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Young people have it tougher these days

Housing and education cost less back in the day, and people made better money.

By MSN Money Partner Feb 24, 2011 2:33PM

This post comes from Trent Hamm at partner site The Simple Dollar.

 

I recently had a long conversation with a man in our community who is nearing retirement age. He felt comfortable about his own coming retirement, but he seemed very pessimistic that his children would ever be able to retire. "They just don't know how to save money," he told me.

I told him that although I agree with him that young people should save more, there is also a strong case that it is much more difficult today for young people to establish themselves financially than it was when he was a young adult.

 

He looked at me strangely. "What do you mean?" he asked. Post continues after video.

So, I laid it out for him, piece by piece. Afterward, it occurred to me that the entire discussion might make for a good post here, particularly with some specific research to back it up.

  • Real wages. Let's start with income. In 1970, the average private wage earner made $312 per week (in 1982 dollars). In 2004, the average worker earned $277 per week (in 1982 dollars) -- and it's still falling. That means that once you factor out inflation, the average wage earner in 1970 brought home about 18% more than the average wage earner today.
  • Home prices. Even if you adjust for inflation -- and even if you take into account the crash of the housing bubble from 2007 to today -- the median price for a home in the U.S. has gone up more than 50% since 1970. Remember, that number accounts for inflation, so what that number actually means is that the cost of a home requires 50% more of a person's paycheck than it did in 1970.
  • Education prices. The cost of an average undergraduate education (.pdf file) since 1970 has drastically outpaced the growth of the Consumer Price Index. In short, disregarding inflation, the cost of an undergraduate degree today is roughly 30% higher than it was in 1970.
  • Other essentials. In order to compete in today's workforce, a young person often must have items that weren't needed in 1970, including a cell phone, a computer, and home Internet access. Often, in the search for work, it's very difficult for a young person to compete without these extra expenses.

So, in order to have housing and an education comparable to what a young person had in 1970, they must spend 50% more on housing and 30% more on education, and do it all while earning less money. That doesn't even include the extra expenses needed to compete.

I look at my own parents for an example. My parents purchased the house I grew up in for $20,000 -- and that included seven acres of land. At the time, that was about what my father earned in a year. Today, if I were to purchase a similarly sized house with seven acres of land, I would be spending well over $100,000 -- significantly more than an annual salary.

 

My parents were also able to find good work without the cost of a college education. Today, the jobs they both had would be completely unavailable to someone without a college education, putting significantly more expense on the back of a young person today.

This isn't meant as an excuse for people of my generation not to live up to their potential. Instead, it's an encouragement for people not to obsess over comparing the success of young people today with the things young people had in the past. It isn't really a valid comparison.

 

Rather than focusing on results, look for signs of progress and for the status of the journey as a whole.

 

More from The Simple Dollar and MSN Money:

29Comments
Feb 24, 2011 4:04PM
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My father worked at tI he shipyard during WWII.  He earned a little more than $400.00 per month.  My mother never worked.  His income was enough to raise 3 kids, buy a house and a car (Chevy Suburban), buy war bonds and put away money each month in savings.  We took vacations to Southern Oregon and Southern California and each year my father and his family went on a two week deer hunting trip.  He did not finish high school.  My son today and his wife both must work to pay on a small house, they have two kids and must budget all the time.  They take may a one week vacation every few years.  They both graduated from college and had student loans to pay back over the years.  No way will they ever be able to afford more than the house they have now.  I worry about the future for my grandchildren even with college educations. 
Feb 24, 2011 5:11PM
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While I have no quarrel with any of the facts discussed, nothing in this post even attempts to address "why" this is the case.

Let me make it simple. The American people have sold themselves down the river. "Yes," for the crap at Wal-Mart. "Yes," by electing leaders more interested in lining their own pockets and those of their corporate sponsors, than in fighting for a better life for ordinary, middle-class Americans. "Yes," by blindly accepting the conditions they're told they "need" to be safe when in fact, it's what Lockheed and Halliburton and McDonnell Douglas "need:" to cause the US to spend more than the next 25 nations in the world *combined* on military hardware that's obsolete before it's used. "Yes," to the demagogues who paint immigrants (we're all immigrants, btw, except for the Indians) as evil when our fragile economy would collapse without them.  

