Hacker News Reader

Or maybe they _could_ afford much more if basic necessities such as housing did not swallow up any gain otherwise expected. (Not to mention children, education, healthcare depending on countries).

When 35-50% of your income is taken up by rent, you don't care that much that home appliances cost less than they used to.

The high cost of housing in urban centers such as NYC, SF, Boston, LA is caused by market inefficiencies caused by zoning density restrictions and overuse of historic landmark status. This actions result in a "politically induced" scarcity which works against wealth creation. In microeconomics, this is called, "rent-seeking." Harvard Economist Edward Glaeser has written extensively about this, see NY Daily News: "Build Big Bill" for a solution to the high cost of housing in NYC. Financial Times columnist (and with a masters in Economics) Tim Harford has written about this. See his book, "The Undercover Economist." Economics Nobelist Paul Krugmann has mentioned this in his NYTimes columns as well.

In the US, at least, the high cost of health care has impacted wage growth for many since firms generally pay employees according to overall salaries and benefits. As more and more money has gone to health care costs, less money has gone to salaries.

"This actions result in a "politically induced" scarcity which works against wealth creation"

I agree. I do think though that even without this artificial scarcity there are physical limits to efficient housing.

Hyperbole: it's impossible to house 7 billion people with a nice balcony facing NY's Central Park.

Economically it wasn't much a smart decision to shy away from suburbia.

Do you think the income stagnation is due to housing costs rather than globalization?

You're right that with increasing utbanization the costs of housing was rising dramatically (as currently people prefer the dense urban areas of a city to its cheaper suburbia).

But that would mean that 70% of western workers now live in the dense city parts, which can't be established I think.

> Do you think the income stagnation is due to housing costs rather than globalization?

I'm not denying globalization's role. However, as bufordsharkley said in a sibling comment, housing costs often do prevent people from moving for work opportunities. They deprive the companies of potential hires and are a significant opportunity cost for the individual. In aggregate this might have an effect. Plus, long-term stagnating income is painful per se, but it's only disastrous when core expenses rise at the same time.

> with increasing urbanization the costs of housing was rising dramatically (as currently people prefer the dense urban areas of a city to its cheaper suburbia)

I'm not american so the phenomenon must be different to me. I think most people end up paying too much for housing, relative to their income. Fortunate and less fortunate people alike spend 35-50%, it's just that some end up in a dump far away from anything (incl. their workplace) while others have a proper flat in the city.

Also, it might be interesting to look at the problem from an age perspective. Retirees (except the wealthiest ones) probably don't expect to see their incomes rise much, and as a group they're more likely to live in cheap places in the countryside. Younger, working-age people feel the housing pressure, need income to relieve it, and are facing dwindling opportunities for upward mobility.

Even those not living in city centers are affected by this.

1) It implies a lack of mobility from job-poor places to job-rich places

2) Suburbs outside of job-rich cities are similarly seeing land values rise: marginal land is expanding outward to exurbs

Ideally, we'd see people be able to chase well-paying jobs by moving to denser, job-rich areas if they wished to, but that's become an impossibility.

As far as solutions go, I think it basically boils down to:

1) People can live in exurbs and ex-exurbs, and work through VR

2) We can lower land costs with a land value tax.

I prefer the latter to the former.

Housing isnt that much of a problem in most of America. Maybe you have to live farther from the city center, but it's quite affordable.

I find HN is a bit focused on San Francisco and New York problems, which are important, but not universally.

I hear similar thinks in the UK, that housing is affordable in such and such a small town. Thats great, but there are never any "good" jobs in these places.

According to this cost of living calculator from CNN [1] housing in San Francisco is 256% higher than in Austin. Both have good jobs in tech.

The argument I've heard against it is that you might have to live farther from the city center and commute for 30 minutes or more, which is certainly a tradeoff, but perhaps a worthwhile one.

[1] http://money.cnn.com/calculator/pf/cost-of-living/index.html

So how do we get people to stop bidding up a positional good?

You could negate the gains of land wealth. There are small fixes for this (applying capital gains to home sales), but the big fix would be an application of a land value tax,[0] something generally agreed to be very economically efficient.

[0] https://en.wikipedia.org/wiki/Land_value_tax

> ... most western workers can afford much more from their flattened or fallen income than they could 10 years ago ...

Afford much more of what?

It's probably easy to find evidence that computing power in a smartphone is more affordable.

But, can people now afford more quality in their children's education or their family's health care?

And what about food? Maybe the price per calorie has actually decreased in real terms, but what about the quality of those calories? Is a calorie of corn equivalent to a calorie of fresh fruits and vegetables?

And housing? Is a condominium equivalent to a house with a yard? etc.

It seems like a mixed picture. Some things are more affordable, but some other important things appear to be more expensive.

> Afford much more of what?

Junk you can buy in a store.

Education, health care and real estate are a totally different matter.

> Education, health care and real estate are a totally different matter

Yes, and totally inaccessible to the people that the folks in this thread are saying allegedly have a better quality of life because they can afford useless commodities.

I hate to sound aggressive or confronting, but will say this: you do have heard of a thing called "the internet"? ;-) we have lots of knowledge for free now.

Degrees however are a different story. Here, the same competition Western workers face from abroad due to globalization, the same competition now students face as emerging market's rich dads prefer to send their offspring to western universities.

