Gen Z have 86% less purchasing power compared to baby boomers in their twenties

Wildly misleading.

Measuring in households and not individuals hides a large number of changes in how people are paid. It also doesn't account for things like pensions, which were common in the '70's and earlier.

However, the comparing CPI to inflation adjusted incomes (as the article does) doesn't work either. Clearer explanation of the error I think the article made (and that I think you're pointing out):

For the sake of argument, say CPI is always proportional to income (which it would be if purchasing power was constant). To make arithmetic easy, say the CPI and median nominal income were both 1 in 1970, and are now both 8.

The inflation adjusted income in 1970 would be 8. (If we assume CPI moves with inflation, we multiply the 1970 median income by the ratio of 2022 CPI / 1970 CPI.)

So, by the author's calculations, a median family would have had 8 units of purchasing power in 1970, but only 1 unit of purchasing power in 2022, even though, by construction, CPI and nominal income went up in lockstep, and real purchasing power should be the same.

It turns out that they use a "quality adjustment" that takes into account the relative performance of a modern computer compared to previous years. The bulk of the 300-fold decrease in price is due to the fact that modern computers are many times faster than those made in the 1990's. But there's a problem with that: a consumer doesn't get hundreds of times more utility out of a computer. You can't have a hundred people in your house sit there and work on the same computer and achieve the productivity scaling which would warrant this adjustment.

In reality, you're paying for one computer an amount which is nominally within an order of magnitude of what you would have paid in 1997. So this adjustment has the effect of drastically skewing the CPI statistic in this sector. Furthermore, computers have only grown in importance. What was a luxury in 1997 has become a necessity today. Families often have multiple computers. Parents may work from home and use their personal computer for paying bills, applying for jobs, doing taxes, budgeting, or applying for government services, while children may use their computers for doing schoolwork, research, playing games. Everyone uses their computers and devices for communications. However, none of these tasks (besides playing games) has markedly improved or been made more efficient by the technological advances in the computers themselves.

The title's premise is so outlandish it deserves at least a little bit of critical thought... But because it confirms some previous biases (even if at a completely different and more extreme scale), more than I expected are acting as if this is true.

https://m.youtube.com/watch?v=ZuXzvjBYW8A

David Willets draws comparison of "boomers" to other generations, and includes what is paid into healthcare vs. what is consumed in a lifetime.

Not just in the US. For example there's a huge glasses cartel in France with specialists that are protected by the government and make pairs of glasses cost 500~1000 USD with very little reimbursement, while in Japan private companies (that actually compete against each other's) let you have glasses for 60~70 USD all included. You are literally better off flying to Japan from France to shop for eyewear.

That's right, you can be billed in the US if you never consented to have care, refused to even go to the hospital, no psych hold was in place, never had any emergency at all, and some healthcare workers touched you against your will without a court order nor being under arrest. I complaint to the state nursing board and they said this is all good and dandy.

Name one other country where you can bill care to someone who refused it while being psychologically stable and being alert and oriented to deny consent, and no court authorized the treatment.

Obamacare has allowed children to stay on their parent's insurance for much longer. All of Gen Z is still young enough to qualify for that, so as a generation they haven't felt the full cost of seeking insurance independently. Plus the overturning of the personal mandate means young people are once again free to simply not get insurance which is often a bad decision overall, but can end up saving a healthy young adult some money.

There is still something very wrong with the healthcare system in the US, it just isn't a problem that has hit Gen Z particularly hard yet.

Post-operative outcomes and survival rates in the US are far better than in the UK and many European countries. Statistics about better birth outcomes or higher longevity is best attributed to healthier lifestyles in Europe/UK and to lower stress (shorter work weeks, etc).

While healthcare in the US can be very expensive, we paid 8k GBP for our NHS immigration surcharge and an additional 5k GBP in NHS-specific taxes (for 2 people, 1 year). A 1k/m health plan in the US (for two of us at the time) gave us 10x better health care.

Yet Americans and Brits alike sing the praises of the NHS vs US healthcare. I chalk it up to shoddy journalism and folklore.

What happened in 1968? LBJ's Great Society massive efforts at free medical care started.

The same thing happened with college tuition. Government attempts to reduce its costs resulted in greatly expanded costliness.