Bottom line is that we have no one to blame but ourselves. It's been no secret for a while now that w/o an education, you're toast, career-wise, at 18. Harvard (and a fair number of the other great schools) will give you a free ride if you can get in. I know they only have 1600 slots every September, but w/o the kind of primary education that puts you in the running for a good college, you haven't got a prayer. So what do we do in America? Demonize the teachers instead of insisting they do great work and paying them accordingly. Don't blame the unions unless you as a parent are doing as much - or more - as the teachers are doing to educate your kid.

The Chinese and the Indians are going to eat our lunch because they are focusing on what needs to be done - creating smart kids. Us? Video games and sports. Fifteen year olds on steroids or w/ repetitive motion injuries from joysticks.  And don't gimme the line about our kids are more creative. Of course they are. But they still need to know how to add, subtract, spell, reason, and find Australia on a map, and too many of 'em, even seniors in high school, haven't got a clue.

Long sad story cut short: blame ourselves. Unless you insist on better schools, better politicians, better cops, better jails, better roads and bridges and train tracks, better control of the 10% of Americans that control 80% of our wealth, and here's the one we hate to hear, unless we all (but the rich more so, as they've had a free ride for years) pay more taxes AND INSIST THEY'RE SPENT MORE WISELY THAN THEY ARE NOW we haven't got a prayer.

I'm 60. I thought America's decline - as it must decline; all empires do - would happen long after I'm gone. Now I think I may live long enough to see it. Sometimes I think it's already here. Not because Obama is a socialist or a Kenyan or the devil but because people would rather try to paint those pictures than address the problems they face. People would rather talk about "American exceptionalism" than do something about it. Of course they do - talk is so much easier. More than anything else, that saddens me more than you know.
Feb 24, 2011 4:16PM
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Outsourcing of jobs overseas, the cuts in income to people who DO still have a job here in America and the continuing pressure to cut everyone's wages and benefits are starting to show.  This is being played out in Wisconsin as we speak. 

 

This is what we are coming to in America.  A nation in a race to the bottom of the wage scale for many people in the middle class. 

 

But, everyone wants their Walmart prices for things that are NOT made here in America.

 

I too, fear for future generations if we continue to not invest in jobs here in America and continue to not produce anything here and buy it all from oversea suppliers.

 

 

Feb 24, 2011 5:13PM
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I have come to the conclusion that we have come to a point in are nation were people don’t care for each other anymore. We keep coming up with every excuse in the book to not get people back to work. They are too old, not educated enough, not enough experience, to much experience; they don’t know this program or that program, it cost too much to do on the job training. Even though they will go to India or China and build million dollar training facilities. How is it that during the Great Depression a person with very little education could go down to a factory and work for a day and know you must have a PHD just to work in an office. It is all @#$%, and everybody knows it.

Not only do companies get in the way of a recovery, so do are own governments (local, state, and federal). They sit up on their golden pedestals and whine and moan about arbitrary subjects as the rest of us suffer at the bottom, just because they don’t want to discuss the real issues that are impacting are nation.

When you see this type of disparity between classes, it tends to cause problems for the future.  It hindered many sectors of are economy; house, business, automotive, etc.


We all need to start making logical decisions, and stop listening to these to bit ideologs, and fifteen second sound bites. We need to get back to a time when people gave each other a second chance.

Feb 24, 2011 4:03PM
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and the sad part is that --- the rich are getting richer, and poor are getting poorer, ---- go figure
Feb 24, 2011 4:14PM
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We're screwed, the only question is will there be enough KY Jelly to go around .  Atleast it won't be as painful.  There will be the 10% of haves and they will have a lot monetarily and control wise, there will be 80% of us just hoping to make ends meet so we can maybe semi-retire at 70.  Semi-retire means be a parttime Wal Mart greeter in some crappy Fla or AZ retirement hot bed, or some other trivial part time gig to suppliment your measly ss check  and diminshed medicare package.   Then there will be 10% in poverty but some of them will be living better than the 80% humping crappy jobs for crappy pay.

1 pt this article leaves out is the high cost of daycare because if you want to make ends meet you'll be spending aroun 8-10K a year for decent childcare before Kindergarten age, because a dual income is needed unless you make around 100K a year. 

Feb 24, 2011 3:57PM
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say what?  outline how much better it was in 1970 then finish with basically a "don't fret about it" remark? 

 

the backslide simply indicates how much we're slid and likely indicates how much MORE we'll slide in another 40 years. 

 

This isn't meant as an excuse for people of my generation not to live up to their potential. Instead, it's an encouragement for people not to obsess over comparing the success of young people today with the things young people had in the past. It isn't really a valid comparison.
 
