for less than 200 euro.
Maybe it is that we are cheap, so those things that cost beyond a certain threshold (like cars and housing) just need to work, whereas things under a threshold need to work and be cool.
iPhones also strike me as an example of this. Ray Ban glasses as well. A lot of clothing stuff ... actually pretty much everything but houses, cars and the big expenses must be cool enough to be bought.
> Bikes
Fixies aren't really popular beyond the hipster demographic; while there are a lot of bikes that cost >$500 dollars, they're generally bought by serious bikers for whom the value proposition is more than worth it.
> iPhone
The only thing exorbitant to me about the iPhone is the data plan, because of how often I'm in the range of WiFi. I'd argue having a personal GPS, email client, information lookup, etc. etc. is more than worth the monthly fee -- I've been lost in the country enough times.
> RayBans
Sunglasses, unfortunately, are in a stranglehold market. You either spend $20 and get colored glass or spend $200 and get an actual product (at a ridiculous markup.)
(That being said, I've had my same pair of RayBans for 8 years. They hold up well.
Fixies aren't really popular beyond the hipster demographic; while there are a lot of bikes that cost >$500 dollars, they're generally bought by serious bikers for whom the value proposition is more than worth it.
> iPhone
The only thing exorbitant to me about the iPhone is the data plan, because of how often I'm in the range of WiFi. I'd argue having a personal GPS, email client, information lookup, etc. etc. is more than worth the monthly fee -- I've been lost in the country enough times.
> RayBans
Sunglasses, unfortunately, are in a stranglehold market. You either spend $20 and get colored glass or spend $200 and get an actual product (at a ridiculous markup.)
(That being said, I've had my same pair of RayBans for 8 years. They hold up well.
I'm kind of in a lucky demographic when it comes to sunglasses. I live in the midwest, drive a beat-up old truck, grew up in the countryside, watch NASCAR and baseball, and fish as a hobby. This affords me the luxury of being able to get away with wearing $20 sunglasses I bought at WalMart without anyone thinking twice about it. It just fits in with the rest of my exterior-facing personality. This is good, because with my relaxation hobbies, I tend to lose or break my cheap sunglasses a few times per year in situations where even Ray Bans would be lost or broken. With $20 shades, I don't need to worry.
We all choose what demographic we're going to fit in with, and with that comes tradeoffs. I have many expensive computers and the latest smartphone. This forces me to be frugal with the cost of my vehicle and the price tag on my jeans, allowing me to be "that redneck who turns into a nerd during the week" as well as "that nerd who turns into a redneck on the weekends".
I think more than the frugal generation, we're the generation who feels free to choose who we want to be and balance the tradeoffs we have to make. No longer does end goal have to be a house in the suburbs, two kids, and this year's nicest sedan, nor are our cliques set in stone. I can be both a nerd and a redneck, I can listen to both techno and country, and that's not weird. I don't have to own the nicest of everything in order to be a part of society.
We all choose what demographic we're going to fit in with, and with that comes tradeoffs. I have many expensive computers and the latest smartphone. This forces me to be frugal with the cost of my vehicle and the price tag on my jeans, allowing me to be "that redneck who turns into a nerd during the week" as well as "that nerd who turns into a redneck on the weekends".
I think more than the frugal generation, we're the generation who feels free to choose who we want to be and balance the tradeoffs we have to make. No longer does end goal have to be a house in the suburbs, two kids, and this year's nicest sedan, nor are our cliques set in stone. I can be both a nerd and a redneck, I can listen to both techno and country, and that's not weird. I don't have to own the nicest of everything in order to be a part of society.
Sunglasses, unfortunately, are in a stranglehold market. You either spend $20 and get colored glass or spend $200 and get an actual product
I've found pretty much the opposite.
I've owned 3-4 pairs of expensive sunglasses in my life, and all but one of them was crap. I'm convinced that the price differential is for nothing but a designer name.
My favorite sunglasses ever I paid $25 for at Rite-Aid, and I liked it so much I bought another pair to keep in the car. They're polarized, the optics seem good, they're solid and durable, comfortable, and don't make me look like a madman. What else do I need?
I've found pretty much the opposite.
I've owned 3-4 pairs of expensive sunglasses in my life, and all but one of them was crap. I'm convinced that the price differential is for nothing but a designer name.
My favorite sunglasses ever I paid $25 for at Rite-Aid, and I liked it so much I bought another pair to keep in the car. They're polarized, the optics seem good, they're solid and durable, comfortable, and don't make me look like a madman. What else do I need?
Speaking as a bit of a layman on the subject, but I know Oakleys are rated for some level of impact resistance (I think they're polycarbonate lenses like in prescription glasses vs. regular "shattering" plastic that may be found in cheaper sunglasses). It might be important to you if you're the active type.
What else do I need?
I think the parent says the cheaper sunglasses lacks UV protection.
I think the parent says the cheaper sunglasses lacks UV protection.
Well, that rack at Rite-Aid is full of glasses that claim to have UVA and UVB protection. Is the concern that these claims are false? Or that the degree of protection is insufficient?
> Sunglasses, unfortunately, are in a stranglehold market.
Most of the sunglass brands that people know, and the stores they buy them from, are owned by a single company:
http://online.wsj.com/article/SB1000142405274870451890457536...
Most of the sunglass brands that people know, and the stores they buy them from, are owned by a single company:
http://online.wsj.com/article/SB1000142405274870451890457536...
This sort of extreme economic consolidation hiding behind an apparently wide range of retailers and/or brands is very common. You could make the same observation, say, of laptops (Foxconn), consumer goods (Proctor & Gamble), or ag products (Monsanto, ConAgra).
I work in central London and see a lot of people riding about on these bikes, clearly very expensive ones often too. This is a part of town where it's impossible to park, the traffic is terrible, and you have to pay[1] to drive there at all. I definitely see the fixie (or really the bike in general) taking over from the car as a status symbol for some people. Driving a car through Soho marks you out as either rich or stupid or both, a bike has a whole set of other connotations about fitness, ethics, intelligence. The expensive ones also carry wealth sat us of course.
I think the point is, that while it's true they are often status symbols, there is a practical motivation behind them too.
[1] Congestion Charge - http://www.tfl.gov.uk/roadusers/congestioncharging/
I think the point is, that while it's true they are often status symbols, there is a practical motivation behind them too.
[1] Congestion Charge - http://www.tfl.gov.uk/roadusers/congestioncharging/
You may feel fixies are impractical but they carry benefits. The primary one being better power transfer. Second, you can often make a cheap fixie by finding an old frame, refurbishing it, and replacing the rear hub. Yes, you can buy them for $700+ but unlike iPhones, there are a number of ways to obtain one for cheap.
Further, a bike that costs less than $200 is certainly not a bike I would buy for commuting. Having commuted without a car for over three years, I can assure you that steel frames are not your friend and arguably not practical if you want to enjoy your lifestyle.
Further, a bike that costs less than $200 is certainly not a bike I would buy for commuting. Having commuted without a car for over three years, I can assure you that steel frames are not your friend and arguably not practical if you want to enjoy your lifestyle.
I disagree re: steel frames. All of my bikes are steel, from my race bike (yes, actually raced... well, in the past) to my city bike. The race bike weighs in right around where the aluminum bike it replaced came in.
Steel rides great. Cheap steel will weigh more than cheap aluminum, but is not that much heavier once you factor in yourself and what you carry.
The nice thing about steel is that it's repairable, rides nicely, and fails gracefully (should it fail at all).
Steel rides great. Cheap steel will weigh more than cheap aluminum, but is not that much heavier once you factor in yourself and what you carry.
The nice thing about steel is that it's repairable, rides nicely, and fails gracefully (should it fail at all).
> I can assure you that steel frames are not your friend
Speaking as one who spent $3500 on a steel-framed commuting/winter training bike, I obviously disagree. Aluminum rides rough and carbon is just silly on a commuter.
Though to give you the benefit of the doubt, you did mention "<$200". I think that's more the issue than what the frame is made of.
Speaking as one who spent $3500 on a steel-framed commuting/winter training bike, I obviously disagree. Aluminum rides rough and carbon is just silly on a commuter.
Though to give you the benefit of the doubt, you did mention "<$200". I think that's more the issue than what the frame is made of.
> You may feel fixies are impractical but they carry benefits. The primary one being better power transfer.
Huh? The "chain loss" is the same during power. There's some friction loss when you're not pedaling a "not fixie" but there's also a "friction loss" in your legs when you're spinning just to keep a fixie's wheels turning.
> Second, you can often make a cheap fixie by finding an old frame, refurbishing it, and replacing the rear hub.
A coaster hub isn't that much more expensive and the user-experience is much better for most people. (That said, a coaster hub with some gears is reasonably cheap.)
And, replacing a hub is work (or expensive). It's often easier/cheaper to just find a rear wheel.
Huh? The "chain loss" is the same during power. There's some friction loss when you're not pedaling a "not fixie" but there's also a "friction loss" in your legs when you're spinning just to keep a fixie's wheels turning.
> Second, you can often make a cheap fixie by finding an old frame, refurbishing it, and replacing the rear hub.
A coaster hub isn't that much more expensive and the user-experience is much better for most people. (That said, a coaster hub with some gears is reasonably cheap.)
And, replacing a hub is work (or expensive). It's often easier/cheaper to just find a rear wheel.
So, for those of us who know nothing about bikes, why are steel frames suboptimal for commuting?
They aren't, IMO. They don't weigh much more (and seriously what kind of commute do you have that weight matters that much? This isn't the tour de france...)
The ride of a decent steel bike is much softer (less harsh) than an aluminum bike. An old steel 10 speed with tension shifters (less fiddly/adjustment prone) is my idea of a perfect commuter bike...
The ride of a decent steel bike is much softer (less harsh) than an aluminum bike. An old steel 10 speed with tension shifters (less fiddly/adjustment prone) is my idea of a perfect commuter bike...
Was about to post the same thing but you said it all.
Steel vs aluminum is like vi vs emacs. People argue about it all the time, but if you just go test ride some bikes you'll find out pretty quite which you prefer.
I like steel. Aluminum is just too bone-jarring.
Steel vs aluminum is like vi vs emacs. People argue about it all the time, but if you just go test ride some bikes you'll find out pretty quite which you prefer.
I like steel. Aluminum is just too bone-jarring.
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Really low end steel is usually heavy. On the high end though (Pegoretti, etc), they're plenty light and ride like a dream. The "common $700 fixie" - the Bianchi Pista - is steel. They all rust when abused though.
Weight.
Weight, as long as it isn't excessive, is only something racers need to worry about. I own aluminum and steel frame bicycles and the main difference is how the different materials feel when going across bumps. The weight difference is probably there, but it's not big enough to notice.
Well, my dream bike wouldn't really work as a fixie. But then again, it probably wouldn't work very well for commuting either - I use a longboard for that.
However, I'd love to try riding a fixie some time. It sounds interesting.
However, I'd love to try riding a fixie some time. It sounds interesting.
You're right: cars are a means to an end. The incremental value provided by a luxury car over a regular car is exceedingly slight, and ends up going negative when you compare long term maintenance and gas prices.
The entire problem with luxury cars is summed up in the word 'luxury': burning cash for social proof.
The entire problem with luxury cars is summed up in the word 'luxury': burning cash for social proof.
The incremental value is entirely dependent on the person buying the car. I've owned a mercedes for 8 years and when I drive other peoples cars I go crazy because of the little things I take for granted in my car.
I dunno man, stuff like this:
http://www.youtube.com/watch?v=CwwWqRV2RsI
Makes me think its just a matter of the younger generation not having the money to buy a car. They spend it all on smaller, indulgent purchases and fail at saving.
http://www.youtube.com/watch?v=CwwWqRV2RsI
Makes me think its just a matter of the younger generation not having the money to buy a car. They spend it all on smaller, indulgent purchases and fail at saving.
I finally got a car since I was able to land an abusrdly cheap loan (2%!), but still won't touch a house. Real estate where I live is absurd, and I do not live in one of the big prestigious cities. (I used to, and real estate there was incomprehensible.)
Why did you need a loan to buy a car? I just waited a couple of months until I'd saved enough to buy a small, fairly old car for cash. It's not a fancy car, but it is reliable, cheap to run, cheap to insure, and costs me nothing in terms of financing now.
> "What if Millennials’ aversion to car-buying isn’t a temporary side effect of the recession, but part of a permanent generational shift in tastes and spending habits?"
It's hardly surprising that people without the money for cars are of the opinion they aren't so important anyway. Not being able to afford things tends to draw into sharp relief the difference between wants and needs.
And I realize Ford's marketing department can't do much about the slow, grinding recovery and thus are stuck worrying about long-term attitude shifts. But until the demographics show millenials moving to and staying in urban areas where transit is a feasible option, I can't imagine it's legitimately worth fretting over.
If millenials still choose to settle down to raise children in the suburbs, car ownership is pretty much necessary.
The only real threat from lasting attitude change, is that perhaps millenials will vote for more transit projects and subsidies over more car/road projects and subsidies and thus make it more feasible in more areas to not own cars.
It's hardly surprising that people without the money for cars are of the opinion they aren't so important anyway. Not being able to afford things tends to draw into sharp relief the difference between wants and needs.
And I realize Ford's marketing department can't do much about the slow, grinding recovery and thus are stuck worrying about long-term attitude shifts. But until the demographics show millenials moving to and staying in urban areas where transit is a feasible option, I can't imagine it's legitimately worth fretting over.
If millenials still choose to settle down to raise children in the suburbs, car ownership is pretty much necessary.
The only real threat from lasting attitude change, is that perhaps millenials will vote for more transit projects and subsidies over more car/road projects and subsidies and thus make it more feasible in more areas to not own cars.
> If millenials still choose to settle down to raise children in the suburbs...
I think that's an open question. Anecdotally, there are an awful lot of young families in my particular urban environment, mine included. Most intend to stay if they can, some give up and decide they "need" a bigger house than they can afford here.
As far as schools, this area is past the point of critical mass where there are enough high-earning, highly-educated families staying that they've driven the school quality up. Plus there is a huge and vibrant community of home schoolers to work with if you want a DIY education.
I think that's an open question. Anecdotally, there are an awful lot of young families in my particular urban environment, mine included. Most intend to stay if they can, some give up and decide they "need" a bigger house than they can afford here.
As far as schools, this area is past the point of critical mass where there are enough high-earning, highly-educated families staying that they've driven the school quality up. Plus there is a huge and vibrant community of home schoolers to work with if you want a DIY education.
> The only real threat from lasting attitude change, is that perhaps millenials will vote for more transit projects and subsidies over more car/road projects and subsidies and thus make it more feasible in more areas to not own cars.
We can only hope.
We can only hope.
The trend for mass transit is to remove options from travelers, thus making itself less useful to us. As such, it's hardly worth funding. [1]
That's not to say that it must be inherently so. Just that, so long as these projects are typical government projects that are expected to go over-budget and over-deadline with no repercussions, they will be used as a tool for political favors and cronyism, at our expense.
[1] http://www.cato-at-liberty.org/denver-fools-the-wall-street-... Quote:
The old-style public transit system used cheap, flexible buses whose routes could be altered overnight to take people from where they were to where they wanted to go. When Denver first built rail, it substituted expensive but glamorous trains for inexpensive buses, but still allowed people to go from where they were–provided they were willing to drive to a park-and-ride station–to where they wanted to go–provided they wanted to go downtown. ...
This has been tried before, of course, most notably in Portland. How well did it work there? In 1980, under the old bus-transit model, transit carried 9.8 percent of Portland-area commuters to work. By 2010, with seven different rail lines and scores of transit-oriented developments, transit carried just 7.1 percent of the region’s commuters to work.
That's not to say that it must be inherently so. Just that, so long as these projects are typical government projects that are expected to go over-budget and over-deadline with no repercussions, they will be used as a tool for political favors and cronyism, at our expense.
[1] http://www.cato-at-liberty.org/denver-fools-the-wall-street-... Quote:
The old-style public transit system used cheap, flexible buses whose routes could be altered overnight to take people from where they were to where they wanted to go. When Denver first built rail, it substituted expensive but glamorous trains for inexpensive buses, but still allowed people to go from where they were–provided they were willing to drive to a park-and-ride station–to where they wanted to go–provided they wanted to go downtown. ...
This has been tried before, of course, most notably in Portland. How well did it work there? In 1980, under the old bus-transit model, transit carried 9.8 percent of Portland-area commuters to work. By 2010, with seven different rail lines and scores of transit-oriented developments, transit carried just 7.1 percent of the region’s commuters to work.