The most expensive things in the world are government provided "free" stuff.

It’s in these moments that the fact that I’ve paid an absurd amount in taxes over the years just… disappears.

You could get a TV for less than $50 if it had the same features and processing power as it did in 2002. Same for computers.

Imagine how cheap we could make a car that only has the features we had in the 90’s? Even if you include the mandatory passive safety upgrades.

The caption is "wages are up 80% but that didn't keep up with living costs" - you cannot draw that inference from this graph. This graph actually shows that in fact wages grew faster than inflation.

Housing is another red herring, of course, because the average new American home is 2x bigger now than it was in the 70s - and the average American family is like 10% smaller. Broadly, 1 square foot of the 'average' American home costs exactly the same as it used to in the 1970s. [1] So yes, housing is more expensive in big cities but that's because of zoning as Mr. Andreessen will tell you. Outside big cities it's still zoning, which requires minimum setback, garages, square footage, etc.

In fact if you look by cohort, inflation-adjusted, millennials are doing roughly as well as other generations did at their age. [2]

Their flagship claim that folks have 86% less purchasing power now holds zero water. The poverty rate remains basically unchanged since the 70s. [3] You'd think there'd be a lot more people in poverty if they only had 1/10th the buying power no?!

Some things are more expensive (college, healthcare, 1 sqft of house in a big city, new houses outside of town) and yes, productivity growth far outpaced wage growth - but wage growth kept pace with inflation. That means folks are just the same off, instead of the better off they could be. [4]

[edit] If you really slice it by decile, the bottom 10% of millennials is much worse off (like 15%) - that's what it looks like when you massacre the social safety net. But millennials as a whole are just as well off as previous generations.

[1] https://fee.org/articles/new-homes-today-have-twice-the-squa...

[2] https://ofdollarsanddata.com/no-millennials-arent-poorer-tha...

[3] https://poverty.ucdavis.edu/faq/what-current-poverty-rate-un...

[4] https://www.cnbc.com/2022/07/19/heres-how-labor-dynamism-aff...

Here's how I like to argue it:

TVs might be cheaper "per unit of TV", but it's also difficult to just buy a basic TV. This is also offset intensely by "shrinkflation", which applies as much to durable goods (cheapening components) as it does to food. So you end up stuck with a bunch of "extra TV" that you don't need or want, effectively providing 0 utility, while the core product is lower-quality, even further lowering utility. And meanwhile economists deny that there is a problem because when you average it all out, you do technically pay less per abstracted unit of TV.

The reason this happens is because it ultimately leads to better profit margins for manufacturers. "We make 'em like they used to!" isn't enough of a differentiating factor for most consumers, who are deliberately kept under-educated and constantly bombarded with p̶r̶o̶p̶a̶g̶a̶n̶d̶a̶ advertising and marketing. If you can sell a TV for $100, do you want to spend $10 manufacturing the TV, or do you want to spend $5 manufacturing the TV and $0.25 adding some onboard computer and software to make it "smart" (marketing!) while skimming off a huge data/ad revenue stream as essentially free money on the side?

Moreover, luxury goods are somewhat irrelevant if your basic economic needs become less affordable. Maybe TVs are cheaper "per unit", but housing, healthcare, food, and energy are not. Those are literally all of the basic human needs except one (water), recognizable as such in even the most primitive of ancient societies. And water is problematic ("expensive" in terms of consumer welfare) in much of the USA for reasons other than pure financial cost.

Edit: None of the above should be construed as advocacy or apology for chart-crimes and misleading reports based thereupon.

The tech giants may have just been a particular touch stone in a long trend of increased, unchecked corporatization of US business. Perhaps that culminated in a kind of phase transition that took place in the 2000s.

But there's another interesting detail to that chart which is that wages appear to be back on track since 2010 and have trended upward pretty sharply since then compared to the 2000s. If the slope of the wage line is to be believed (and were to continue), we'd be in pretty good shape in another decade or so. So, to play devil's advocate, perhaps it's wrong to look sideways at some of the big players in the space right now. I don't know. Not an economist.

My parents bought a house when I was born in NYC in the 70s for $20k, sold it for 10x more in 1990 and that buyer sold it for 10x more circa 2007.