Rather than focusing on results, look for signs of progress and for the status of the journey as a whole.
Feb 24, 2011 4:55PM
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Good article.  As a middle class kid I had to borrow lots of money to go to school.  Sorry I'm not perfect like the below writer.  I studied computer science and do get paid well, but even with my salary I can never get ahead.  That debt crushed my chance getting a house, at least until my 10-15 year prison sentence is served with my banker-master.   Then I can have a new banker-master for a while before blow all my money on health care then die. 

Seems like in my grand parents' generation you would meet someone that flipped burgers and THEY COULD BUY A HOUSE and RAISE A FAMILY with that money!  WTX?  Are you serious!? 

I agree with the outsourcing comments below - I've been outsourced 3 times.  I think we were better off keeping to ourselves more.  TheOnlineGovernment.org gives a good explanation of this.  Too many big businesses with too many hands steering the government - so the boat goes nowhere in the end. 

Feb 24, 2011 5:26PM
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Good to see the reality expressed in concrete financial terms for once.

 

All I know is I went to a major State-supported University in the early 1980's as an in-state student.  Under the current tuition & fee schedule, it now costs more to go to the same school for one semester than for the 4 years I was there (not including room & board).

 

And they are going to increase everything this fall because the legislature is going to cut the funding the State provides, again.

Feb 24, 2011 6:23PM
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"How big was the average house back then?  How many cars for each household?  How often did people go out to eat?  How often did they drive through?  How much did they spend on entertainment?  Travel?  Pedicures? "
 
The avg size house was approx 965 sq feet. (good luck finding a house that size in a decent neighborhood now... which most were in decent areas back then) Many people had one car, however there wasn't the busy schedules then that there is now. Try getting your boss to let you leave work for a couple of hours to take your spouse to the dr (which is what they would have done if there was no busses, and in many suburban and more affordable areas lack such luxuries). And most companies didn't work their employees until all hours of the night nor did people have an hour and a half commute to get home. They did eat out less, though when they did eat out it was much less, as were groceries. And as for the rest of it, you assume everybidy does all of this.
Yes, I aggree, things were simpler back then... but not neccisarilly practical now. And btw~ I would love to hang my clothes on a line, but I live in a neighborhood that will fine you for stuff like that. Bottom line, I aggree with the author. There are many required expenses now that didn't even exist then. Plus life is more expensive.
Feb 24, 2011 6:35PM
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It is nice to read an article that simply articulates as much of an apples to apples comparison as possible when trying to analyze life's options.

 

I have more simple comforts such as centralized heat and appliances than my grandparents, their life expectancy was quite good, 96 years for the ones that lived through the 1970's.  They had more free time, but they didn't have the entertainment options or computers to "simplify" choices.  But housing costs and outsourcing has stymied retirement indefinitely.  My grandparents left property to my parents and they sold it to retire and there won't be anything left.  I'm not whining just trying to work out my options.  Pensions are very few & far between, I have a small business and supporting payroll just about wiped us out.  Everyone wants a guarantee and that's not realistic.  I'm not bored.

Feb 24, 2011 8:18PM
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It certainly won't happen overnight, but if the trend continues - the growing disparity between wealthy and poor, with a diminishing middle class - then we are already seeing the beginning of the decline of the great American "Empire".  Our demographics are moving us in the direction of becoming a nation along the lines of the Roman Empire, or Great Britain in its colonial heyday - extremely wealthy and powerful at the top (and on a map), but with the social infrastructure of a miserable 3rd world country for the vast majority of its people.
Feb 24, 2011 9:01PM
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So if I earn $40K today and in 1970 they earned 18% more, that means I would have a spare $600/mo to play with in today's money.  Imagine that.  No wonder they did so many drugs back then, they could afford it.
Feb 25, 2011 1:12AM
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Do you guys realize that we are not just better off but drastically better off than at least 80% of the world's population?  The vast majority of people on here need to visit a third world country to see how good they really have it and cut the "woe is me" sentiment that is omnipresent in this article and on this discussion board.  
Feb 25, 2011 2:20PM
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Things are different now, but not more difficult.  I grew up in the 70s/80s.  My mom worked like a dog as a waitress at the holiday inn to buy a tiny house and keep food on the table -but she did it and it was a matter of priorities.  We had basics and that's it.  Vacation?  Whats that?  new clothes?  Maybe for Christmas.  Go out to eat?  My mom would have died laughing if we kids had asked.  Child support?  Are you kidding me?