The Portland numbers are pretty much irrelevant without accompanying context. e.g. population growth, sprawl, rail expansion vs average commute distances, funding, etc.
As for the linked arugment: seriously? People are honestly arguing that Denver should allow the problems of rail in America[1] to be exacerbated rather than addressed [2]???
Should we have built highways that went from suburban stables to urban stables because people liked their horses, owned horses and horses can go more places than cars (absent further roads)?
What kind of logical argument is that?
[1] the old "you can take the train downtown, but then you still need a car to get anywhere".
[2] say, by ensuring there are useful destinations at the other end of the rail line.
As for the linked arugment: seriously? People are honestly arguing that Denver should allow the problems of rail in America[1] to be exacerbated rather than addressed [2]???
Should we have built highways that went from suburban stables to urban stables because people liked their horses, owned horses and horses can go more places than cars (absent further roads)?
What kind of logical argument is that?
[1] the old "you can take the train downtown, but then you still need a car to get anywhere".
[2] say, by ensuring there are useful destinations at the other end of the rail line.
Portland's transit problems stem from the fact that most of the region's job growth over the past 20 years has taken place away from downtown. On a given morning, there are almost as many commuters driving to jobs in the west suburbs as driving to jobs in the city. Of course, the light rail doesn't go to where the jobs are in the suburbs. Not without the need to walk considerable distances or transfer to a bus.
most of the region's job growth over the past 20 years has taken place away from downtown
I think that's central to the point of my linked citation.
People stubbornly insist on buying homes where they want to live, rather than where bureaucrats claim they should. For a transit strategy to have any success, it needs to address what people are actually going to do -- or at least not pretend that it is doing so.
I think that's central to the point of my linked citation.
People stubbornly insist on buying homes where they want to live, rather than where bureaucrats claim they should. For a transit strategy to have any success, it needs to address what people are actually going to do -- or at least not pretend that it is doing so.
I live in Portland and use public transit every day. On every article about Trimet on OregonLive, there are people that cite the same numbers you do, that say that these services are useless and that nobody uses them.
Until you do use them, and you realize that every bus is full, every Max car is standing room only and for as slow as the streetcar is, it is still packed every time. Considering the growth rate in this city, it isn't surprising that numbers look like they're going down.
I complain about the continuously, almost monthly, rising costs of a Trimet pass every month, but $100/mo compared to the $600+ I was paying for insurance and car payments (and not even including maintenance) has allowed me to live a more comfortable lifestyle. Forcing me to get a bike and living in a city that embraces its bicyclists has even made it a more healthy lifestyle as well.
Until you do use them, and you realize that every bus is full, every Max car is standing room only and for as slow as the streetcar is, it is still packed every time. Considering the growth rate in this city, it isn't surprising that numbers look like they're going down.
I complain about the continuously, almost monthly, rising costs of a Trimet pass every month, but $100/mo compared to the $600+ I was paying for insurance and car payments (and not even including maintenance) has allowed me to live a more comfortable lifestyle. Forcing me to get a bike and living in a city that embraces its bicyclists has even made it a more healthy lifestyle as well.
Of course, the die was cast in the 40s, 50s, and 60s for the automobile. It's impossible to build effective mass transit to serve a low density population. But the argument should not be whether or not to build ineffective mass transit layered on top of low density sprawling metro areas, but instead about what are our nation's transit and residential goals in the long term, like next sixty years -- because you eventually have to fix the mess we've made.
Sure, I'm not arguing against the idea itself. My concern is how to approach it without it continuing to fester as a slush bucket for cronyism.
Today, the actual effect is not addressing actual "transit and residential goals". It's to funnel tax dollars to entities favored by the bureaucrats -- return the favor for campaign donations and so on (how else to explain that they've universally cost so much more than we agree to pay, yet they fail so dismally at attracting riders?).
So I believe that we need to find out how the system continues to be corrupted, so that we can go forward with a plan that can be reasonably expected to be successful. Following this pattern just digs us a deeper fiscal hole, without doing very much to address the real goal.
Today, the actual effect is not addressing actual "transit and residential goals". It's to funnel tax dollars to entities favored by the bureaucrats -- return the favor for campaign donations and so on (how else to explain that they've universally cost so much more than we agree to pay, yet they fail so dismally at attracting riders?).
So I believe that we need to find out how the system continues to be corrupted, so that we can go forward with a plan that can be reasonably expected to be successful. Following this pattern just digs us a deeper fiscal hole, without doing very much to address the real goal.
Is there an example of a vote, in the last two decades, for transit projects over roads that has actually led to high density neighborhoods where residents use mass transit to get to their jobs?
The only reason I ask, is because I'm almost finished reading, in The Power Broker, how Robert Moses permanently crippled the NYC metro area and Long Island in particular, forcing them into a lower-density, automobile-centric society, when they would have been better served by mass transit, which he let rot on the vine. I imagine most other metro areas that were expanding at the time followed the same path.
The only reason I ask, is because I'm almost finished reading, in The Power Broker, how Robert Moses permanently crippled the NYC metro area and Long Island in particular, forcing them into a lower-density, automobile-centric society, when they would have been better served by mass transit, which he let rot on the vine. I imagine most other metro areas that were expanding at the time followed the same path.
Myself and many other "millennials" are very reluctant to "buy" such things because they can't.
What we can do is go into massive, enslaving, soul-crushing debt for them, something the smart ones are justifiably reluctant to do.
Real estate hyperinflation is particularly bad. A house is unthinkable to anyone under 40 unless:
a) they've had a liquidity event, inherited money, or have a big trust fund.
b) they are willing to live in bumscrew nowhere or the ghetto.
c) they are willing to go into soul-crushing debt with the very real threat of being rendered underwater and thus permanently shackled to that house without bankruptcy or a short sale.
Screw that. Screw it all. Turn on, tune in, drop out.
What we can do is go into massive, enslaving, soul-crushing debt for them, something the smart ones are justifiably reluctant to do.
Real estate hyperinflation is particularly bad. A house is unthinkable to anyone under 40 unless:
a) they've had a liquidity event, inherited money, or have a big trust fund.
b) they are willing to live in bumscrew nowhere or the ghetto.
c) they are willing to go into soul-crushing debt with the very real threat of being rendered underwater and thus permanently shackled to that house without bankruptcy or a short sale.
Screw that. Screw it all. Turn on, tune in, drop out.
Or d) they are willing to move out of the top 5-10 mostly coastal real estate markets. For instance, tech hub Austin, TX has a median home price of $122k. The payment on that will be around $1k-$1100/mo including taxes etc. You'll find very similar numbers in places like Atlanta, Houston, Dallas, Raleigh, etc.
The basic problem with coastal markets (and a few inland ones) is that building regulation has messed up the housing market by making it impossible to build enough to meet demand, as Matt Yglesias describes in The Rent is Too Damn High and Edward Gleaser describes in The Triumph of the City.
That's a valid point, but I didn't know there were any tech hubs or otherwise interesting places with jobs that had house prices like that. That is lower than small Midwestern cities with lousier economies. Why is housing so affordable in Texas? Lack of stupid regulations? Loads of land?
Both, plus c) it's not perceived as being as cool as living in a trendier place and d) it's under-marketed relative to the bigger cities. Note also that Raleigh/Durham has a smallish tech hub and housing is cheap there too. Oh, and also e) the perception that nothing is interesting unless it happens in NYC or SF (or other mega-city).
If you're willing to live outside a tech hub (which has other advantages), you'll find that in most places in the US programmers make high salaries relative to the cost of living, but the focus tends to be on the few places that this is not true. Outside the top markets, $70k + bonus is more than enough to be comfortably middle class (and own a home and car if desired).
If you're willing to live outside a tech hub (which has other advantages), you'll find that in most places in the US programmers make high salaries relative to the cost of living, but the focus tends to be on the few places that this is not true. Outside the top markets, $70k + bonus is more than enough to be comfortably middle class (and own a home and car if desired).
Every market is different, but there is a lot of housing supply in most of the US, prices are depressed and lending rates are the lowest they'll probably ever be in our lifetime.
I have a couple friends (from our generation) who are buying up duplexes. They can live upstairs and rent the lower and nearly cover their mortgage from the rent income. They are living for free and banking the savings for the down-payment on the next duplex.
Seems incredibly smart to me. You have a generation of people who've convinced themselves not to buy a house, driving up rents and driving down home prices. You can borrow money for next to free to buy those assets and rent them.
Even if you don't want to be a landlord, you can get a mortgage payment that is less than rent. Sure you have debt, but rent is just burning money every month. Even if your home declines in value, it probably won't lose as much value as you'd have paid in rent, so you're basically breaking even.
I have a couple friends (from our generation) who are buying up duplexes. They can live upstairs and rent the lower and nearly cover their mortgage from the rent income. They are living for free and banking the savings for the down-payment on the next duplex.
Seems incredibly smart to me. You have a generation of people who've convinced themselves not to buy a house, driving up rents and driving down home prices. You can borrow money for next to free to buy those assets and rent them.
Even if you don't want to be a landlord, you can get a mortgage payment that is less than rent. Sure you have debt, but rent is just burning money every month. Even if your home declines in value, it probably won't lose as much value as you'd have paid in rent, so you're basically breaking even.
I'm under 40 and own a house.
a.) Nope, none of those. Two incomes though, of which combined is higher than the median, but not by that much... b.) Not quite the ghetto, though some would say all of Tacoma is the ghetto. Still, there are much, much worse areas around here. c.) Not soul crushing. We pay about 1400/mo for our mortgage, which isn't much more than rent around here. (we had a small two bedroom apartment for 750, so it is possible to go cheaper though)
a.) Nope, none of those. Two incomes though, of which combined is higher than the median, but not by that much... b.) Not quite the ghetto, though some would say all of Tacoma is the ghetto. Still, there are much, much worse areas around here. c.) Not soul crushing. We pay about 1400/mo for our mortgage, which isn't much more than rent around here. (we had a small two bedroom apartment for 750, so it is possible to go cheaper though)
I should send this comment to my parents and grandparents the next time they berate me about why I'm not planning on owning a home any time soon and would rather rent and/or mooch off them for as long as possible.
Send them the median income / home value ratios too.
I think the boomers qualify as the most irresponsible generation in history, especially in the USA. Now half of them have no retirement savings and are getting old, fast. Guess who's going to pay for it.
I think the boomers qualify as the most irresponsible generation in history, especially in the USA. Now half of them have no retirement savings and are getting old, fast. Guess who's going to pay for it.
Worst generation EVER! Almost every boomer I talk to complain about everything but don't do a damn thing about it.
In the age of smart phones, the car has ceased being a vital communication tool for young people. There's no need to drive to the mall to see if Paul is there hanging out. A text will let me know that he's at Joel's party instead. Another text and Steve will swing by in his car.
The housing situation is another matter. There's a glut. Credit is tight. Jobs are scarce. And housing prices are going down. Millenials aren't stupid.
The housing situation is another matter. There's a glut. Credit is tight. Jobs are scarce. And housing prices are going down. Millenials aren't stupid.
You're right about smart phones, but I'm not so sure about housing. Credit is ridiculously cheap, and housing everywhere is on sale. If you have a job, why wouldn't you buy as much house as you can afford?
I think that the kind of Millenials this article is trying to describe (DC/NY/SF types) don't live in places where housing is affordable.
I'm pretty much a spot on example of what this article's describing; I live in DC where the average person in my peer group is still single, makes <50K/yr, and has student loans. A decent metro-accessible 2BR apartment here is 350K+, a house in the gentrified or gentrifying parts of the city is 500K+ (if school is a concern, make that 700K+).
This is COMPLETELY different from the experience that my friends back home in my small city in Missouri have, many of whom are married and buying houses for a song (<100K on 25-80K combined incomes).
The car thing fits this pattern too, a car in DC (and especially NY) is a total luxury item. A parking spot alone in my building is more than my rent was in MO. In MO, it's a necessity.
It's not that the author is right or wrong, they're just using a very broad brush to talk about a specific (albeit usually trend-setting) group of people.
I'm pretty much a spot on example of what this article's describing; I live in DC where the average person in my peer group is still single, makes <50K/yr, and has student loans. A decent metro-accessible 2BR apartment here is 350K+, a house in the gentrified or gentrifying parts of the city is 500K+ (if school is a concern, make that 700K+).
This is COMPLETELY different from the experience that my friends back home in my small city in Missouri have, many of whom are married and buying houses for a song (<100K on 25-80K combined incomes).
The car thing fits this pattern too, a car in DC (and especially NY) is a total luxury item. A parking spot alone in my building is more than my rent was in MO. In MO, it's a necessity.
It's not that the author is right or wrong, they're just using a very broad brush to talk about a specific (albeit usually trend-setting) group of people.
Because current home prices (post-crash) are still at unsustainable multiples of incomes.
My wife and I just bought a house. We could have afforded something big an shiny and new, but the prices being asked for that are simply unconscionable. Houses are not worth that much, and anyone who thinks otherwise is delusional. We are still in a bubble.
Instead we bought a rather nice small house in town, for less than my yearly base salary (i.e. not counting my wife's income or bonuses). It's not showy, but it's exceedingly comfortable. We'll spend some cash to make a few changes, but our payments are half of what our rent was previously.
We could have easily spent five times as much money, for a house that wouldn't suit our needs any better than the one we bought. How could the underlying asset possibly be worth five times as much? It can't be. Bubble. I'll invest my surplus income in something with sound fundamentals instead, thank you.
My wife and I just bought a house. We could have afforded something big an shiny and new, but the prices being asked for that are simply unconscionable. Houses are not worth that much, and anyone who thinks otherwise is delusional. We are still in a bubble.
Instead we bought a rather nice small house in town, for less than my yearly base salary (i.e. not counting my wife's income or bonuses). It's not showy, but it's exceedingly comfortable. We'll spend some cash to make a few changes, but our payments are half of what our rent was previously.
We could have easily spent five times as much money, for a house that wouldn't suit our needs any better than the one we bought. How could the underlying asset possibly be worth five times as much? It can't be. Bubble. I'll invest my surplus income in something with sound fundamentals instead, thank you.
Because the stability of work at present means it's not practical to do so. I could lose my job at any moment - and if I've bought a house, I'm stuck in the same city, looking for a limited amount of work.
I rent at present, it's not ideal, but it means that I'm not tied to a certain geographic region - if I need to move, it's a hassle, but I don't have a house on a 25-year mortgage that I'm stuck trying to sell in a terrible market, I can just say to the landlord - right, I'm offski, here's the keys, bye.
I rent at present, it's not ideal, but it means that I'm not tied to a certain geographic region - if I need to move, it's a hassle, but I don't have a house on a 25-year mortgage that I'm stuck trying to sell in a terrible market, I can just say to the landlord - right, I'm offski, here's the keys, bye.
Because by renting as little apartment as I can get away with, I:
- Leave more money in the bank.
- Get to maintain a positive net worth.
- Am much more free to move if I need to.
- Don't have to worry about sudden, large, unpredictable repair costs.
- Can demonstrate that I have learned something from watching the preceding generation recently get taught a very brutal lesson about the dangers of habitually buying as much as you can afford.
- Leave more money in the bank.
- Get to maintain a positive net worth.
- Am much more free to move if I need to.
- Don't have to worry about sudden, large, unpredictable repair costs.
- Can demonstrate that I have learned something from watching the preceding generation recently get taught a very brutal lesson about the dangers of habitually buying as much as you can afford.
why wouldn't you buy as much house as you can afford?
Because you may not have a job next month? You don't need the space? You have better things to spend the money on? Bigger houses come with bigger energy bills? While I do agree that the biggest factor here is economics (if people can't pay, they won't), I also think that there are other non-insignificant factors. Some of it is getting away from cars and houses as status symbols (a good thing), others are more practical (trying to offload a house while looking for a job is not easy). In this day and age, long-term employment is not a sure thing, so why settle down and grow roots when you'll only have to rip them out again?
Because you may not have a job next month? You don't need the space? You have better things to spend the money on? Bigger houses come with bigger energy bills? While I do agree that the biggest factor here is economics (if people can't pay, they won't), I also think that there are other non-insignificant factors. Some of it is getting away from cars and houses as status symbols (a good thing), others are more practical (trying to offload a house while looking for a job is not easy). In this day and age, long-term employment is not a sure thing, so why settle down and grow roots when you'll only have to rip them out again?
Bigger utilities, bigger insurance costs, bigger property taxes, bigger maintenance bills, bigger repair costs. That's all lighting money on fire just like rent, but most people discount it.
