> Compounded with the fact that median wages haven't increased that much the last 30 years.
Median income has gone up by about 150% (to 2.5x) in nominal terms between 1986 and 2016.
Median income has gone up by about 150% (to 2.5x) in nominal terms between 1986 and 2016.
https://fred.stlouisfed.org/series/MEHOINUSA672N
The story here is quite different - only a 19% increase, and much more unstable over the years. Most of the increase happened before 2000. Almost no change since then.
1. Every idiotic meme about how goods X, Y, and Z have more than doubled in price while [real] wages haven't. I'm torn between thinking the meme creators are completely clueless or epic trolls.
2. There is a substantial linkage between nominal wages and nominal inflation, especially for limited, competitively bid goods (like housing).
Looking at median house prices https://fred.stlouisfed.org/series/CSUSHPINSA , it looks like they went up slightly more than median wages (2.85x vs 2.5x in 30 years), which I think is likely more than explained by today's lower than historical norms interest rates (increasing affordability). https://www.macrotrends.net/2604/30-year-fixed-mortgage-rate...
Mortgage rates over 10% in 1988 and under 5% today means that 1988 houses were less affordable on 1988 wages than 2018 houses are on 2018 wages.
That means that it's sufficient for the lower income tiers (relative to the house value) to have a few months of high interest rates (in a time frame of 15-25 years) in order to lose the house.
Buying at the current rates is risky, while the risk of rising rates in 1988 was much lower. Factoring that in should change your conclusion.
http://www.freddiemac.com/perspectives/sean_becketti/2017041...
People got burned bad by ARMs in the housing crash of 2009 and they still aren't willing to take the risk.
("Yes and") There's also very little rate benefit to adjustable mortgages right now, so it's quite sensible to take a fixed rate mortgage. When I bought my first house (in 1996), I recall that fixed rate mortgages were several points higher than adjustable rate mortgages during their fixed portion. In cases like that, it made for an actual decision.
With both fixed rates and ARMs having roughly the same initial rates, there's little reason to choose adjustable.
Health Care and Other Benefit Costs
As nonwage benefits are beefed up by U.S. employers, such as expanded paid leave and performance-based bonuses, fewer dollars in their total rewards budgets may be available for salary increases.
But health care benefit costs are a prime suspect.
"The rise of health-care costs is the most important reason wages have not increased more for U.S. workers," Nobel economics laureate Edward C. Prescott and Lee E. Ohanian of the Center for the Advanced Study in Economic Efficiency at Arizona State University, wrote in the Wall Street Journal in 2018. "The extra compensation is swallowed up by health-insurance premiums."
A new white paper provides evidence that "the rising values of fringe benefits, such as health insurance, may have offset potential wage gains for middle-income workers" despite falling unemployment. The authors, Jeff Larrimore of the Federal Reserve and David Splinter of the congressional Joint Committee on Taxation, contend that when factoring in the cost of health coverage, "total compensation may be higher than previously believed, also implying that employer-sponsored health insurance benefits may represent a larger share of employee compensation."
Economics columnist Robert J. Samuelson wrote in the Washington Post:
The problem is plain: We'd all like both cheaper health insurance and higher wages, but the way the health-care system is operating today, we might get neither. As insurance premiums get more expensive, inflation-adjusted ("real") wages will continue to stagnate or decline.