 

Then I borrowed tons and tons of money for school--state school, not private.  After grad school, my multiple loan payments were for 15 and 20 years but I paid them off in 10 because after my basics were paid (mortgage, utilities and food basically) every dollar, I mean EVERY dollar went toward those loans.   Yeah 10 years was a long time, but it was half of the time I might have paid and in the end I saved on the interest  which was a whopping 9-10% for student loans back then.  I learned from how my mom managed in hard times. 

 

Then after finding I didn't die without a new car every couple years, a bigger house, the newest cell phone and the biggest cable package and with all student loans paid off, I was able to actually live AND save.     Now I can live comfortably but modestly-I don't have the newest, but I do have some stuff like a cell phone and internet.  Yes people, these things are luxuries not necessities.  If you view them that way you will see you aren't really as bad off as you think.  I still use everything to the last scrap, drop and fiber just like in the lean days.  I couldn't wait to stop "acting poor"  but now when that time is here, I can't help it because being wasteful is just dumb no matter what you have.

 

BTW, I was a high school drop out, had 2 kids by 19, and just scraped and scrapped little by little up the ladder.  Got some lucky breaks, also had to manage a few bad breaks.   There are probably more of both to come.  As for mom...she now has several totally paid for income producing properties , a nice nest egg , and can still be overjoyed at a dinner at a nice restaurant. 

 

 

Feb 25, 2011 4:13PM
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Dear Mom,

 

My own house (3bdrm, 2 bath, 1 story w/basement, 25yr old house) cost six times my annual salary.  Could you afford to pay that even in 1970 when wages were 18% higher than they are now?

 

My annual salary is $40,000.  In 1970 they earned 18% more which means I would have a ‘spare’ $600 a month to play with in today’s money. More actually, if you reduce my housing costs by 50% as they were in 1970. 

 

Let’s see, my mortgage is $1058 a month.  Reduce that by 50% is $529.  Let’s add $529 along with the $600 and you get a whopping $1129 a month Extra!  Oh wait.  I don’t have that extra because I earn less money today than they did in 1970 and I pay 50% more for housing  in addition to the extra expenses not needed in 1970 such as cell phone, computer, and home internet access. 

 

So, in actuality I have over a thousand dollars more per month in expenses than you had in 1970. Or you could calculate it simply as 9 days worth of pay.  Could you make ends meet with 9 days less pay each month?

 

Let’s look at taxes.  Have taxes gone up since 1970?  What percentage did you pay in 1970?      I bet I pay more.

 

Tell me again, why is it that young people today can’t save money?

Feb 24, 2011 8:37PM
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What part of being screwed don't you understand?  Tax the "producers" I'm kidding.  Tax the corporations to the max.  You won't have to tax the mega rich and there won't be as many when they pay the taxes that corporations don't pay and put them in their pockets a profit bonus.  Incent business to create more jobs by not allowing them the profit margins if they are not serving the country (they are not).  More jobs is more taxes and the bonus is the rich will be pared down (they'll still be fabulously rich) and they will not be the threat to our economy and basic rights that they are at present.  I'll pay 50% if the wealthy will.  Of course, my 50% wont amount to anything since I'm the problem.  Yes, I'm taking responsibility for the woes of our country.  It was me, the working poor and the union protected.  We did it.  It didn't have anything to do with obscene profits and speculators feasting on the blood of the innocents.  No it was me and my ilk, the struggling low income people. 
May 22, 2011 9:13AM
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Woe is me. My wife blew my 401k's. Social security will run out about the time i am old enough to get it after paying into it forever. Think ill head out for a burger so i can have a heart attack.
Feb 24, 2011 4:58PM
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Listen to the super-old song 'the window washer man' sung by the Mills Brothers.  That would be great to be able to make a living washing windows. 
May 12, 2011 4:26PM
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It's certainly different.  I didn't spend any money on, Internet service, cable TV, video games, computers, cell phones, I pads,  and a host of other things that just didn't exist.   I didn't get on a airplane until I joined the Navy, hardly ever ate out, and lived the first twenty years of my life without an air conditioner in Kansas.  I don't envy young adults starting out because they have things they consider necessity's that weren't even an option for me.  Also, you could earn a decent living without a college degree.  Still, I would make a bet that not many of them would like to time travel back half a century and start again.
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