Because housing is not necessarily (or does not neccessarily appear to be) a good investment. Millenials watched their families wealth evaporate. I would the stress of the Meltdown to effect them in a way similar to the way the Great Depression effected the generation which came of age during that time.
Furthermore, demographics in much of the affluent world is likely to create a further surplus of housing which further reduces over the long term the value of entry level housing as an investment vehicle. The population is greying.
Furthermore, demographics in much of the affluent world is likely to create a further surplus of housing which further reduces over the long term the value of entry level housing as an investment vehicle. The population is greying.
> If you have a job, why wouldn't you buy as much house as you can afford?
Because interest rates are likely to go and then I wouldn't be able to afford that mortgage any more?
I'm kinda thinking about buying a house, so I filled in an online mortgage calculator to work out what sort of money i'd have to work with. It said i'd qualify for a mortgage that was twice as high as what I think I need to get somewhere really nice, or three times as high as what i'd need for somewhere quite good.
I don't need that much extra debt to worry about.
Because interest rates are likely to go and then I wouldn't be able to afford that mortgage any more?
I'm kinda thinking about buying a house, so I filled in an online mortgage calculator to work out what sort of money i'd have to work with. It said i'd qualify for a mortgage that was twice as high as what I think I need to get somewhere really nice, or three times as high as what i'd need for somewhere quite good.
I don't need that much extra debt to worry about.
People buying as much house as the bank would approve them for rather than what they could afford is what caused the first bubble. We bought a house for 2x our annual income 3 miles from work. We could have bought in a trendier neighborhood but it would have come with an unreasonable mortgage and an extra 1.5-2 hours of commuting per day.
Obviously you should get a fixed-rate mortgage. When interest rates "go" you will have insanely cheap mortgage while inflation drives up the price of your house.
That said, I suggested buying as much house as you can afford, not for how much they are willing to lend you. That will be different for everyone.
That said, I suggested buying as much house as you can afford, not for how much they are willing to lend you. That will be different for everyone.
Aside from those whose livelihood depends on car sales, who have an obvious incentive not to believe it, why is it so hard to believe that people might simply not want to own a car? The whole tone of this article seems like: It appears that millennials don't want to own cars, but that can't be right, can it? If I could get away with not owning one, I certainly would. As it is, I spend as little time in it as possible (much preferring to bike).
Well this is written from the perspective of economists who lack imagination. If consumers don't spend money on cars then they will just spend it on other things. It means car companies will get smaller, less influential, and probably go out of business in many cases. I assume the public doesn't have the stomach for another round of bailouts for car makers but it's not like we were consulted about that anyway so who knows if it matters.
If consumers don't spend money on cars then they will just spend it on other things.
Not necessarily true. Half the comments in this thread are saying that consumers don't spend money on cars, and don't spend it on other things, because NOBODY HAS MONEY.
Not necessarily true. Half the comments in this thread are saying that consumers don't spend money on cars, and don't spend it on other things, because NOBODY HAS MONEY.
I thought that assumption throughout the article strange, too. A factor no one else seems to have mentioned (which admittedly only applies to transport, not housing) is that public transport is, overall, getting better. In London I have an Oyster card which actually gets me all the way to my dad's house too, even though he lives well outside London. Something like this just would not have been possible in the 90s, and now I can check how much money is on my Oyster from my phone, and see live train and bus (!) times on it as well. Not to mention that having tools like Google Maps makes using public transport in an unfamiliar city a doddle, I just punch in a postcode and it tells me which bus to get on, and which stop to get off at.
Public transportation in America might as well be non-existent, and American suburbs which is where the largest portion of the country lives in, are un-walkable. You can't do anything if you don't have a car. I think this isn't clear to people who live in the few very large cities in the US, or live elsewhere in the word where public transportation does a good job of getting you around in a timely manner.
To give you an example, I live in San Jose area. To get to downtown san jose, it'll take me less than 10 minutes in a car on the high way, 45 minutes on the bike through the streets, or 1.5 hours on the bus.
To give you an example, I live in San Jose area. To get to downtown san jose, it'll take me less than 10 minutes in a car on the high way, 45 minutes on the bike through the streets, or 1.5 hours on the bus.
Although Londoners complain about their public transport, it really is exceptionally good. For many routes within London it's quicker and far cheaper to take public transport (or a bike!) than to use a private vehicle.
Most places aren't like that, unfortunately.
Most places aren't like that, unfortunately.
While I would say that London's public transport is good (not exceptionally good, Germany, Switzerland and Japan are exceptionally good, London is merely good), I think:
> For many routes within London it's quicker and far cheaper to take public transport (or a bike!) than to use a private vehicle.
Is a rather poor way to look at it in the context of London, because walking is often quicker than using a private vehicle here!
> For many routes within London it's quicker and far cheaper to take public transport (or a bike!) than to use a private vehicle.
Is a rather poor way to look at it in the context of London, because walking is often quicker than using a private vehicle here!
It is awful by comparison to many continental cities though. Have you used the U-bahn in berlin? It's so clean, so efficient, so cheap!
That's what we get for inventing this stuff I suppose...
That's what we get for inventing this stuff I suppose...
Me too. I only use my car when I absolutely have to. My bike, however, I use every day for commuting.
The great majority of Americans, including millenials, live in unwalkable areas where not having a car is a major PITA at best. They can't get away with not owning a car any more than you can.
In 1985 the average age of a car on the road was about 6 years. In 2012, the average age is over 11 years. This has a number of obvious implications on new-car purchasing behavior of young people:
1. It's much easier to buy a used car now since they have more years of service in them.
2. Getting a hand-me-down from a relative is possible.
3. Culturally, getting a new car is much more rare so there is less pressure to do it.
I think 3 is a huge factor. The social status a new car provides has fallen dramatically.
1. It's much easier to buy a used car now since they have more years of service in them.
2. Getting a hand-me-down from a relative is possible.
3. Culturally, getting a new car is much more rare so there is less pressure to do it.
I think 3 is a huge factor. The social status a new car provides has fallen dramatically.
Culturally, getting a new car is much more rare so there is less pressure to do it.
I agree, and this isn't just for Gen Y-ers, either. Most of my Gen X friends (I guess I'm a Gen X-er, too) have no interest in purchasing new vehicles. My wife and I have owned exactly one new car (which we then sold after 6 years to purchase our camper van), and our current vehicle is ten years old. Shiny cars just aren't the status symbols they used to be.
I agree, and this isn't just for Gen Y-ers, either. Most of my Gen X friends (I guess I'm a Gen X-er, too) have no interest in purchasing new vehicles. My wife and I have owned exactly one new car (which we then sold after 6 years to purchase our camper van), and our current vehicle is ten years old. Shiny cars just aren't the status symbols they used to be.
Funny, as a Gen X-er I was reading this as a story about somebody else, but you're totally right. I'm 41 and I've only ever owned one new car. We bought it when my wife was pregnant, because I wanted to make sure she had a good reliable car for her 30-minute commute to and from work. That car has lasted five years so far, and fate willing it will last at least another five. (Her commute is only five minutes these days, and the carseat is in our purchased-used minivan.)
It's really a crazy contrast from what I remember a number of adults doing back in the 80s -- a new car every two years, regular as clockwork.
It's really a crazy contrast from what I remember a number of adults doing back in the 80s -- a new car every two years, regular as clockwork.
With every passing year, cars become less substantial, and more like delicate metal cages surrounded by plastic fairings, and protecting their inhabitants with vinyl ballons. I just can't fathom parting with my hard-earned money for such a creation.
The newer cars are far safer, it seems every 5 years we bump up the crash test standards.
If you've seen a modern ski helmet after a hard hit, it looks destroyed. You wonder how it helped at all. But the destruction of the helmet absorbs some of the energy. A 'sturdy' helmet would just pass that right through to the head. Helmets are now effectively single use.
Cars are almost the same way. It's seemingly silly how easily modern cars are totaled. But they are crumpling and absorbing energy - while maintaining the passenger compartment's integrity. Older cars simply folded up. Often times the passenger compartment was the weakest point - i.e. the first thing to crush. That makes modern cars fairly disposable after major accidents, but I'd vasty prefer the safety of a modern car.
If you've seen a modern ski helmet after a hard hit, it looks destroyed. You wonder how it helped at all. But the destruction of the helmet absorbs some of the energy. A 'sturdy' helmet would just pass that right through to the head. Helmets are now effectively single use.
Cars are almost the same way. It's seemingly silly how easily modern cars are totaled. But they are crumpling and absorbing energy - while maintaining the passenger compartment's integrity. Older cars simply folded up. Often times the passenger compartment was the weakest point - i.e. the first thing to crush. That makes modern cars fairly disposable after major accidents, but I'd vasty prefer the safety of a modern car.
I would add that used cars are increasingly more reliable and easier to vet. There are also more resources available to help identify lemons as well.
Truth.
CarFax was pretty much directly predicted by Akerlof's "The Market for Lemons".
CarFax was pretty much directly predicted by Akerlof's "The Market for Lemons".
Cars were never a good investment, and driving a new one off the lot will cost you 20% (minimum). I'm quite a bit older than most HNers but have driven reasonably good used cars for years. And now my two college-aged kids have chosen cars they thought were cool ... a 1971 VW Super-Beetle and a 1991 Toyota MR2. These cars are both far more cost-effective than a new car ... the key is to pick one that was well maintained! I honestly don't know how the car companies can justify a price that is 1/4 the cost of a house (in many areas).
Houses on the other hand have always been held up as an investment, but I think the millenial's have been affected by witnessing the housing melt-down. Now is actually a good time to get into a mortgage (in many areas), but many people will wait because they don't want to see their investment decline. You read stories about the people who are underwater on their mortgage, but you never hear about people like me who bought a house they could afford, made payments and improvements and even with the collapse of the housing bubble, my investment is worth twice what I've put into it.
But younger people view houses and cars as tools and I can honestly applaud that view ... neither will bring you happiness by themselves.
Houses on the other hand have always been held up as an investment, but I think the millenial's have been affected by witnessing the housing melt-down. Now is actually a good time to get into a mortgage (in many areas), but many people will wait because they don't want to see their investment decline. You read stories about the people who are underwater on their mortgage, but you never hear about people like me who bought a house they could afford, made payments and improvements and even with the collapse of the housing bubble, my investment is worth twice what I've put into it.
But younger people view houses and cars as tools and I can honestly applaud that view ... neither will bring you happiness by themselves.
Single page version: http://www.theatlantic.com/magazine/archive/2012/09/the-chea...
I don't like The Atlantic's title: it implys what is happening as negative.
I don't like The Atlantic's title: it implys what is happening as negative.
This is because our current economy is skewed towards consumption with real estate and cars as the primary metric. I agree, I don't see it as a negative. I'm Gen X and I don't own a house or car.
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I realized recently I'm more reluctant to own a house than have a baby.
It all depends on where you live and what your local market is like. I have a kid, and still don't need a car or house. I also live in NYC, so it's easy to do that. If I lived someplace like Houston, where there is almost zero public transport and houses are crazy cheap I might rethink things. That said, don't buy into social groupthink, don't buy a house if it doesn't fit your sensibilities.
Consumption is the driving force of modern capitalism generally, not particularly related to the current economy. Capitalism relies on surplus; the problem with this of course is that is wasteful but it seems we don't really have an equally successful alternative.
indeed, by freeing up the money that is tied up in mortgages/car loans and burnt as oil, can't we put that money and those resources to far more productive endeavours.
This article is dumb. It seems to ignore the most obvious explanations for these trends, and lumps together young adults in all socioeconomic classes and geographic locations like they're the same (they're not).
Outside of urban areas, cars are pretty much a necessity. I highly doubt that young adults in these areas aren't using cars at all, but it makes a lot of sense that they would buy used or borrow friends or parents cars over owning a new car, because low wages and unemployment tend to result in not having wads of cash on hand to throw at owning a new vehicle.
For young adults in urban areas, cars have pretty much always been a nice-to-have, but if you don't have the money for them (especially the extra for parking in urban areas), public transportation will work, even though it might not always be sexy.
Same with home ownership. Homes are the most expensive possessions out there. If you don't have the money, credit, cushy job, you can't afford one. So living at home, or with friends, or renting are the doable options, even though home ownership is still highly desired.
The experience of middle and lower class young adults is much different than their upper class peers. I imagine buying behavior really hasn't changed much for the upper classes. But the large majority in the lower classes have the greatest sway on the trends.
I find it fascinating that anyone would be baffled why these trends exist. When youth and lack of experience mean shitty jobs and unemployment, its no wonder the younger demographic aren't big spenders. If you don't have the money, you don't have the money.
Outside of urban areas, cars are pretty much a necessity. I highly doubt that young adults in these areas aren't using cars at all, but it makes a lot of sense that they would buy used or borrow friends or parents cars over owning a new car, because low wages and unemployment tend to result in not having wads of cash on hand to throw at owning a new vehicle.
For young adults in urban areas, cars have pretty much always been a nice-to-have, but if you don't have the money for them (especially the extra for parking in urban areas), public transportation will work, even though it might not always be sexy.
Same with home ownership. Homes are the most expensive possessions out there. If you don't have the money, credit, cushy job, you can't afford one. So living at home, or with friends, or renting are the doable options, even though home ownership is still highly desired.
The experience of middle and lower class young adults is much different than their upper class peers. I imagine buying behavior really hasn't changed much for the upper classes. But the large majority in the lower classes have the greatest sway on the trends.
I find it fascinating that anyone would be baffled why these trends exist. When youth and lack of experience mean shitty jobs and unemployment, its no wonder the younger demographic aren't big spenders. If you don't have the money, you don't have the money.
I'm fairly sure the reason 21-30 year olds aren't buying houses and cars in droves isn't because they are "quirky eco-conscious individuals" that your marketing "isn't speaking to"... I'm pretty sure its mostly because:
1: Many of them don't have jobs (or have low-paying jobs) because of the economy.
2: Many of them watched their parents drown in debt from houses and cars they bought but couldn't really afford
3: Student debt.
No amount of marketing is going to fix that.
This quote alone just makes me shake my head: “I don’t believe that young buyers don’t care about owning a car,” says John McFarland, GM’s 31-year-old manager of global strategic marketing. “We just think nobody truly understands them yet.”
1: Many of them don't have jobs (or have low-paying jobs) because of the economy.
2: Many of them watched their parents drown in debt from houses and cars they bought but couldn't really afford
3: Student debt.
No amount of marketing is going to fix that.
This quote alone just makes me shake my head: “I don’t believe that young buyers don’t care about owning a car,” says John McFarland, GM’s 31-year-old manager of global strategic marketing. “We just think nobody truly understands them yet.”
#3 is underappreciated. We have a generation that's going to be slaving away for years to pay off large student loan debts that are at high interest rates compared to a mortgage. Naturally they're going to be averse to wasting money on an overpriced car when they could be paying a student loan instead, which has a guaranteed rate of return of 5-10% (depending on the terms of the loan), tax-free.
Definitely that, but also the skyrocketing costs of a college education. The days of paying your way through school by working summers and weekends are over. Either you are lucky enough to have parents pay for your school, or you are coming out of school with debt the size of some people's mortgages. There goes your ability to buy a house or car...
Then factor in that for many folks, they spent that money on that education and graduated to find out the only place that would/could hire them was the local coffee shop for 20 hours a week, and there is no amount of marketing in the world that is going to convince that person to buy a $30,000 car.
Then factor in that for many folks, they spent that money on that education and graduated to find out the only place that would/could hire them was the local coffee shop for 20 hours a week, and there is no amount of marketing in the world that is going to convince that person to buy a $30,000 car.
You are right. As a dropout, I only learned recently how many of my friends were struggling under monthly student loan debt of $50-80k with payments of $500-800. There goes car money, poof, or 20-45% of a mortgage payment for a reasonably nice home in an urban area like Philadelphia.
After watching their parents and grandparents obsess over material possessions, why is anyone surprised when Millennials choose to prioritize other things? Owning a bunch of stuff is a giant hassle and doesn't bring you any more happiness. Perhaps they have just learned the lesson their parents taught them.
The things you own, end up owning you. (Tyler Durden)
I'm sure it has nothing to do with the fact that 78 hours of minimum wage work could pay the rent in 1980, compared to 109 hours in 2010 [1], along with the other associated cost-of-living increases over the last three decades that have come without comparable increases in wages.
I doubt that most people who felt financially secure and could afford a new car wouldn't want to own a new car. Nobody really enjoys driving a beater, or being forced to walk or ride a bike everywhere (aside from doing it for the enjoyment of it), or trying to negotiate for rides with friends. Public transportation in most of the U.S. is awful, so I don't see many people choosing that over having your own shiny new car.