The deflationary power of the internet powered costs for business. My employer has 1/3 the accountants they had 30 years ago, but 5x as many IT people. Specific occupations make more money, but most make less due to dropped demand. On the production side, you can pretty trivially source goods from a anywhere on the planet. Again, reducing cost.

But the hard assets go up. Housing, food, durable goods. The average white good like a fridge costs 50% more and last 50% less time.

Of course Putin's doing it now in Ukraine and maybe China is about to do it in Taiwan so don't worry, the rest of the world is catching up to America's stupidity.

If I'm being charitable, they made a mistake in their analysis, if I'm uncharitable they didn't care about the methodology and went in looking for a way to write a provocative conclusion like "86% less purchasing power". Obviously a lot of energy was spent here drawing up the pretty infographics, probably should have spent more energy getting the basic statistics correct first?

But auto loans were around since the 20s. What changed?

https://lendedu.com/blog/history-of-auto-lending-industry

If some are rejected directly by the banks for getting these loans, then the banks can still get them by setting up a BNPL (Buy-Now-Pay-Later) competitor / service with even higher interest rates. Either way, the banks still win.

So you will own nothing, and you will be very happy. Even if you can't afford it, the banks will be very happy to charge you interest and you will still be happy.

The scam of the century.

If anything, banking and lending regulation have only increased since the boomer era. We made it more convenient, but we also made it harder for businesses to trap people in bad loans.

No. It’s the result of our real estate and housing system. (Stocks and Bitcoin can go up faster than wages without spiking CoL.)

The US economy is thriving. The profits just aren't getting to actual workers.

And that conclusion is born through when you actually read the article, they completely misrepresent reality with that title. It's kind of astounding how many people are just taking it as face value.

Don't have figures but then couldn't afford one when I grew up in the 70's.

Then colour TV's.

Much technology has got cheaper.

Now real-estate and travel costs (well apart from plan flights I'd say) have got more expensive.

But when rent and travel is a big chunk of life, and you measure things from owning a home. Well, those do skew things.

Then you also have aspects of population growth, post-war, kinda fewer people, that soon grow to hit that real-estate boom.

Also interest rates, was mentality of saving for things in 70s and shifted towards low interest rates and buy now, pay later. This also changed the landscape and again made those on the property ladder grow and push the access to that property ladder higher and higher.

But rental and travel, those really are the skew factors at play.

Need to compare quality of life really to get a bigger picture of everything, as that has increased in more aspects than people appreciate.

Heck I grew up with no central heating, single pain windows which had ice on the inside in winter and an outdoor toilet. This was in the uk in the 70s. Today, that would be called homeless. So much improved, so can't distract from that difference either.

My dad worked for ma'bell, and earned somewhere around $150k in today's dollars as an high-school-educated lineman when he retired (and was then hired back on to train). And that's with a fully funded pension plan.

So, even if they were in the workforce earlier (they weren't, I (as a genX) was working part time in college at 18, my wife full time), the workforce was very different.

The times, they've changed.

[1]https://youtu.be/rStL7niR7gs?t=878

The above paragraph is a broad brush statement and does not apply to all jurisdictions and situations. The prior sentence shouldn't be needed but is.

Any possibility this perceived "less-hard" working is an effect rather than a cause?

> Those who do work hard are fairly well off. They work two jobs, didn’t go to college, but own their homes and have a steady income.

Any possibility that Baby Boomers achieved this with just one job?

> There’s definitely systemic issues, but work ethic is the major issue. And that’s a cultural issue.

> Would you want the gen z you know building your house? I know some that I would, but not many.

I'd take literally any Gen Z to build me a house because I'd know how to compensate them for their work. It's largely unskilled/low-skilled labor, hence why almost anyone with some physical fitness and capability (Gen Z or otherwise) can do it.

Bear in mind: lots of Gen Z are children of Gen X and may have already witnessed the negative impact of inequality on Gen X and Millennials, which could very well be the "cause" for lower perceived participation in the workforce among Gen Z.

Either way, this is an exceptionally low-EQ take.

Ballpark the 80's as 1985 and that works out to 82,604.83 to 99,125.80, for the curious. What most people would consider an excellent salary in their 20s, probably (software engineers in the current market excepted, perhaps).