Comment by m23khan | Hacker News Reader

Comment by m23khan | Hacker News Reader

1990s was a long time ago - economics and demographics around the World have changed a lot since then (in fact, The Simpsons lifestyle - at least in earlier seasons - seems to be more reminiscent of 1980s era). Things like inflation and changing consumer trends have led to what we see now -- don't know about small towns but at least in major North American Cities.

What we have now is either people staying single longer and eventually they end up with Simpsons' style living standard (while staying Single) or they eventually achieve it via DINK lifestyle.

I think a huge part that has played into making this transformation is due to people's increased access to cheap loans (mortgage) and the idea that real-estate is the ultimate ROI game-in-the-town and the new pension fund.

What we see now (compared to say 1980s): almost no major corps offering pension, inflation to the point where both Husband and Wife need to work in order to just afford a property and perhaps a kid, creeping fees/charges (cellphones, internet, netflix, disney+, etc.).

This all leads to people, in my opinion, to look for safety net in order to fend themselves in old age: buy house -- no, make it 2 or 3 houses so you can live off their rent income, delay (or forget about) having kid(s) to achieve that financial goals. Automation and globalization has also caused some pain points: IT jobs are much more competitive than say even 10 years ago and there is always threat of being left out in the cold due to outsourcing.

See, funny thing is, here in Canada, I would always see hardworking immigrant families where the Husband and the Wife would be working in multiple low-income jobs and even their teenage kids would be picking up retail/factory job while studying to balance their family's financial books. To me, it always seemed excessive or even mindboggling - but now, it makes perfect sense...it is the very future for the masses in North America.

And for folks in developing World: Don't worry, your turn will come to experience all this (if you haven't yet) soon enough in your lifetime. I guarantee it.

> What we see now (compared to say 1980s): almost no major corps offering pension, inflation to the point where both Husband and Wife need to work in order to just afford a property and perhaps a kid, creeping fees/charges (cellphones, internet, netflix, disney+, etc.).

For the US (and this generally holds true in other western countries to varying degrees), the rise of female workforce participation was (as you imply) a counterbalance to stagnating real wage growth.

But this isn't due to inflation. It's due to changes in income distribution.

While it's true that labor productivity growth has slowed over the last few decades, GDP per capita has continued to grow (https://www.macrotrends.net/countries/USA/united-states/gdp-...). What's changed is that those gains have been overwhelmingly distributed to the rich.

The middle and lower classes have compensated for this by, as you note, increasing workforce participation, increasing reliance on consumer debt, and increasing personal bankruptcy (https://files.stlouisfed.org/files/htdocs/publications/revie...).

> For the US (and this generally holds true in other western countries to varying degrees), the rise of female workforce participation was (as you imply) a counterbalance to stagnating real wage growth.

A counterbalance or an unintended cause? From a very high-level viewpoint, the market optimizes to capture disposable income, both through offering new things to buy, and price increases on the old things (the more disposable income you have, the less likely you are to seek out alternatives if something you like becomes more expensive). So, as more and more household became double-income, the market compensated, locking female workforce participation from a choice into a necessity.

I don't totally follow. Your comment about increasing the price on old things seems like a reference to Giffen Goods? But the actual existence of such goods is somewhat unverified/contentious, I understand.

One shouldn't assume this is zero sum. Increased labor participation should (given consistent productivity) driven economic growth—i.e. GDP should go up; everyone should get richer.

Increased workforce participation can of course drive down wages. That could explain the weakened status of the middle class. But that doesn't explain declining labor productivity.

I doubt there's one single cause. Women entering the workforce was probably a reaction to labor insecurity and also conceivably a driver of it; that resulting insecurity probably also is attributable to various policy changes (weakening of unions, decreasing political power of the working class, the increasing role of capital). I don't have a good one-sentence summary, nor have I even made up my own mind on this.

I'm not referring to Giffen goods, just regular goods. A clarifying example:

I have a favourite brand of tea that I've been drinking for years. I have some disposable income, so even if the price of that tea went up 2x, I wouldn't switch to a cheaper (but less tasty) alternative. But I know people who would, and I lived through period of financial distress during which I'd make such switch. The same applies to quite a lot of other goods I buy: from ketchup and mustard to soap and toilet paper.

The same also applies to the places I shop. I'm already buying most groceries at our local ALDI equivalent, but I could optimize that further - but I don't, because I have disposable income, and I won't - even if the prices go up - until it becomes noticeable enough on my balance sheet to justify the effort.

My hypothesis is the example above, but generalized over population: if an average person has $X of disposable income, the market suddenly loses the downward pressure from demand side to the tune of $X; the pressure resumes once the average person has no disposable income.

I haven't made my mind up on this either, I'm just presenting what I currently believe to be a causal relationship. This is partially based on the experience in European countries (notably Poland and Germany), where double income is increasingly becoming a necessity as well, but we don't have some of the commonly attributed contributory factors like student debt and high healthcare costs.

I don't know. That seems oddly zero sum to me (which is why I alluded to it before). It suggests that there never are real productivity gains—in the sense that any resultant wage increases are followed by compensatory inflation.

Yet even if that were true, if we treat this purely as zero sum (and don't account for economic growth), we can still easily look at _distribution_ of wealth and income, and the trends there (as I noted elsewhere), both in the US and the developed world more broadly, are directionally consistent with less income due to labor and a greater role of capital ownership.

I don't think this inflationary argument (which may be valid) would explain why capital ownership would be an increasing share of overall wealth. I tend to think this is better explained by (crudely summarizing) Piketty's thesis that the Kuznets curve is simply wrong, that (unfortunately) war and commensurate economic upheaval is associated with a flattening of inequality, and that the long period of relative growth and stability in the west almost inevitably leads to increasing inequality and a relative weakening of the labor force.

> And for folks in developing World: Don't worry, your turn will come to experience all this (if you haven't yet) soon enough in your lifetime. I guarantee it.

I don’t understand this statement. Is it meant to imply that people in the developing world right now have it better than those in the developed world?

It's a generalization on my part - countries like India and Pakistan (as I am sure others as well) have a very competitive lifestyle (more so than in North America) if you were to look at their major Cities (Karachi, Mumbai, etc.).

I was pointing more towards relatively wealthy countries where the Governments are still subsidizing various aspects of life AND they are still classified as 'not first world yet'. They definitely have it easy to a large extent (Citizens of GCC for example) -- but even the sands of time are also shifting the tide over there, in socio-economic aspects, that is.

What is GCC?

Gulf Cooperation Council - Saudi Arabia, Kuwait, UAE, Bahrain, Oman and Qatar.

Developing countries also tend to have faster economic growth than "vanguard" countries. This can be explained by the fact that for developing countries, productivity growth is driven in part by importing of existing technology and capital, whereas in countries at the forefront of labor productivity it's driven only by innovation.

(Some easily-viewed graphs here: https://www.un.org/development/desa/dpad/wp-content/uploads/.... Note that while emerging economies have higher labor productivity growth than established economies, both have, somewhat surprisingly, experienced declines in growth over time.)

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