So the article briefly touches on the economic pressures facing young people in mentioning the recession and student debt, but it spends most of its paragraphs trying to paint some kind of cultural picture of "Millenials" as being a neo-beatnik generation that worships sharing.
No, it's the economy, stupid. And not just recently, either; for the last 50 years at least, there has been a gradual trend towards ownership of things like homes and cars costing more and more in terms of the working hours needed to afford them.
If you are among the 3.8 million people making minimum wage (or less!) now [2], a car is the last damn thing you want to own. You won't be able to afford a good one, so you'll constantly be spending money on maintaining it, not to mention that it will strand you one day and your minimum wage job will be more likely to fire you for not showing up than the average cubicle job. Cars are expensive to license, expensive to insure, and in California, old cars are expensive to smog. Even better, if you fail to pay for any of this, you're likely to receive a citation or ticket, which can quickly add up to more time off work and more money out of pocket.
If you're young, you're far more likely to either be burdened by student debts or be making minimum wage [3]. That means that the odds are that you're either not living on your own, in which case a shared vehicle (either a housemate's or a Zipcar or something else) makes more sense than owning your own, or you're living on your own and you can't afford a shiny new Ford Fiesta without a third full-time job.
Additionally, the entertainment industry tends to make more money during economic downturns, and poor people are more likely to spend a greater portion of their money on entertainment. If you can afford little, you might as well have as much fun as you can, especially if your prospects for making more money in the near future aren't that good. If you can hitch a ride to Burning Man, that sounds better than spending the money of the ticket price and time off work and food and everything else on mechanical work for your aging car.
Bah. This article was crap. It didn't have the quality I've come to expect from The Atlantic.
[1]: http://finances.msn.com/saving-money-advice/6952105
[2]: http://www.bls.gov/cps/minwage2011.htm
[3]: http://www.bls.gov/cps/minwage2011.htm again.
I doubt that most people who felt financially secure and could afford a new car wouldn't want to own a new car. Nobody really enjoys driving a beater, or being forced to walk or ride a bike everywhere (aside from doing it for the enjoyment of it), or trying to negotiate for rides with friends. Public transportation in most of the U.S. is awful, so I don't see many people choosing that over having your own shiny new car.
So the article briefly touches on the economic pressures facing young people in mentioning the recession and student debt, but it spends most of its paragraphs trying to paint some kind of cultural picture of "Millenials" as being a neo-beatnik generation that worships sharing.
No, it's the economy, stupid. And not just recently, either; for the last 50 years at least, there has been a gradual trend towards ownership of things like homes and cars costing more and more in terms of the working hours needed to afford them.
If you are among the 3.8 million people making minimum wage (or less!) now [2], a car is the last damn thing you want to own. You won't be able to afford a good one, so you'll constantly be spending money on maintaining it, not to mention that it will strand you one day and your minimum wage job will be more likely to fire you for not showing up than the average cubicle job. Cars are expensive to license, expensive to insure, and in California, old cars are expensive to smog. Even better, if you fail to pay for any of this, you're likely to receive a citation or ticket, which can quickly add up to more time off work and more money out of pocket.
If you're young, you're far more likely to either be burdened by student debts or be making minimum wage [3]. That means that the odds are that you're either not living on your own, in which case a shared vehicle (either a housemate's or a Zipcar or something else) makes more sense than owning your own, or you're living on your own and you can't afford a shiny new Ford Fiesta without a third full-time job.
Additionally, the entertainment industry tends to make more money during economic downturns, and poor people are more likely to spend a greater portion of their money on entertainment. If you can afford little, you might as well have as much fun as you can, especially if your prospects for making more money in the near future aren't that good. If you can hitch a ride to Burning Man, that sounds better than spending the money of the ticket price and time off work and food and everything else on mechanical work for your aging car.
Bah. This article was crap. It didn't have the quality I've come to expect from The Atlantic.
[1]: http://finances.msn.com/saving-money-advice/6952105
[2]: http://www.bls.gov/cps/minwage2011.htm
[3]: http://www.bls.gov/cps/minwage2011.htm again.
I'm in the demographic that this article is talking about and I nodded my head in agreement to everything they said. My attitudes about lifestyle and my relationship to driving has shaped my value system about new car ownership and home ownership.
When I owned a car it was simply a means to an end and not an identity. A method of getting from one place to another. Living in the city (I've lived in several) the car gets beat to hell, so having a new car is largely impractical without an off-street parking space. I also have absolutely no desire to live in distant cul-de-sac style suburbs, and I'd prefer to walk to the store if I can, even though I'm at the point where I'm thinking about buying a house and raising a family.
So whatever assumptions you're making about minimum wage or driving an older car or walking / biking are not applicable to me, and pretty much anyone in my circle of friends in the demographic which spans both coasts and multiple cities.
When I owned a car it was simply a means to an end and not an identity. A method of getting from one place to another. Living in the city (I've lived in several) the car gets beat to hell, so having a new car is largely impractical without an off-street parking space. I also have absolutely no desire to live in distant cul-de-sac style suburbs, and I'd prefer to walk to the store if I can, even though I'm at the point where I'm thinking about buying a house and raising a family.
So whatever assumptions you're making about minimum wage or driving an older car or walking / biking are not applicable to me, and pretty much anyone in my circle of friends in the demographic which spans both coasts and multiple cities.
> Public transportation in most of the U.S. is awful, so I don't see many people choosing that over having your own shiny new car.
Ah, but the shift in housing desirability also plays into this. Those few places in the US that do have great walkability/bikeability/public transit are booming and in huge demand.
I think many young people do aspire to walk and bike everywhere, which is why they aspire to be able to live in vibrant, much-denser-than-suburban environments. That this is true is obvious when you compare housing prices. People pay a huge premium for it.
Biking almost everywhere is awesome if you're fortunate enough to live in a place that makes it safe and convenient to do so. I take trips by bike at least four times more often than by car, purely by choice since I own both.
When we visit family out in more typical America, my young son gets frustrated by so much time spent in a car seat. He's "spoiled" by always being able to interact much more with his surroundings, whether walking, in his stroller, or on my bike with me.
Ah, but the shift in housing desirability also plays into this. Those few places in the US that do have great walkability/bikeability/public transit are booming and in huge demand.
I think many young people do aspire to walk and bike everywhere, which is why they aspire to be able to live in vibrant, much-denser-than-suburban environments. That this is true is obvious when you compare housing prices. People pay a huge premium for it.
Biking almost everywhere is awesome if you're fortunate enough to live in a place that makes it safe and convenient to do so. I take trips by bike at least four times more often than by car, purely by choice since I own both.
When we visit family out in more typical America, my young son gets frustrated by so much time spent in a car seat. He's "spoiled" by always being able to interact much more with his surroundings, whether walking, in his stroller, or on my bike with me.
> I doubt that most people who felt financially secure and could afford a new car wouldn't want to own a new car.
Not that this is anything more than anecdata, but in my peer group, this isn't true. I get around by bike and don't own a car, but could afford a new car if I wanted one, and this is true of many of my friends. Ideas stemming from New Urbanism are a pretty big deal in at least a certain sector of our generation; we're much more likely to consciously decide to prioritize proximity to things over cars, and even if we can afford cars, we're (I'd like to think) more mindful of the sustainability consequences of the modes of transportation that we choose than our parents' generation was; further, I have a fifteen-minute commute and don't have to worry about traffic or parking, and it would take a lot for me to be willing to give that up. This is in Washington, DC, but I know people in similar situations in New York, San Francisco, Portland, and Seattle.
Not that this is anything more than anecdata, but in my peer group, this isn't true. I get around by bike and don't own a car, but could afford a new car if I wanted one, and this is true of many of my friends. Ideas stemming from New Urbanism are a pretty big deal in at least a certain sector of our generation; we're much more likely to consciously decide to prioritize proximity to things over cars, and even if we can afford cars, we're (I'd like to think) more mindful of the sustainability consequences of the modes of transportation that we choose than our parents' generation was; further, I have a fifteen-minute commute and don't have to worry about traffic or parking, and it would take a lot for me to be willing to give that up. This is in Washington, DC, but I know people in similar situations in New York, San Francisco, Portland, and Seattle.
>If you can afford little, you might as well have as much fun as you can, especially if your prospects for making more money in the near future aren't that good.
Not enough people understand this concept, and it's been documented from at least the Great Depression from what I'm aware of.
Not enough people understand this concept, and it's been documented from at least the Great Depression from what I'm aware of.
U.S. context: In aggregate the "last generation(s)" chose to spend their money abroad and on themselves (e.g. foreign-produced consumer goods), rather than on the next generation (e.g. infrastructure, education, living wage, healthcare). Witness the result.
Certain sectors of the economy are doing well. The aggregate economy is tanking.
Individuals will find their way, more or less effectively. The lauded "U.S.A." may well not remain what their parents envisioned -- probably quite often really in turn that generation's parents' vision assumed whole by those children and presumed, without much critical thought, to somehow be "inviolate", no matter their (those children, the current generation's parents) own personal actions.
Certain sectors of the economy are doing well. The aggregate economy is tanking.
Individuals will find their way, more or less effectively. The lauded "U.S.A." may well not remain what their parents envisioned -- probably quite often really in turn that generation's parents' vision assumed whole by those children and presumed, without much critical thought, to somehow be "inviolate", no matter their (those children, the current generation's parents) own personal actions.
I can attest to that, I live in the UK, public transport in the north is okay but far from optimal.
I wish I could afford my own transport, but my low paying tech job (I'm a 4 year self taught junior developer at a small web development company) can barely pay my rent, let alone afford the ridiculous amounts of money I would have to pay for car insurance (I think I was quoted around £2,100), my driving lessons and a car mean that, for the next few years at least, it won't be possible.
Which is a shame, considering that I have to pay 1/6 of my monthly wages in monthly bus tickets anyway.
I wish I could afford my own transport, but my low paying tech job (I'm a 4 year self taught junior developer at a small web development company) can barely pay my rent, let alone afford the ridiculous amounts of money I would have to pay for car insurance (I think I was quoted around £2,100), my driving lessons and a car mean that, for the next few years at least, it won't be possible.
Which is a shame, considering that I have to pay 1/6 of my monthly wages in monthly bus tickets anyway.
In most of the U.S. public transportation is virtually unusable. I've heard European exchange students compare the U.S. transit system to the worst of the former Soviet bloc.
One of my friends spent some time in California this year interning with Google and he said that while public transport around California was bearable, when he spent some time in New York he found it completely useless.
One of the qualms I have with English public transport is that over 55's get completely free transport, (I have no issue with them of course) whereas 15 - 21 year olds tend to pay extra in my area, so the people who are only just starting to work in their low paying jobs get charged so that people who have houses fully paid for and receive money every month on their pensions can have it for free.
One of the qualms I have with English public transport is that over 55's get completely free transport, (I have no issue with them of course) whereas 15 - 21 year olds tend to pay extra in my area, so the people who are only just starting to work in their low paying jobs get charged so that people who have houses fully paid for and receive money every month on their pensions can have it for free.
In London at least, you pay half price for public transport if you're 16-18 (and free buses if you're in education) and a reduced price if you're 18+ and in education.
Being neither of those, I get to pay a hell of a lot more! I'm glad I've got a decent job since I still wince each month when I renew my Oyster.
Being neither of those, I get to pay a hell of a lot more! I'm glad I've got a decent job since I still wince each month when I renew my Oyster.
I think it's over 65 in England:
http://www.direct.gov.uk/en/TravelAndTransport/Publictranspo...
http://www.direct.gov.uk/en/TravelAndTransport/Publictranspo...
Fair enough, but in the same way, these people are in a much better position than me and yet get this benefit which I don't, yet I'm also forced to pay taxes.
There are occasional grumbles from the right about means testing free bus passes, but it would probably lose a lot of votes and I suspect the increased bureaucracy would mean that hardly any money would be saved.
I agree, I believe it would be best if everyone paid the same cost, then no one could say it was unfair. Although I'm sure that someone else would be in the position I am complaining about it, so maybe I should just accept that for now at least, I will have to struggle.
Minimum wage is a silly thing to look at. In 1980, 10% of men and 22% of women earned min wage. In 2010, this fell to 5% and 7%.
http://www.statista.com/statistics/185536/share-of-workers-p...
Further, a look at hard data (for both the bottom 20% and the middle 20%) shows that people today are more likely to own a car than in 1981, and have more house per person than in 1989 (no data on square footage exists in 1981).
http://www.aei.org/files/2011/10/25/Material-Well-Being-Poor...
So no, it's not the economy.
http://www.statista.com/statistics/185536/share-of-workers-p...
Further, a look at hard data (for both the bottom 20% and the middle 20%) shows that people today are more likely to own a car than in 1981, and have more house per person than in 1989 (no data on square footage exists in 1981).
http://www.aei.org/files/2011/10/25/Material-Well-Being-Poor...
So no, it's not the economy.
Earth to Planet Trust Fund: it is the economy.
http://livingwage.mit.edu
Also look at the ratio of median income to real estate value. We are still in a housing bubble.
My household earns about 40% more than the national average, we do not live extravagantly, we budget well, and we feel barely middle class. This is ridiculous. I'm surprised there aren't riots.
http://livingwage.mit.edu
Also look at the ratio of median income to real estate value. We are still in a housing bubble.
My household earns about 40% more than the national average, we do not live extravagantly, we budget well, and we feel barely middle class. This is ridiculous. I'm surprised there aren't riots.
I'm sorry that stats about what people actually consume disagree with your vague speculation about what stuff should cost.
If we "feel barely middle class", it's because our expectations and desires have grown faster than our means. It's not because we have less than some historical cohort.
If we "feel barely middle class", it's because our expectations and desires have grown faster than our means. It's not because we have less than some historical cohort.
This is exactly what both the left and the right are propagandizing the middle class to do: lower expectations. In some cases, it means lowering our expectations to below those of our parents.
Think about that for a minute.
Find me a corporation or an entrepreneur who thinks like this. Imagine a CEO saying this to shareholders and the board:
"We didn't make our goals this quarter, and many in our industry also showed reduced sales numbers. It is clear that we need to reduce our expectations. Next quarter's numbers will be lower, and shareholders are just going to have to take a loss."
He'd be out on his ass the next day.
Related to this is the idiotic garbage that the working class are fed by the media: that they should hate people who make good wages and agitate to cut those other peoples' wages down to be in line with their own.
Again, find me a corporation that thinks like this. Apple is currently worth more than Microsoft. Is Microsoft thinking "how can we make them make less money?!?" No. They're thinking "How can we grow? How can we make as much money as Apple is making?"
Unbelievable.
You realize that you're being sold into fiefdom on the feudal "lands" owned by the financial industry, right?
Edit: I'm not a socialist. I'm a capitalist.
Part of capitalism is negotiation. The American middle and working classes have been fed this ridiculous line of baloney that capitalism is a magical hands-free machine that will elevate their standard of living if they do nothing. It doesn't work that way, as every businessman and entrepreneur understands. You have to negotiate. You have to push. They push, and you push.
Studies have shown that the ideal point in negotiation is often precisely where both parties feel a bit, but not too, unhappy. Right now the rich and corporate interests are rolling in it, happy as clams, and everyone else is suffering. That's because one side is pushing and the other side is not.
So how do workers and professionals (whom I count as workers... the white/blue collar distinction is increasingly meaningless) push?
The old way was unions, but that's definitely shown its age. We need some new ideas.
Lowering our expectations is not a particularly productive idea.
Edit 2: I also think using government to push is fair game.
Why? Because the rich and corporations do it. They take corporate welfare, bailouts, special infrastructure investments, government contracts, and benefit hugely from publicly funded R&D.
But they want you to refuse to use the government as a lever because... it works!
So capitalists really ought to be socialists, at least for now. Only give up a lever in a negotiation if the other party on the other side of the table also gives up that lever. The rich want you to be principled libertarians while they munch at the government trough.
Think about that for a minute.
Find me a corporation or an entrepreneur who thinks like this. Imagine a CEO saying this to shareholders and the board:
"We didn't make our goals this quarter, and many in our industry also showed reduced sales numbers. It is clear that we need to reduce our expectations. Next quarter's numbers will be lower, and shareholders are just going to have to take a loss."
He'd be out on his ass the next day.
Related to this is the idiotic garbage that the working class are fed by the media: that they should hate people who make good wages and agitate to cut those other peoples' wages down to be in line with their own.
