1970 thru 2005 changes
Not my usual posting topic but found this very interesting video given our current economic climate. What has changed? Why? What can be done about it?http://www.wimp.com/notgreat/ 38min lecture from ‘07, details below
Video comparing the family income from 1970 – 05. I assume and hear often about how we are consuming too much and how we spend too much on clothes, electronics and other things and don’t save enough, houses are much bigger now and such. The not saving part is true but compared to 1970, we actually spend less adjusted for inflation and the median house is actually about the same.
Elizabeth Warren is a law professor at Harvard and got her data from the Commerce dept. I believe it also talked about how she talked to Congress committee as well (skipped most of the intro).
This video compares the 1970 one income median family to today’s dual income median family and what has changed.
The highlights:
1970 1.4% of annual income is revolving debt
2005 15% of annual income is revolving debt
Adj for inflation, median income household earner makes around the same, if not slightly less than 1970 counterpart. Total household income went up due to wives entering the market but avg salary for males stayed the same.
Adjusted for inflation, for the median household (2 parents, 2 kids) spend in dollars from 1970 to 2005:
Clothing -32%
Food (including eating out) -18%
Appliances -52%
Per Car ownership -24%
Generic stuff where numbers not given:
Electronics + (~$300)
Baby Food -
Dog Food +
Cigarettes -
Liquor +
Dry Cleaning -
So was a wash or negative in overall consumption, but:
Mortgages (for same median house) +76%
Healthcare insurance +74%
Cars (now need 2) +52%
Childcare (new) +100%
Taxes +28%
Mortgage is for an avg sized house, 3 Bdr, 1 bath house. Went from 5.8 rooms to 6.1 rooms only. Added a 3rd bdr or a second bath but not both. New housing is being built for top 20% of income not avg or lower 70% (new is usually 3rd or 4th home purchase, not initial). Even though we have lower interest rates, the overall cost has gone up for roughly the same house.
Decreases were in somewhat flexible items and of a smaller amount of income, where you could make do or put off expenditures
Largest Increases were in non-flexible items
Savings:
1970 11%
2005 -6%
Fixed items:
1970 ½ of income (plus extra worker at home if needed)
2005 ¾ of income (no extra workers, higher risk when employment terminated)
Given the above the avg family, in ONE GENERATION has spent the extra income of the second earner, 11% of the savings, AND an extra 15%, all on mostly fixed costs, let alone taken on much more risk compared to 1970.
The current environment will help the largest fixed cost (to a point) but there is a long way to go and many more large fixed costs that need to be addressed.
Labels: economy