Protectionism kinda works, yeah. Globalization increases the profits of the companies that can take advantage of it, but it also has major downsides for all the local people who can't compete. On average, the "economy" might go up even when lots of individual people are being put out of work or taking much lower-paying jobs. You can either tax the increased profits and distribute them to the under-employed workers so they maintain a decent income, or limit globalization so they can keep their old jobs.

This is an overly simplistic (to the point of being absolutely incorrect) explanation. There are four parties involved; {consumers, producers} in {country A, country B}.

https://en.m.wikipedia.org/wiki/Economic_surplus

Well of course it only works for the specific people you're "protecting" and kinda screws over everyone else. My point was, if you're only looking at the median OF the richest countries, of course it's going to move down. Maybe a lot. Even as the mean of that country goes up and the real median (of everyone involved) should go up too.

And long-term, the cheaper workers overseas should move a bit higher into the middle class, which makes them more expensive and also increases their demand for services and manufacturing. At that point the original workers could get better jobs to fulfill the new demand. But that could take a long time!

That they can afford more, I would assume, is because things are cheaper. clarified below

To me it feels like quality of living per dollar has risen tremendously over the past generation, but income per household hasn't. So while quality of living overall has improved, it doesn't 'feel' like it with regards to individual wealth. That is to say, an upper-middle class person 15 years ago might feel lower-middle class today even with a better QoL overall.

I would definitely agree that this kind of stagnating income in the middle class is a large part of what is pushing these nationalist/populist movements.

It's definitely not a popular sentiment on HN at the moment(nationalism), but I can definitely see the allure; especially for the lower-middle class who have lived through the past ~15 years and aren't seeing the same increase in wages/authority that the previous generation did.

Personally I have yet to see a real cogent argument for why globalism would help here at all with regards to the growing income inequality in developing nations. From my perspective a single centralized government(e.g.: the EU) can only really benefit the multinational corporation and almost by definition be of detriment to the individual nation-states.

It's hard to really grok the reality of the situation from unemployment/income statistics because they don't really tell the whole tale and of course because I'm neither an economist nor a statistician.

Lastly, I don't think it can really be ignored that this is the fastest changing world our species has ever had to adapt to.

I love technology, of course, but I don't think it's impact has been _only_ good. Looking at pictures of previous generations you can't help but notice the upright postures and healthy bodies that are so often missing from today's populace. Not trying to be a luddite here, and you can of course so,

Edit: to clarify 'because things are cheaper', I'm speaking of disposable items and food, as was stated by another commenter "stuff you can buy in a store"

In fact, I think an important aspect of this discontent is the increasing cost of housing/healthcare relative to income.

One thing the EU does is prevent a "race to the bottom" with regards to foreign trade agreements and tariffs. For example, if Poland wants to trade with China, they cannot negotiate directly. They must go through the EU. This prevents China from playing EU countries against each other to get better and better trade deals.

The EU also has labor and human rights protections built into it, so factories that move from Germany to Romania see far less benefit than a factory moving from the US to Mexico.

Really? What about Ireland? They call it the Celtic tiger, but it is really the Celtic leech upon the rest of Europe.

It works with trade deals, taxes are not harmonized.

An alternative view would be that it makes things much more convenient for bad actors because they only have to bribe one set of bureaucrats.

Regulatory capture is a thing.

Both views may be valid because the "bad actors" are sentient human beings with working brains, not a force of nature. They have a goal, they'll pick whatever methods works depending on conditions.

> From my perspective a single centralized government(e.g.: the EU) can only really benefit the multinational corporation

From my perspective it's the other way around since it's much easier to regulatorily capture smaller governments than larger ones. A large French company can easily capture the French government, especially when the competition is German or Spanish, by leveraging local power and appealing to nationalist sentiment, whereas that wouldn't fly in Brussels.

> Looking at pictures of previous generations you can't help but notice the upright postures and healthy bodies that are so often missing from today's populace.

I don't disagree, but they were often leaner from hard physical labor and fewer calories, and lived shorter lives. None of which means they were less happy, or that we are happier, but just that there are tradeoffs involved.

> quality of living per dollar has risen tremendously over the past generation

Given how many more dollars it costs to rent or buy property compared to 20 years ago, it is quite evident to many of us that quality of living per dollar has decreased.

I think housing costs and quality of living per Dollar are two different things.

Why? Aside from many reasons, we westerners changed our perception of what is included in our "quality of life"-basket.

Some of those things that can enter this basket are especially scarce and inelastic. And since we've chosen that "life in a dense urban city part" should be in this basket we've chosen one of the most inelastic economic items.

Still, it doesn't mean that this life-quality-basket is set in stone. Its composition will change again. And it doesn't have to become more expensive.

> I think housing costs and quality of living per Dollar are two different things.

Well, I don't. I consider living in a place I don't like or a property I don't like to contribute to poor quality of life, and I'm definitely not alone in thinking that.

Having >40% of my income eaten up to pay for a mediocre living situation is not good quality of life.

Thats your decision to put this costly housing in your basket. And your not alone making this decision, but a) its a trend and b) the aforementioned 70% of western workers aren't necessarily repeating your choice.

> Thats your decision to put this costly housing in your basket.

That's true for a lot of people, so redefining "quality of life" to exclude housing and then claiming that everyone's quality of life is going up seems dishonest.

> So, protectionism works?

They aren't talking about protectionism, Sweden "protected" Swedish jobs during this time period by aggressively cutting taxes for the middle/upper class.

http://www.spectator.co.uk/2012/04/swedens-secret-recipe/