Again, find me a corporation that thinks like this. Apple is currently worth more than Microsoft. Is Microsoft thinking "how can we make them make less money?!?" No. They're thinking "How can we grow? How can we make as much money as Apple is making?"
Unbelievable.
You realize that you're being sold into fiefdom on the feudal "lands" owned by the financial industry, right?
Edit: I'm not a socialist. I'm a capitalist.
Part of capitalism is negotiation. The American middle and working classes have been fed this ridiculous line of baloney that capitalism is a magical hands-free machine that will elevate their standard of living if they do nothing. It doesn't work that way, as every businessman and entrepreneur understands. You have to negotiate. You have to push. They push, and you push.
Studies have shown that the ideal point in negotiation is often precisely where both parties feel a bit, but not too, unhappy. Right now the rich and corporate interests are rolling in it, happy as clams, and everyone else is suffering. That's because one side is pushing and the other side is not.
So how do workers and professionals (whom I count as workers... the white/blue collar distinction is increasingly meaningless) push?
The old way was unions, but that's definitely shown its age. We need some new ideas.
Lowering our expectations is not a particularly productive idea.
Edit 2: I also think using government to push is fair game.
Why? Because the rich and corporations do it. They take corporate welfare, bailouts, special infrastructure investments, government contracts, and benefit hugely from publicly funded R&D.
But they want you to refuse to use the government as a lever because... it works!
So capitalists really ought to be socialists, at least for now. Only give up a lever in a negotiation if the other party on the other side of the table also gives up that lever. The rich want you to be principled libertarians while they munch at the government trough.
>"We didn't make our goals this quarter, and many in our industry also showed reduced sales numbers. It is clear that we need to reduce our expectations. Next quarter's numbers will be lower, and shareholders are just going to have to take a loss."
Uh, they do say that all the time.
I tend to agree with the other poster: our expectations are too high. It's a product of having witnessed one of the greatest runups in wealth (and debt) we've ever seen in history.
A 2500 sqft house, two (or three) cars, regular vacations to Europe or the warm south, maybe a summer house, boats, motorcycles and other toys...these things are now expected by the "middle class". It's completely out of whack with history and the rest of the planet.
So whether you choose to lower your expectations or not has no bearing on what will actually happen. We're going to have a deleveraging run where the average Westerner is, as a whole, poorer than the generation before us.
Uh, they do say that all the time.
I tend to agree with the other poster: our expectations are too high. It's a product of having witnessed one of the greatest runups in wealth (and debt) we've ever seen in history.
A 2500 sqft house, two (or three) cars, regular vacations to Europe or the warm south, maybe a summer house, boats, motorcycles and other toys...these things are now expected by the "middle class". It's completely out of whack with history and the rest of the planet.
So whether you choose to lower your expectations or not has no bearing on what will actually happen. We're going to have a deleveraging run where the average Westerner is, as a whole, poorer than the generation before us.
I know a lot of professional people in my generation, and I know of only a few that have anything like what you describe.
One managed to land a six-figure job in Kentucky, one of the lowest cost of living places that was largely passed over by the housing bubble. The major reason he's well-off is that his house was affordable and he went to a lower priced university and didn't need much in the way of student loans. He lives in a ~2000 sq. ft. house that cost about $175k when he bought it. Where I live that house would be $400k, and it's not even a major city. Median incomes where I live are no higher.
Another had a liquidity event. Another owns a hugely successful online company.
The vast majority -- vast majority -- of the peers I know do not live anything like what you describe. These are not slackers either. These are hard working, highly educated professionals. Many of them routinely pull 60 hour work weeks doing things like computer programming, business, marketing, and high-end interior design for wealthy clients.
I honestly have no idea how people making the median family income can live, unless they live in horrible neighborhoods or in the middle of nowhere.
I didn't say "Earth to Planet Trust Fund" just to be snarky. There is a culture of people who grew up with wealthy parents, had mostly paid for rides to places like MIT, and earn six figures, and really do have kind of a "why do they not eat cake?" view on this stuff. In my experience they're not bad people. They're just insulated and ignorant. They have absolutely no idea what they're talking about if they think their situation is anywhere near normal.
Again, public enemy #1 here is the housing bubble, which from an income/value ratio point of view is still in effect. #2 is the cost of college. The former has increased somewhat in quality since the previous generation, though not enough to justify a quadrupling (or more) in cost. The latter hasn't increased much in quality at all, but the cost has skyrocketed.
One managed to land a six-figure job in Kentucky, one of the lowest cost of living places that was largely passed over by the housing bubble. The major reason he's well-off is that his house was affordable and he went to a lower priced university and didn't need much in the way of student loans. He lives in a ~2000 sq. ft. house that cost about $175k when he bought it. Where I live that house would be $400k, and it's not even a major city. Median incomes where I live are no higher.
Another had a liquidity event. Another owns a hugely successful online company.
The vast majority -- vast majority -- of the peers I know do not live anything like what you describe. These are not slackers either. These are hard working, highly educated professionals. Many of them routinely pull 60 hour work weeks doing things like computer programming, business, marketing, and high-end interior design for wealthy clients.
I honestly have no idea how people making the median family income can live, unless they live in horrible neighborhoods or in the middle of nowhere.
I didn't say "Earth to Planet Trust Fund" just to be snarky. There is a culture of people who grew up with wealthy parents, had mostly paid for rides to places like MIT, and earn six figures, and really do have kind of a "why do they not eat cake?" view on this stuff. In my experience they're not bad people. They're just insulated and ignorant. They have absolutely no idea what they're talking about if they think their situation is anywhere near normal.
Again, public enemy #1 here is the housing bubble, which from an income/value ratio point of view is still in effect. #2 is the cost of college. The former has increased somewhat in quality since the previous generation, though not enough to justify a quadrupling (or more) in cost. The latter hasn't increased much in quality at all, but the cost has skyrocketed.
>the cost of college
In the UK, our parents' generation paid zero. They got given grants...
That includes the elite, politician-farming universities.
The current government just tripled the fees, after one coalition partner promised to abolish them in the campaign. That's why students ended up trashing (actually the other partner's) HQ in 2010.
In the UK, our parents' generation paid zero. They got given grants...
That includes the elite, politician-farming universities.
The current government just tripled the fees, after one coalition partner promised to abolish them in the campaign. That's why students ended up trashing (actually the other partner's) HQ in 2010.
Yet college is more of a requirement now than it was then.
Agreed, tatsuke95's comment is ridiculously out of proportion. My friends are all middle class, with two exceptions who are upper middle class -- myself & my husband, and another married couple who run a software business like we do. They have an expensive house and a very nice car, but they live well within their means and save a lot of money (and they worked their asses off to earn that money). They certainly don't have a vacation home. My husband and I just bought a house which cost just less than our biz's gross receipts last year, but we got a 30-year mortgage and we don't even own a car. We do travel fairly often and for longer periods (up to a month) but it's almost always a tax write-off, organized around conferences.
And, that other couple aside, we're by far the most extravagant people in our friend group (designers, developers, creative class all). Only a couple of our middle class friends own anything, much less expect to own two houses and cars.
The specter of wide swathes of middle class people who "expect" two houses and cars and European vacations is simply a strawman argument, conjured up to "prove" that these people "deserve what they get."
And, that other couple aside, we're by far the most extravagant people in our friend group (designers, developers, creative class all). Only a couple of our middle class friends own anything, much less expect to own two houses and cars.
The specter of wide swathes of middle class people who "expect" two houses and cars and European vacations is simply a strawman argument, conjured up to "prove" that these people "deserve what they get."
>"The specter of wide swathes of middle class people who "expect" two houses"
In 2006, 40 percent of home sales were for "second homes", with the typical buyer having a household income of $80,000.
>"tatsuke95's comment is ridiculously out of proportion"
I'm glad you think it's out of proportion, based on your personal anecdotes about your friends (except for two, but you've defined them as upper middle class, so they don't count!).
But the "wide swathes" of indebtedness, bankruptcies, defaults and deleveraging in the US says otherwise. Where have you been for the past five years? Those are facts. It occurs when people "live beyond their means", which is nearly synonymous with having too high expectations: you want more than you earn. Do you think it's the rich people living beyond their means? Is it the poor people buying cars and houses they can't afford? No, it's the middle class.
In 2006, 40 percent of home sales were for "second homes", with the typical buyer having a household income of $80,000.
>"tatsuke95's comment is ridiculously out of proportion"
I'm glad you think it's out of proportion, based on your personal anecdotes about your friends (except for two, but you've defined them as upper middle class, so they don't count!).
But the "wide swathes" of indebtedness, bankruptcies, defaults and deleveraging in the US says otherwise. Where have you been for the past five years? Those are facts. It occurs when people "live beyond their means", which is nearly synonymous with having too high expectations: you want more than you earn. Do you think it's the rich people living beyond their means? Is it the poor people buying cars and houses they can't afford? No, it's the middle class.
What incentive do we have then, to not forcibly extract that wealth from the previous generation? To me it seems that if we need to de-leverage, why on earth should we pay these people their pensions? All the intergenerational trust and good faith is already gone anyway.
Note: the views casually related above may or may not represent the actual considered opinions of the management.
Note: the views casually related above may or may not represent the actual considered opinions of the management.
>"What incentive do we have then, to not forcibly extract that wealth from the previous generation?"
We do have the incentive. And we will extract that wealth. But it takes time, since "they" currently have the political power.
What you describe is what is happening in the real world. Reform everywhere so they get the pensions and benefits, but nobody after them will. This is happening both publicly and privately. Even unions are stiffing new members.
We'll have the last laugh, though. Eventually the boomers will need to divest. At that point they'll find out we don't have the money to buy their assets.
We do have the incentive. And we will extract that wealth. But it takes time, since "they" currently have the political power.
What you describe is what is happening in the real world. Reform everywhere so they get the pensions and benefits, but nobody after them will. This is happening both publicly and privately. Even unions are stiffing new members.
We'll have the last laugh, though. Eventually the boomers will need to divest. At that point they'll find out we don't have the money to buy their assets.
>We'll have the last laugh, though. Eventually the boomers will need to divest. At that point they'll find out we don't have the money to buy their assets.
Hadn't thought of that. Might be quite funny...
I suppose they'll just give it to their offspring. So for now... kill rich kids? Just brainstorming here.
Hadn't thought of that. Might be quite funny...
I suppose they'll just give it to their offspring. So for now... kill rich kids? Just brainstorming here.
It's interesting. I believe it's going to be a crisis, at least here in Canada, where our boomer bulge is the largest in the world.
Much like our southern neighbours, our soon-to-be-retirees don't have much in savings, and the vast majority of their net-worth is tied up in their homes. Unlike the US, we haven't had a housing price adjustment yet. So these boomers are counting on having the current value of their home as their future retirement fund. But as we've learned, that number may as well be fairy dust until someone hands you a cheque.
So what happens when these boomers go to retire, and they find out nobody can afford (or wants) to buy their $500,000 McMansion? When every boomer actually has half, or worse, the amount of money to retire as they thought?
Much like our southern neighbours, our soon-to-be-retirees don't have much in savings, and the vast majority of their net-worth is tied up in their homes. Unlike the US, we haven't had a housing price adjustment yet. So these boomers are counting on having the current value of their home as their future retirement fund. But as we've learned, that number may as well be fairy dust until someone hands you a cheque.
So what happens when these boomers go to retire, and they find out nobody can afford (or wants) to buy their $500,000 McMansion? When every boomer actually has half, or worse, the amount of money to retire as they thought?
>When every boomer actually has half, or worse, the amount of money to retire as they thought?
Goldman buys them all up at a bargain rate and rents them to those of us who can afford to not live in the global megaslum?
Goldman buys them all up at a bargain rate and rents them to those of us who can afford to not live in the global megaslum?
At least you've got Saudi Canada out in Alberta that can help pay for some of it.
I make high middle class money and I don't know anyone in my peer group who has "A 2500 sqft house, two (or three) cars, regular vacations to Europe or the warm south, maybe a summer house, boats, motorcycles AND other toys".
You are describing the upper echelon of lawyers and execs.
You are describing the upper echelon of lawyers and execs.
Yeah, our household income is ~30-40% higher than the median for our state (WA) and with two modest cars, a 1300 SqFt home(in an "up and coming" neighborhood, lol), student loans, a new baby, and very, very few electronic devices (our phones are our most expensive computing device - and we only have a small 26" LCD TV), we barely squeeze by, or so it feels. We don't vacation at all, at least in terms of going to Europe - we might road trip to Vancouver, BC for a weekend once a year.
Also, no other Toys - I have a weight set (power rack, olympic weights, heavyweight bench, etc) that ran me 1300 brand new, other than the car and the house that is our most expensive purchase... ever. I could have sworn once we reached a six figure income we'd be "well off." I guess that is a dream.
Also, no other Toys - I have a weight set (power rack, olympic weights, heavyweight bench, etc) that ran me 1300 brand new, other than the car and the house that is our most expensive purchase... ever. I could have sworn once we reached a six figure income we'd be "well off." I guess that is a dream.
I'm going to go out on a limb with an assumption: the fact that you hang out here probably says a lot about you and your socio-economic status and general intelligence, which relates to your financial sense.
But there were/are a generation of blue-collar, "middle class" people out there living the life I describe. I know some of them. They aren't lawyers and execs, they're public servants, unionized factory workers and such, most of whom make less money than me. Their boomer parents were middle-class wealthy, and their expectations are higher. Only the economy no longer supports it. So they fulfilled these expectations via copious amounts of debt. Then everything broke.
But there were/are a generation of blue-collar, "middle class" people out there living the life I describe. I know some of them. They aren't lawyers and execs, they're public servants, unionized factory workers and such, most of whom make less money than me. Their boomer parents were middle-class wealthy, and their expectations are higher. Only the economy no longer supports it. So they fulfilled these expectations via copious amounts of debt. Then everything broke.
...lowering our expectations to below those of our parents.
Go read the article I linked to. We are richer than our parents. We own more and bigger houses and cars than they owned.
To fix your analogy: "Next quarter's numbers will be higher, and shareholders are just going to accept 10% growth rather than 20%. Expecting 20% growth forever is unrealistic."
If you want to argue that growth should have been higher than it actually was, or that somehow the evil vampire squid is holding us back and making us into serfs, go ahead and make that argument. But you still need to square your argument with the fact that we are consume more than ever.
Go read the article I linked to. We are richer than our parents. We own more and bigger houses and cars than they owned.
To fix your analogy: "Next quarter's numbers will be higher, and shareholders are just going to accept 10% growth rather than 20%. Expecting 20% growth forever is unrealistic."
If you want to argue that growth should have been higher than it actually was, or that somehow the evil vampire squid is holding us back and making us into serfs, go ahead and make that argument. But you still need to square your argument with the fact that we are consume more than ever.
We consume more than ever, but does that mean we're richer? (especially in terms of wealth per unit work, given that this generation has vastly more participation of women in the workforce). The fact that we have bigger houses and more cars doesn't mean anything if we're having to take on more debt, or devote higher percentages of our income to them. And at least for your "average" middle class family there are often two wage-earners now...
Also, wrt growth, the argument I would make is that for much of the last 30 years, most of the economy's growth has not been shared with the middle class. Some of this is undoubtedly structural - the technology revolution has put a higher premium than ever on those with highly developed skills/education and there are certainly workers who have just been left behind. But if you look at the data, the wealth gains over the last 30 years have pretty overwhelmingly been concentrated in the VERY top of the income distribution (I hate to use the rhetoric of the Occupy movement just because it is very inflammatory to a lot of people, but it really is a top 1% phenomena). If this inequality could be mostly explained by education/skills, you'd expect something more like the top ~20% to be vastly pulling away from the bottom 80% of the distribution.
Also, wrt growth, the argument I would make is that for much of the last 30 years, most of the economy's growth has not been shared with the middle class. Some of this is undoubtedly structural - the technology revolution has put a higher premium than ever on those with highly developed skills/education and there are certainly workers who have just been left behind. But if you look at the data, the wealth gains over the last 30 years have pretty overwhelmingly been concentrated in the VERY top of the income distribution (I hate to use the rhetoric of the Occupy movement just because it is very inflammatory to a lot of people, but it really is a top 1% phenomena). If this inequality could be mostly explained by education/skills, you'd expect something more like the top ~20% to be vastly pulling away from the bottom 80% of the distribution.
I agree that growth forever is unrealistic. I'm referring to the fact that growth has stalled for everyone below a certain bracket, but is continuing apace for everyone above.
This has been true for a very long time, but people were filling it in with debt. Then everything got over-extended and collapsed.
This has been true for a very long time, but people were filling it in with debt. Then everything got over-extended and collapsed.
I'm referring to the fact that growth has stalled for everyone below a certain bracket,
Please go read the source I linked to, which shows that growth has not stalled for the bottom 20%, nor the middle 20%.
Please go read the source I linked to, which shows that growth has not stalled for the bottom 20%, nor the middle 20%.
I can't help but nitpick. Companies lower guidance and expectations all the time. Share price almost always falls when this happen, but it's not uncommon and not cause for the CEO being ousted.
https://www.google.com/search?hl=en&gl=us&tbm=nws...
https://www.google.com/search?hl=en&gl=us&tbm=nws...
[deleted]
Really? AEI?
Minimum wage hasn't kept up with inflation.
Debt financed consumption.
You're trying too hard. This stuff isn't that complicated.
Minimum wage hasn't kept up with inflation.
Debt financed consumption.
You're trying too hard. This stuff isn't that complicated.
The numbers all come from the American Housing Survey and Consumer Expenditure Survey. Are you claiming they are incorrect? Or are you merely stating your dislike for AEI?
Lies, damned lies, and statistics.
I rather like the AEI. It serves a purpose. Kind of like a honeypot.
I rather like the AEI. It serves a purpose. Kind of like a honeypot.
"Minimum wage hasn't kept up with inflation. Debt financed consumption."
You're right that minimum wage hasn't kept up with inflation. You're also right that debt financed (a lot of) consumption. But it doesn't follow that those earning minimum wage drove consumption by acquiring debt.
As yummyfajitas links above show, those earning minimum wage are a tiny percentage of overall wage earners. In other words, minimum wage earners aren't going to move the needle much. Double minimum wage (and magically don't have that affect employment levels) and consumption isn't going to go up all that much, simply because there aren't that many people earning minimum wage. For that reason, it is a bit of a silly metric to base an argument on.
You're right that minimum wage hasn't kept up with inflation. You're also right that debt financed (a lot of) consumption. But it doesn't follow that those earning minimum wage drove consumption by acquiring debt.
As yummyfajitas links above show, those earning minimum wage are a tiny percentage of overall wage earners. In other words, minimum wage earners aren't going to move the needle much. Double minimum wage (and magically don't have that affect employment levels) and consumption isn't going to go up all that much, simply because there aren't that many people earning minimum wage. For that reason, it is a bit of a silly metric to base an argument on.
OP is about why Millennials aren't buying cars and houses.
Whereas OP includes values (eg smartphones vs cars), thaumaturgy also says they don't have the cash.
No reasonable person can deny wage stagnation, rising unemployment, increasing costs (education, food, housing, and transportation).
yummyfajitas gets argumentative, citing some libertarian fallacies.
specialist refutes yummy.
liber8 gets pedantic, forgetting original point.
Whereas OP includes values (eg smartphones vs cars), thaumaturgy also says they don't have the cash.
No reasonable person can deny wage stagnation, rising unemployment, increasing costs (education, food, housing, and transportation).
yummyfajitas gets argumentative, citing some libertarian fallacies.
specialist refutes yummy.
liber8 gets pedantic, forgetting original point.
Upvoted you for being the only response with numbers so far, even though I disagree with your conclusion.
The average price of a new car in 1980 was $7,200 [1]. In 2010, it's $28,400 [2]. That's an almost 300% increase.
Federal minimum wage in 1980 was $3.10 [3]. In 2010, it's $7.25, a 130% increase. That's lagging pretty far behind new car prices.
You point out that fewer people are earning minimum wage now than in 1980, but I would counterpoint that more people are unemployed now than in 1980 -- by almost double in terms of the real numbers of unemployed people (but "only" a rate increase from 7.1% to 8.4%) [4].
Although car ownership did increase from 1980 to 2010 [5], total new passenger car sales actually fell from 1980 to 2010 [6], which is closer to what the original article was actually discussing, and would support the conjecture that there are simply more cars on the road now than in 1980.
Further, the inflation-adjusted income of people aged 25 to 34 has stayed roughly level from 1980 to 2010 [7], which pretty well jives with so much of what I've read everywhere else that shows a tremendously overall weakened buying power amongst the youth demographics -- which, again, was what the article was trying to be about.
So, in summary: the price of a new car has gone up a lot but wages have not, especially if you're young. I'm pretty confident that this might be a factor in why young people aren't buying new cars.
[1]: http://www.thepeoplehistory.com/1980.html -- might not be a good source, I'm open to suggestions for something better.
[2]: http://www.ehow.com/facts_5977729_average-cost-new-car.html; this number seemed high to me, but http://www.usatoday.com/money/autos/2010-07-12-carprices12_S... corroborates it.
[3]: http://www.infoplease.com/ipa/A0774473.html
[4]: http://www.nidataplus.com/lfeus1.htm
[5]: http://en.wikipedia.org/wiki/Motor_vehicle#United_States -- because I questioned the partisanship of your source.
[6]: http://www.bts.gov/publications/national_transportation_stat...
[7]: http://nces.ed.gov/fastfacts/display.asp?id=77
The average price of a new car in 1980 was $7,200 [1]. In 2010, it's $28,400 [2]. That's an almost 300% increase.
Federal minimum wage in 1980 was $3.10 [3]. In 2010, it's $7.25, a 130% increase. That's lagging pretty far behind new car prices.
You point out that fewer people are earning minimum wage now than in 1980, but I would counterpoint that more people are unemployed now than in 1980 -- by almost double in terms of the real numbers of unemployed people (but "only" a rate increase from 7.1% to 8.4%) [4].
Although car ownership did increase from 1980 to 2010 [5], total new passenger car sales actually fell from 1980 to 2010 [6], which is closer to what the original article was actually discussing, and would support the conjecture that there are simply more cars on the road now than in 1980.
Further, the inflation-adjusted income of people aged 25 to 34 has stayed roughly level from 1980 to 2010 [7], which pretty well jives with so much of what I've read everywhere else that shows a tremendously overall weakened buying power amongst the youth demographics -- which, again, was what the article was trying to be about.
So, in summary: the price of a new car has gone up a lot but wages have not, especially if you're young. I'm pretty confident that this might be a factor in why young people aren't buying new cars.
[1]: http://www.thepeoplehistory.com/1980.html -- might not be a good source, I'm open to suggestions for something better.
[2]: http://www.ehow.com/facts_5977729_average-cost-new-car.html; this number seemed high to me, but http://www.usatoday.com/money/autos/2010-07-12-carprices12_S... corroborates it.
[3]: http://www.infoplease.com/ipa/A0774473.html
[4]: http://www.nidataplus.com/lfeus1.htm
[5]: http://en.wikipedia.org/wiki/Motor_vehicle#United_States -- because I questioned the partisanship of your source.
[6]: http://www.bts.gov/publications/national_transportation_stat...
[7]: http://nces.ed.gov/fastfacts/display.asp?id=77
Note that your “average price of a new car in 2010" is skewed wildly high for a number of reasons.
(1) The variety of mid-high end luxury cars (i.e. $50k+), and the number of such cars sold, far exceeds the choices available in 1980. For example, you now have a variety of choices if you want to drop >$50k on a pickup truck. (2) We simply have more disposable income to spend on cars. That we’re so rich we can afford to spend a higher minimum wage multiple on a frivolous expense isn’t really a bad thing.
This of course also overlooks the fact that today, right now, you can buy a brand new car for about $7,200. (I just bought a Ford Ranger for about that, but there are numerous other choices in that range as well.) Even these very cheap cars are so much better in every tangible and intangible metric than even “decent” 1980's cars that it’s laughable. Step up to cars in the $15k range, and you’re able to buy cars that are better in just about every way, except for upholstery, than even luxury cars in from 1980.
(1) The variety of mid-high end luxury cars (i.e. $50k+), and the number of such cars sold, far exceeds the choices available in 1980. For example, you now have a variety of choices if you want to drop >$50k on a pickup truck. (2) We simply have more disposable income to spend on cars. That we’re so rich we can afford to spend a higher minimum wage multiple on a frivolous expense isn’t really a bad thing.
This of course also overlooks the fact that today, right now, you can buy a brand new car for about $7,200. (I just bought a Ford Ranger for about that, but there are numerous other choices in that range as well.) Even these very cheap cars are so much better in every tangible and intangible metric than even “decent” 1980's cars that it’s laughable. Step up to cars in the $15k range, and you’re able to buy cars that are better in just about every way, except for upholstery, than even luxury cars in from 1980.
I don't think it's useful to compare minimum wage, which is a fixed floor, with the average cost of a new car, which will float upward if rich people buy more expensive cars. I also don't know why you would limit yourself to new cars, since the least expensive cars are typically used--and cars have undoubtedly gotten more reliable since 1980. They last a lot longer.
Unfortunately I don't have the time to do the research and math myself to tease out these relationships.
Unfortunately I don't have the time to do the research and math myself to tease out these relationships.
If car ownership increased, but sales of new cars fell, it implies people are keeping the same car for more time.
The employment to population ratio is the same as it was during the 80's, and was considerably higher until the recent recession. In contrast, the fraction of people earning min wage has fallen.
http://research.stlouisfed.org/fred2/series/EMRATIO
Further, adjusting wages (rather than total comp) for inflation is a gratuitous statistical fallacy. One of the biggest drivers in "inflation" is an average of the price of the expanding basket of goods called "health care" [1]. For most people, this is paid for out of non-wage compensation.
[1] I.e., an MRI + laparoscopic spine surgery today costs more than back pain in 1980.
The employment to population ratio is the same as it was during the 80's, and was considerably higher until the recent recession. In contrast, the fraction of people earning min wage has fallen.
http://research.stlouisfed.org/fred2/series/EMRATIO
Further, adjusting wages (rather than total comp) for inflation is a gratuitous statistical fallacy. One of the biggest drivers in "inflation" is an average of the price of the expanding basket of goods called "health care" [1]. For most people, this is paid for out of non-wage compensation.
[1] I.e., an MRI + laparoscopic spine surgery today costs more than back pain in 1980.
Quibbling about the exact source of inflation is irrelevant unless you want to claim that people are not buying cars or houses because they are buying health care instead.
And that is clearly not the case. According to government statistics [1], nearly one-third of those lacking health care coverage in the United States are young adults. The unemployment rate among this cohort is over 15 percent, and much higher if one looks at U6. And those who are employed are collecting lower wages which are not offset by higher benefits: less than 25 percent of young workers are provided health insurance through their jobs as compared with over 57 percent for the rest of the labor force.
Put simply, breaking down aggregate statistics into demographic chunks gives a much better picture of what is really happening. Younger works have it really hard these days. Older (employed) people are still doing OK and they are the ones pulling up the aggregate income figures. But for young people -- the focus of this article -- the data supports Thaumaturgy's argument that younger people these days are simply poorer.
[1] http://money.cnn.com/2012/04/16/pf/health-care-young-adults/...
And that is clearly not the case. According to government statistics [1], nearly one-third of those lacking health care coverage in the United States are young adults. The unemployment rate among this cohort is over 15 percent, and much higher if one looks at U6. And those who are employed are collecting lower wages which are not offset by higher benefits: less than 25 percent of young workers are provided health insurance through their jobs as compared with over 57 percent for the rest of the labor force.
Put simply, breaking down aggregate statistics into demographic chunks gives a much better picture of what is really happening. Younger works have it really hard these days. Older (employed) people are still doing OK and they are the ones pulling up the aggregate income figures. But for young people -- the focus of this article -- the data supports Thaumaturgy's argument that younger people these days are simply poorer.
[1] http://money.cnn.com/2012/04/16/pf/health-care-young-adults/...
People are buying cars and houses, as you'd know if you read my link. We currently have more cars/houses than ever before.
If inflation-adjusted compensation were down, this fact would pose a paradox and suggest we are incorrectly measuring inflation - however, the paradox is easily resolved by looking at total comp.
If inflation-adjusted compensation were down, this fact would pose a paradox and suggest we are incorrectly measuring inflation - however, the paradox is easily resolved by looking at total comp.
The AEI is a laughingstock in economic circles, and the paper you cite is a good example of the reason why. The authors do not say that more people are buying cars and houses, but argue that there is greater "housing consumption", a catchall term they use to cover rentals along with the accumulated value of detritus like hand-me-down appliances. The authors also redefine the idea of conventional housing to start including things like mobile homes and trailer parks in the mid-1980s.
Their "income" figures are equally shoddy since they include government transfers through programs like food stamps as part of the "market income" of poorer people by calculating the value of these products and services as if they were bought using salary. Leaving aside the morass of problems with the way this approach leads to grossly inflated aggregate income and is clearly intended to deflect from more accurate claims that most market wages are stagnant, their approach is totally off-topic in any discussion about the state of the labor market: what kind of jobs are available to young people; what those jobs pay in salaries and benefits; and what people can afford to purchase given those incomes.
You should also ask yourself why the authors go through such contortions to count things like rentals as purchases and IMPLY that housing is clearly affordable when there is a perfectly straightforward and universally-applicable measure of real estate affordability in the rent/buy ratio? The only reason the AEI does not use this statistic is that it is inconvenient, showing that housing costs have risen significantly across the United States in response to the housing bubble which started in the 1990s, Prices have still not collapsed even close the levels enjoyed by previous generations. So housing is NOT more affordable for people today than in the past. It is in fact significantly more expensive pretty much everywhere except Las Vegas:
http://money.cnn.com/real_estate/storysupplement/price_to_re...
Finally, since you explicitly make the claim that health care coverage has improved in your MRI/backpain comment and suggest that this is what people are spending their money on instead of cars and houses, it is interesting that the AEI paper explicitly excludes health care costs in its panegyric on how well-off American workers are, noting that "we exclude from consumption out-of-pocket health expenses because they are not closely tied to well-being." In other words, they realized that including basic health care expenses as income makes people relatively worse off now as compared to the past.
On a final point -- it is worth commenting that your other link to the labor participation rate shows the exact opposite of what you claim: the average labor participation rate is visibly much higher throughout most the 1980s than at present, except for a brief crash during the 1982 recession. If 2008 was anything like 1982, the participation rate now would be well into the 60s again and growing.
Their "income" figures are equally shoddy since they include government transfers through programs like food stamps as part of the "market income" of poorer people by calculating the value of these products and services as if they were bought using salary. Leaving aside the morass of problems with the way this approach leads to grossly inflated aggregate income and is clearly intended to deflect from more accurate claims that most market wages are stagnant, their approach is totally off-topic in any discussion about the state of the labor market: what kind of jobs are available to young people; what those jobs pay in salaries and benefits; and what people can afford to purchase given those incomes.
You should also ask yourself why the authors go through such contortions to count things like rentals as purchases and IMPLY that housing is clearly affordable when there is a perfectly straightforward and universally-applicable measure of real estate affordability in the rent/buy ratio? The only reason the AEI does not use this statistic is that it is inconvenient, showing that housing costs have risen significantly across the United States in response to the housing bubble which started in the 1990s, Prices have still not collapsed even close the levels enjoyed by previous generations. So housing is NOT more affordable for people today than in the past. It is in fact significantly more expensive pretty much everywhere except Las Vegas:
http://money.cnn.com/real_estate/storysupplement/price_to_re...
Finally, since you explicitly make the claim that health care coverage has improved in your MRI/backpain comment and suggest that this is what people are spending their money on instead of cars and houses, it is interesting that the AEI paper explicitly excludes health care costs in its panegyric on how well-off American workers are, noting that "we exclude from consumption out-of-pocket health expenses because they are not closely tied to well-being." In other words, they realized that including basic health care expenses as income makes people relatively worse off now as compared to the past.
On a final point -- it is worth commenting that your other link to the labor participation rate shows the exact opposite of what you claim: the average labor participation rate is visibly much higher throughout most the 1980s than at present, except for a brief crash during the 1982 recession. If 2008 was anything like 1982, the participation rate now would be well into the 60s again and growing.
The authors do not say that more people are buying cars and houses, but argue that there is greater "housing consumption"...
See table 1 & 2. Housing consumption is measured in terms of square footage, number of rooms, fraction of homes owning a car, and other similar objective properties.
I didn't claim housing was "more affordable" (whatever that means), I claimed people have more of it.
See table 1 & 2. Housing consumption is measured in terms of square footage, number of rooms, fraction of homes owning a car, and other similar objective properties.
I didn't claim housing was "more affordable" (whatever that means), I claimed people have more of it.
Thaumaturgy's point was simple: rental costs have increased relative to wages and housing prices have increased relative to wages. It is no mystery why fewer young people are able to purchase real estate now than in the past. Or cars.
At worst your argument and sources conflate wages and income and standard of living in order to make insinuations that are statistically wrong. At best they can be interpreted as making the fairly non-controversial claim that the AGGREGATE standard of living in America has improved over the last 30 years, despite the fact that there has been a clear reduction in the relative purchasing power and affluence of younger Americans over the last 10 years.
At worst your argument and sources conflate wages and income and standard of living in order to make insinuations that are statistically wrong. At best they can be interpreted as making the fairly non-controversial claim that the AGGREGATE standard of living in America has improved over the last 30 years, despite the fact that there has been a clear reduction in the relative purchasing power and affluence of younger Americans over the last 10 years.
If you have stats to back up your assertions, present them. So far all you've done is made ad-hominem attacks against the authors of my study and incorrect claims about it's contents.
Sources for health care and housing statistics are already listed above and I do not make a single ad-hominem attack on the authors. If you can point out where exactly you think I am misrepresenting their argument I will be happy to provide page references so they can disagree with you themselves.
To cite just one example as evidence that you need to read AEI "research" more carefully, you can find the authors mention the mid-1980s inclusion of mobile homes and trailer parks as new forms of "housing consumption" in the first paragraph on page 15. I give them some credit for mentioning this, since it should be obvious even to the uninformed that aggregate measures of "housing consumption" are going to go up when you find new forms of housing to count half-way through your survey.
As far as the reputation of the AEI goes, it stopped having any when it fired David Frum for being too far left [1]. Mainstream economists find the institute laughable [2], and even conservative economists like Bruce Bartlett mock its employees as "scholars" (his quotes) [3]. Poor quality ideological broadsides like the one cited above are the norm rather than the exception. Charles Murray's "The Bell Curve" is broadly derided for racism, while Kevin Hassett and James Glassman are ridiculed in the mainstream media for backing pump-and-dump schemes like "Dow 36,000" and for seeming to be unaware of such basic economic concepts as discounted cash flow.
[1] http://www.washingtonpost.com/wp-dyn/content/article/2010/03... [2] http://delong.typepad.com/sdj/2011/10/the-uncertainty-argume... [3] http://capitalgainsandgames.com/blog/bruce-bartlett/1601/gro...
To cite just one example as evidence that you need to read AEI "research" more carefully, you can find the authors mention the mid-1980s inclusion of mobile homes and trailer parks as new forms of "housing consumption" in the first paragraph on page 15. I give them some credit for mentioning this, since it should be obvious even to the uninformed that aggregate measures of "housing consumption" are going to go up when you find new forms of housing to count half-way through your survey.
As far as the reputation of the AEI goes, it stopped having any when it fired David Frum for being too far left [1]. Mainstream economists find the institute laughable [2], and even conservative economists like Bruce Bartlett mock its employees as "scholars" (his quotes) [3]. Poor quality ideological broadsides like the one cited above are the norm rather than the exception. Charles Murray's "The Bell Curve" is broadly derided for racism, while Kevin Hassett and James Glassman are ridiculed in the mainstream media for backing pump-and-dump schemes like "Dow 36,000" and for seeming to be unaware of such basic economic concepts as discounted cash flow.
[1] http://www.washingtonpost.com/wp-dyn/content/article/2010/03... [2] http://delong.typepad.com/sdj/2011/10/the-uncertainty-argume... [3] http://capitalgainsandgames.com/blog/bruce-bartlett/1601/gro...
"The AEI is a laughingstock in economic circles..." <- Ad hominem. See also the third paragraph of your most recent post.
"You should also ask yourself why the authors go through such contortions to count things like rentals as purchases..." <- Misrepresentation. The authors attempt to measure consumption of housing, as does thaumaturgy. You are the only person discussing real estate investments.
"Their "income" figures are equally shoddy since they include government transfers through programs like food stamps as part of the "market income" of poorer people..." <- Misrepresentation. The authors explicitly distinguish between earned and unearned income.
To cite just one example as evidence that you need to read AEI "research" more carefully, you can find the authors mention the mid-1980s inclusion of mobile homes and trailer parks as new forms of "housing consumption" in the first paragraph on page 15. <- Misrepresentation. The "re-definition" was done by the government, not the AEI. It's also irrelevant, since I compared square footage in 2009 to 1989 (i.e., both stats are after the redefinition).
"You should also ask yourself why the authors go through such contortions to count things like rentals as purchases..." <- Misrepresentation. The authors attempt to measure consumption of housing, as does thaumaturgy. You are the only person discussing real estate investments.
"Their "income" figures are equally shoddy since they include government transfers through programs like food stamps as part of the "market income" of poorer people..." <- Misrepresentation. The authors explicitly distinguish between earned and unearned income.
To cite just one example as evidence that you need to read AEI "research" more carefully, you can find the authors mention the mid-1980s inclusion of mobile homes and trailer parks as new forms of "housing consumption" in the first paragraph on page 15. <- Misrepresentation. The "re-definition" was done by the government, not the AEI. It's also irrelevant, since I compared square footage in 2009 to 1989 (i.e., both stats are after the redefinition).
So, in summary: the price of a new car has gone up a lot but wages have not, especially if you're young. I'm pretty confident that this might be a factor in why young people aren't buying new cars.
You're probably right, but that doesn't lead to a conclusion that the effect is caused by the economy.
In absolute dollars, cars are more expensive than they used to be, but for your dollar, you get much more car. That is, there are more features (stereo, A/C, power everything), more safety (both structurally as well as ABS, better restraints, etc.), more reliability, and much greater life expectancy [1] from a modern car. In short, it's a better investment.
If you've got enough money to meet the minimum threshold for buying a new car, you're going to get more for your money than you did in 1980. But that minimum threshold has definitely been raised. Part of this is from consumer demand; part of it (particularly in areas related to safety or emissions) is government mandated.
So it looks to me like the car market just evolved itself out of the reach of many young people.
[1] We just got a new car for the wife, trading in her old car at 200,000 miles. My car has 128,000 and is still running strong. In this age those numbers are expected; back then, a 200K mile car would be a minor miracle.
You're probably right, but that doesn't lead to a conclusion that the effect is caused by the economy.
In absolute dollars, cars are more expensive than they used to be, but for your dollar, you get much more car. That is, there are more features (stereo, A/C, power everything), more safety (both structurally as well as ABS, better restraints, etc.), more reliability, and much greater life expectancy [1] from a modern car. In short, it's a better investment.
If you've got enough money to meet the minimum threshold for buying a new car, you're going to get more for your money than you did in 1980. But that minimum threshold has definitely been raised. Part of this is from consumer demand; part of it (particularly in areas related to safety or emissions) is government mandated.
So it looks to me like the car market just evolved itself out of the reach of many young people.
[1] We just got a new car for the wife, trading in her old car at 200,000 miles. My car has 128,000 and is still running strong. In this age those numbers are expected; back then, a 200K mile car would be a minor miracle.
To take your increase in traditional unemployment numbers and build on it:
http://en.wikipedia.org/wiki/File:US_incarceration_timeline-...
Incarceration rates: it's a hockey stick! Incarcerated people are all unemployed, and most of them, if in the job pool, are likely to be in the minimum wage or similar bracket.
The equivalent of a $3.80 minimum wage in 1980 is also nearly $9 today with inflation, so the group of true "minimum wage" workers is much larger for yet another reason.
http://en.wikipedia.org/wiki/File:US_incarceration_timeline-...
Incarceration rates: it's a hockey stick! Incarcerated people are all unemployed, and most of them, if in the job pool, are likely to be in the minimum wage or similar bracket.
The equivalent of a $3.80 minimum wage in 1980 is also nearly $9 today with inflation, so the group of true "minimum wage" workers is much larger for yet another reason.
I'm 21, live in New York City, and let my driver's licence lapse over a year ago. I don't plan on owning a house, preferring to drive my surplus wealth into assets I understand better and which don't restrict my mobility, and don't care to own a car.
This is not economically motivated - I have comfortable free cash flow and a healthy balance sheet free of personal debt. I pay for a car service and take taxis more than public transportation and pay more than the average U.S. homeowner's mortgage payment in rent. I also spend a great deal more than my parents, who find my behaviour and preferences baffling, on travel and technology.
I won't disagree that a significant fraction of decreasing home and car ownership may be explained by economic factors, but would caution that (a) there is a significant minority that is making these choices as a matter of preference, and, (b) for the rest, these behavioural changes, initially motivated by economic conditions, could become ingrained to where they persist beyond economic weakness. With the second point I'm not saying we will be a "cheap" generation, just cheap traditionally, as we spend in categories we value more than piles of sticks and little steel boxes propelled along asphalt by exploding chemicals.
This is not economically motivated - I have comfortable free cash flow and a healthy balance sheet free of personal debt. I pay for a car service and take taxis more than public transportation and pay more than the average U.S. homeowner's mortgage payment in rent. I also spend a great deal more than my parents, who find my behaviour and preferences baffling, on travel and technology.
I won't disagree that a significant fraction of decreasing home and car ownership may be explained by economic factors, but would caution that (a) there is a significant minority that is making these choices as a matter of preference, and, (b) for the rest, these behavioural changes, initially motivated by economic conditions, could become ingrained to where they persist beyond economic weakness. With the second point I'm not saying we will be a "cheap" generation, just cheap traditionally, as we spend in categories we value more than piles of sticks and little steel boxes propelled along asphalt by exploding chemicals.
[I] live in New York City ... and don't care to own a car.
Your lack of desire for a car has a LOT more to do with living in NYC than your age or social status. You sound just like friends of mine from NYC.
Your lack of desire for a car has a LOT more to do with living in NYC than your age or social status. You sound just like friends of mine from NYC.
A global trend amplified by us "Millenials" in the U.S. is a preference for urbanisation. Contrary to past generations, I don't plan on ever giving up the pace and energy of the metropolis.
Thus our (and my) psychological shift could be explained as simply as a preference for the hyper-connected urban lifestyle, with decreasing home and car ownership flowing from that change in preferences rather than a direct change in beliefs about cars or houses. Either way, the symptoms look set to persist.
Thus our (and my) psychological shift could be explained as simply as a preference for the hyper-connected urban lifestyle, with decreasing home and car ownership flowing from that change in preferences rather than a direct change in beliefs about cars or houses. Either way, the symptoms look set to persist.
> I don't plan on ever giving up the pace and energy of the metropolis
Until you have kids, and you see how most urban school districts are run. This is the same reason our parents left the city and moved to the burbs. Things are not really as different now as we think.
Though now there is a huge opportunity to reduce the cost and drastically improve K12 education. If our generation can break the entrenched bureaucracy of public education, then I would say urbanization in the US could be more than a consequence of Gen Y being poor and delaying starting a family.
Until you have kids, and you see how most urban school districts are run. This is the same reason our parents left the city and moved to the burbs. Things are not really as different now as we think.
Though now there is a huge opportunity to reduce the cost and drastically improve K12 education. If our generation can break the entrenched bureaucracy of public education, then I would say urbanization in the US could be more than a consequence of Gen Y being poor and delaying starting a family.
Also, space. If you have kids, space will become more important.
As soon as you even think about having kids, absolutely everything about how the suburbs are designed suddenly makes sense.
I still prefer an urban setting though.
As soon as you even think about having kids, absolutely everything about how the suburbs are designed suddenly makes sense.
I still prefer an urban setting though.
> I don't plan on ever
The thing with age that young(er) people will never believe is that you change. It really doesn't matter what you think or believe now. It is unlikely to remain constant for 20 years.
The thing with age that young(er) people will never believe is that you change. It really doesn't matter what you think or believe now. It is unlikely to remain constant for 20 years.
Counterpoint: I live in NYC because I don't like driving and hate commuting. If I was into cars and houses, I would live in California or Texas.
Or rather, his living in NYC particularly has a lot to do with his age, social status and preferences. People like him prefer big cities because they don't want to own cars. So it's the other way around.
That's a pretty bold generalization. "People like him" prefer big cities for a lot of diverse reasons, most of which are probably not that they do not want to own a car. Not needing to own a car is a result of the convenience of a big city--having everything you need within walking/transit distance. That is the reason I live in NYC.
Edit: last sentence was unclear
Edit: last sentence was unclear
As far as I am concerned the single biggest thing we as a family have done to improve quality of life is to arrange things so that my wife and I both walk to work and our son can walk to school.
Living or working in the 'burbs is absolutely not an option for our household. The reason is quite directly that we don't want to be reliant on a car.
And wanting to not be reliant on a car is a big part of the reason I moved into the city in the first place. I did the calculation many years ago, and figured out that even from a purely financial perspective it's better - the rent's higher, but cars are impressively expensive to own, fuel, and maintain. And there are a bunch of other financial perks. Living within walking distance of numerous bars saves a mint in cab fares, for example. (Not to mention that suburban taxi service tends to be an enormous PITA.)
And wanting to not be reliant on a car is a big part of the reason I moved into the city in the first place. I did the calculation many years ago, and figured out that even from a purely financial perspective it's better - the rent's higher, but cars are impressively expensive to own, fuel, and maintain. And there are a bunch of other financial perks. Living within walking distance of numerous bars saves a mint in cab fares, for example. (Not to mention that suburban taxi service tends to be an enormous PITA.)
I suspect that you are a minority (as you admit). My monthly student loan burden exceeds my rent burden by almost $200; my loan debt is far less than the median.
There may be a cultural factor to it as well. I don't find the need to drive everywhere like I did growing in the 90s, but I certainly don't have a ton of income left over for car and fuel (let alone even more debt for a mortgage and the other costs that entails).
My behavior is driven more by economics than culture.
There may be a cultural factor to it as well. I don't find the need to drive everywhere like I did growing in the 90s, but I certainly don't have a ton of income left over for car and fuel (let alone even more debt for a mortgage and the other costs that entails).
My behavior is driven more by economics than culture.
>live in New York City
MYSTERY SOLVED.
Of course you don't want to own a car in NYC.
MYSTERY SOLVED.
Of course you don't want to own a car in NYC.
My brother lives in NYC and owns a car. He wants to own a car. (He doesn't live on Manhattan, but…)
I live in Toronto and don't want to own a car. We will need to get a replacement for our current car because there are enough things that we need to do that car services would not benefit us (we also live just outside of the core service area for every single one of the three—or is it four?—car services in Toronto).
I live in Toronto and don't want to own a car. We will need to get a replacement for our current car because there are enough things that we need to do that car services would not benefit us (we also live just outside of the core service area for every single one of the three—or is it four?—car services in Toronto).
Same here. I'm not American, but i also mention a drastic lack of desire of my generation (late X or early Y depending on who you ask) to own a house or a car vc. earlier ones. I bought an apartment only when i could save of one in one year and buy in cash, and only recently bought a car (also within a couple months of income) only because of moving to a place with little public transport.
This has nothing to do with economy, this is behavioral change. Freedom in all forms is the thing we value most of all and ready to spend a lot of money for, and houses and cars have negative value in this respect, they bind you.
This has nothing to do with economy, this is behavioral change. Freedom in all forms is the thing we value most of all and ready to spend a lot of money for, and houses and cars have negative value in this respect, they bind you.
I own a beater car even though I could pay cash a new car if I wanted to. One reason is that cars are expenses, not assets, so there is no reason to spend more than you have to for the transportation it provides. Spending money on a nice car is just about one of the worst financial decisions you can make.
The other reason I own a beater is that I live near a major city and can take public transit to and from work. If my car is going to sit in front of my house most of the time, why pay for a nice one?
Public transportation is much better near cities, and the Millenial generation is the most city-bound American generation ever. Americans in general are migrating to cities, and young people more than most. I think the article grossly underplays the importance of this demographic trend.
I would bet this is a major factor in declining car ownership, AND home ownership--since it is so much easier to find reasonable rent near a city. In small towns and even many suburbs, there are typically few rentals, so you have to purchase if you want to live there. Real estate tends to be more affordable there too.
The other reason I own a beater is that I live near a major city and can take public transit to and from work. If my car is going to sit in front of my house most of the time, why pay for a nice one?
Public transportation is much better near cities, and the Millenial generation is the most city-bound American generation ever. Americans in general are migrating to cities, and young people more than most. I think the article grossly underplays the importance of this demographic trend.
I would bet this is a major factor in declining car ownership, AND home ownership--since it is so much easier to find reasonable rent near a city. In small towns and even many suburbs, there are typically few rentals, so you have to purchase if you want to live there. Real estate tends to be more affordable there too.
Cheapest Generation?
How about poorest generation. Wages are stagnant and down in real terms. Debt burden out of the gates (thanks to educational loans) are through the roof. Social norms around employment security have collapsed. Returns in the stock market have been flat to down their entire sentient lives. They've seen home purchases wreck the financies of their parents (and especially their X-er older siblings who bought at the peak.)
Oh, and under/unemployment is running over 50% for under-30's.
I don't know, Atlantic, maybe that little recession thing we were told was over has something to do with it.
How about poorest generation. Wages are stagnant and down in real terms. Debt burden out of the gates (thanks to educational loans) are through the roof. Social norms around employment security have collapsed. Returns in the stock market have been flat to down their entire sentient lives. They've seen home purchases wreck the financies of their parents (and especially their X-er older siblings who bought at the peak.)
Oh, and under/unemployment is running over 50% for under-30's.
I don't know, Atlantic, maybe that little recession thing we were told was over has something to do with it.
This likely varies a lot based on location, but my impression is that suburbs aren't as high-status with (some) young people as they used to be: many people who in my parents' generation aspired to owning a house+garage+car now aspire to live in the city and walk/bike/transit to work. That doesn't mean no spending, though; young people are certainly shelling out to live in San Francisco or Manhattan, even if they don't buy a car.
How can we reconcile "everybody is poor now" with all the teenage millionaires and 22 year olds moving to California for six figure salaries?
Is everything we read here such an extreme case that the rest of the world has no chance of catching up or competing (except in the überextreme sport of Startup)?
Is everything we read here such an extreme case that the rest of the world has no chance of catching up or competing (except in the überextreme sport of Startup)?
Does the author of the article somehow assume that Millennials don't spend because they don't buy cars or houses? Do they just stuff their money in their socks, or might it be that they splurge on electronics and traveling? Of course, one does not usually take up a mortgage for any of those, so that may lead to macroeconomic woes in the short run, but in the long run I suppose we can just expect consumption patterns to shift.
One word: insurance.
Rates for drivers under 25 are upwards of $200/mo in most urban areas, and that's for the utmost basic 'one-way coverage' insurance. Under one-way, if you are deemed even partially at fault in an accident, however minor, the insurance pays the other's bill only - and essentially ensures you cannot drive for the next three years as premiums quite literally skyrocket.
Anecdote from my university years: friend of mine was driving his van, had a lady sideswipe him and send him into the median, immediately crashing into a tree. She kept driving. The van incurred damage from the sideswipe. He was found 100% at fault regardless. His insurance went from an already preposterous ~$240/month to over $900. Nine hundred dollars per month - isn't that what they charge for Lamborghinis? Fully licensed, clean record for 4+ years at the time, I believe he was 21. It was over two years until the rates finally lowered to 'a more affordable' $300+/mo, which is AFAIK still what he pays.
I currently pay $250/month, one-way of course. I could drive a '95 Civic or an '08 BMW, my rate would differ ~$20/mo. The difference between dozens of insurance companies is about the same - $20 more or less. I am 24.
FWIW, bikes are not exactly feasible for over half the year in our climate (Toronto).
Rates for drivers under 25 are upwards of $200/mo in most urban areas, and that's for the utmost basic 'one-way coverage' insurance. Under one-way, if you are deemed even partially at fault in an accident, however minor, the insurance pays the other's bill only - and essentially ensures you cannot drive for the next three years as premiums quite literally skyrocket.
Anecdote from my university years: friend of mine was driving his van, had a lady sideswipe him and send him into the median, immediately crashing into a tree. She kept driving. The van incurred damage from the sideswipe. He was found 100% at fault regardless. His insurance went from an already preposterous ~$240/month to over $900. Nine hundred dollars per month - isn't that what they charge for Lamborghinis? Fully licensed, clean record for 4+ years at the time, I believe he was 21. It was over two years until the rates finally lowered to 'a more affordable' $300+/mo, which is AFAIK still what he pays.
I currently pay $250/month, one-way of course. I could drive a '95 Civic or an '08 BMW, my rate would differ ~$20/mo. The difference between dozens of insurance companies is about the same - $20 more or less. I am 24.
FWIW, bikes are not exactly feasible for over half the year in our climate (Toronto).
As I was reading your post I said to myself, this person must live in Canada! turns out I was right :)
I used to live in Toronto, bought my first car when I was 20, got into an accident at 21; I couldn't afford insurance and hence a car again until I moved to the US at 23. It isn't the same here, my wife and I now pay $200 every 6 months which is 3rd party and liability (the one-way you mention) and convers both of us. Also 1 accident in every 3 years is forgiven. (I live in California)
I used to live in Toronto, bought my first car when I was 20, got into an accident at 21; I couldn't afford insurance and hence a car again until I moved to the US at 23. It isn't the same here, my wife and I now pay $200 every 6 months which is 3rd party and liability (the one-way you mention) and convers both of us. Also 1 accident in every 3 years is forgiven. (I live in California)
Pretty sloppy reporting all around. They aren't even looking at the correct statistics to address the hypothesis.
The article cites the percent of new car sales that were from 21 to 34 year olds in 1985 versus 2010 and find that it falls. What they really want to look at is the percent of 21 to 34 year olds that buy cars. You could have an increasing percent of young people buying cars AND a fall in the percent of car sales driven by young people if young people are making up a smaller proportion of the car buying demographic. Indeed, 21 to 34 year olds make up a smaller proportion of the general U.S. population in 2010 than in 1990 (http://www.censusscope.org/us/chart_age.html). It probably isn't enough to reverse their result, but it soaks up some of the claimed behavior.
They make the same type of mistake looking at the percent of teens with a license. Well, 13-15 can't even have a license, so what is happening to the age distribution within "teens"?
Then you have all of the other causal effects that other commenters address. I've come to expect this type of thing from the Atlantic blog posts, so I was surprised to see that this was a magazine article.
The article cites the percent of new car sales that were from 21 to 34 year olds in 1985 versus 2010 and find that it falls. What they really want to look at is the percent of 21 to 34 year olds that buy cars. You could have an increasing percent of young people buying cars AND a fall in the percent of car sales driven by young people if young people are making up a smaller proportion of the car buying demographic. Indeed, 21 to 34 year olds make up a smaller proportion of the general U.S. population in 2010 than in 1990 (http://www.censusscope.org/us/chart_age.html). It probably isn't enough to reverse their result, but it soaks up some of the claimed behavior.
They make the same type of mistake looking at the percent of teens with a license. Well, 13-15 can't even have a license, so what is happening to the age distribution within "teens"?
Then you have all of the other causal effects that other commenters address. I've come to expect this type of thing from the Atlantic blog posts, so I was surprised to see that this was a magazine article.
"MTV Scratch — a corporate cousin of the TV network responsible for Jersey Shore", I like how they say "responsible" akin to a criminal action. +1
> the share of young people getting their first mortgage between 2009 and 2011 is half what it was just 10 years ago
I would like to explain to the author, very slowly and carefully, that something happened in 2008 which made banks a bit more wary of lending to people they would call "subprime." I tried to get a mortgage this spring and failed, even with a good income and 35% down payment.
I would like to explain to the author, very slowly and carefully, that something happened in 2008 which made banks a bit more wary of lending to people they would call "subprime." I tried to get a mortgage this spring and failed, even with a good income and 35% down payment.
I believe the next shift in the economy is towards an "Entertainment Economy" (we're currently in an Service Economy, or least the Western world is). Which means everything we do has to be part of some sort of entertainment or experience. Anything that is a commodity, such as car, train, plane, or bus, is no longer going to yield high profits. For example, it means companies like BMW, Mercedes, Porsche, will win out, because they no longer sell something that gets you from point A to point B, but rather they sell you the Ultimate Driving Machine™. Heck, even cycling is now more of an "experience" than a car. Cars are just plain boring to my generation.
When I last had a personal car, TCO was over 900USD per month (auto financing, parking, insurance).
Since I live in an urban area well served by subways, buses, taxis, Zipcar, and Uber, letting go of that high fixed monthly expense in favor of an a-la-carte approach has been a great financial benefit for me.
Of course, if I had two kids, lived in remote suburbs, or had to commute to suburbs, the equation would be very different.
But for now, for me and many other urban dwellers, the value of owning my own car just doesn't compute.
Since I live in an urban area well served by subways, buses, taxis, Zipcar, and Uber, letting go of that high fixed monthly expense in favor of an a-la-carte approach has been a great financial benefit for me.
Of course, if I had two kids, lived in remote suburbs, or had to commute to suburbs, the equation would be very different.
But for now, for me and many other urban dwellers, the value of owning my own car just doesn't compute.
The difference between Gen Y / Millennials, and Gen X, is that the younger generation is taking a hard look at the big consumer purchases and deciding that they're either not worth it, or are simply unaffordable.
Gen X matured into a world not quite as harsh, but generally took on huge amounts of debt to fund first school (not quite so much as current students), vehicles, homes, and marriages. Only to be hit by multiple periods of very uncertain economic times (recessions in 1989-92, 2001, 2007-2009), each of which was followed by increasingly weak recoveries. The early 1990s recovery not really picking up steam until 1995-6, the 2000s in 2005-6, and the most recent recession still not really over.
In the early 1990s, it was popular to call Gen X the "slacker generation", which I suspect was largely due to the economic conditions of the time. A few years later, they were the dot-com generation, beavering away in the first generation of Internet start-ups.
The 2000s are already being called a "lost decade". The 2010s are well on their way to much of the same. Some sectors, notably tech, have been countertrending, which may affect YC/HN impressions. But overall, economic trends have been downward.
Gen X matured into a world not quite as harsh, but generally took on huge amounts of debt to fund first school (not quite so much as current students), vehicles, homes, and marriages. Only to be hit by multiple periods of very uncertain economic times (recessions in 1989-92, 2001, 2007-2009), each of which was followed by increasingly weak recoveries. The early 1990s recovery not really picking up steam until 1995-6, the 2000s in 2005-6, and the most recent recession still not really over.
In the early 1990s, it was popular to call Gen X the "slacker generation", which I suspect was largely due to the economic conditions of the time. A few years later, they were the dot-com generation, beavering away in the first generation of Internet start-ups.
The 2000s are already being called a "lost decade". The 2010s are well on their way to much of the same. Some sectors, notably tech, have been countertrending, which may affect YC/HN impressions. But overall, economic trends have been downward.
“I don’t believe that young buyers don’t care about owning a car,” says John McFarland, GM’s 31-year-old manager of global strategic marketing. “We just think nobody truly understands them yet.”
I'll give him this: at least he's not blaming his customers or the market, unlike some other industries I could name. I just wonder what he will do if when he "understands them" he will have figured out that they don't care about owning a car.
I'll give him this: at least he's not blaming his customers or the market, unlike some other industries I could name. I just wonder what he will do if when he "understands them" he will have figured out that they don't care about owning a car.
The closeout of the article is overly optimistic. Oh I know many Millennials who are "investing" in themselves. Trouble is it is not education but instead clothing, electronics, and expensive trips. I can understand why many do not want a new car or even a car, it is far easier to declare you don't want a thing than to admit you cannot afford what you want.
So there are two sides to this story.
So there are two sides to this story.
When I was 22, I only wanted to buy new cars and my very first car was brand new. Slowly, I realized that used cars are a better option and never bought a new one again. Now at 31, I don't even have a car because I just don't feel the need. Life,age and experience changes perspectives so much. Having said this, I love BMWs but not buying one anytime soon.
This paragraph in the article seems off:
Education is the “obvious outlet for the money Millennials can spend,” Perry Wong,
the director of research at the Milken Institute, told us, noting that if young
people invest less in physical things like houses, they’ll have more to invest
in themselves. “In the past, housing was the main vehicle for investment, but
education is also a vehicle.” In an ideas economy, up-to-date knowledge could
be a more nimble and valuable asset than a house.
Living in the Mission, Zipcar hasn't cut it for me but Lyft has changed my world! I initially was stoked by Zipcar but there's virtually nowhere in SF you want to go to where parking is not a major issue.
With Lyft, they're brought the prices down enough so that I'm no longer thinking "can I afford to go there", lyfts become an impulse purchase. Mission to Soma is like, $6 - $8. Mission to Richmond is $15, Mission to Chinatown is $12 or so. If you're going with 2 or 3 friends, then it's basically about the same price as public transit.
Disclaimer: I'm friends with several of the Zimride staff but I'd equally be a fan, even if I weren't.
With Lyft, they're brought the prices down enough so that I'm no longer thinking "can I afford to go there", lyfts become an impulse purchase. Mission to Soma is like, $6 - $8. Mission to Richmond is $15, Mission to Chinatown is $12 or so. If you're going with 2 or 3 friends, then it's basically about the same price as public transit.
Disclaimer: I'm friends with several of the Zimride staff but I'd equally be a fan, even if I weren't.
Or maybe it's just the generation that realizes that the supply of oil is finite.
That's the reason young people aren't buying houses? Try again.
If you think that the cost of oil doesn't have very direct impacts on the value (and expense) of housing, think again.
Commute costs, viable living distance, heating and cooling bills, construction costs, amenities (pools, landscaping, toys including boats and RVs), and consumer goods are all directly tied to energy costs.
Housing is an expensive, illiquid, geographically fixed investment. You're investing not only in the property and structure, but the neighborhood, local job markets, and/or anticipated commute costs.
Oil prices have had a very direct effect on the present and future value of suburban and exurban housing. Both positive (in the era of cheap energy, 1945 - 1974), and negative (as prices increased from the 1970 oil shocks onward).
Commute costs, viable living distance, heating and cooling bills, construction costs, amenities (pools, landscaping, toys including boats and RVs), and consumer goods are all directly tied to energy costs.
Housing is an expensive, illiquid, geographically fixed investment. You're investing not only in the property and structure, but the neighborhood, local job markets, and/or anticipated commute costs.
Oil prices have had a very direct effect on the present and future value of suburban and exurban housing. Both positive (in the era of cheap energy, 1945 - 1974), and negative (as prices increased from the 1970 oil shocks onward).
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if i'm guilty of making some sort of fallacious comment then at the very least you are also guilty of it.
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I found the analysis of the importance of smartphones over vehicles to be very interesting.
I pay $150 month for my family talk, text, and data plan, plus another $50 for high speed internet into my house. The payment on my car is $207 a month (own, not lease).
I probably spend another $2k-$4k a year on other piece of technology, while doing the bare minimum to keep my car running.
And I live in the suburbs in the midwest. I bet HNers in cities have a much stronger bias towards personal technology than personal transportation.
I pay $150 month for my family talk, text, and data plan, plus another $50 for high speed internet into my house. The payment on my car is $207 a month (own, not lease).
I probably spend another $2k-$4k a year on other piece of technology, while doing the bare minimum to keep my car running.
And I live in the suburbs in the midwest. I bet HNers in cities have a much stronger bias towards personal technology than personal transportation.
And how much does registration/insurance/gas for your car run per year?
I wish they had sliced and diced the data more. How do these generalizations hold up among:
- Millennials with children
- Millennials living in rural areas vs those in the cities
- Millennials with college educations
- Nonwhite Millennials
- Millennials with children
- Millennials living in rural areas vs those in the cities
- Millennials with college educations
- Nonwhite Millennials
Although I'm sure most of this effect is due to the economy and student loans, I wonder how much of it comes from people having children later and less often. Doing without a car or home becomes trickier once you have kids. I was disappointed the article didn't bring up children at all, because I'd be curious to hear something on it one way or the other.
Amidst all the arguments about whether or not it's due to the economy, the truth is really that all decisions like this are economically based; the real question is whether the trends created and influenced by the economic downturn will persist after the economy recovers.
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I don't think the article puts enough emphasis on gas prices driving car sales. When I first started driving in 1999-2000, gas prices were under $2.00 USD. When I fill up at lunch today, it'll be around $3.89.
I swear I read this article last night and it had a different title. Would be interesting to see what the linkbait choices were.
> “In the past, housing was the main vehicle for investment, but education is also a vehicle.”
Is this why university costs more than a house now?
Is this why university costs more than a house now?
So here I am, with a car - but it's not a fancy brand-new £10,000 model with crippling monthly payments. It's a slightly beaten-up 2002 Micra, I bought it from a guy down the road for £600 cash, it doesn't use much gas. I don't care how I look in it, whether it's 'cool,' I don't see it as a status symbol, I see it as a tool for life.
Maybe that's the difference - younger generations don't see a house or a car as a symbol of status or wealth, merely as something to be used, as a necessity - just like you wouldn't choose your electricity supplier based on how "cool" it is, we don't choose our cars on that basis either now.