>I can’t help but think those people don’t understand that $100k is very much the new $45k of the 2000s, and has much less purchasing power than the latter did at the time.
False. $45k in 2005 is only $73k today, when adjusted for inflation[1]. Even if you use the most generous interpretation of "2000s" to mean 2000, that's only $82k.
The more I stare at this the more I think that using official inflation numbers / using the official CPI is wrong -- these baskets combine recreation and technology being nearly -50% (TVs can be had today for $300, whereas they used to cost $500 in 1995 dollars), assume you only buy new cars (only up ~25% since 2000, but used cars are now almost as expensive as new whereas they used to be available for half the price or less), and underweight housing (basically doubled since 2000, worse if you need to move to a HCOL major urban center for employment).
If you are a healthy person living frugally then I think the inflation in your personal basket of goods is actually higher than the fed numbers would dictate (esp for rent and housing).
>these baskets combine recreation and technology being nearly -50% (TVs can be had today for $300, whereas they used to cost $500 in 1995 dollars),
The entire "Recreation commodities" category (which includes other stuff like "Sporting goods" and "Pets and pet products") is only weighed at 2%, compared to 13% for food and 37% for shelter. Even if it's down 50% the impact on the overall CPI is negligible.
>assume you only buy new cars (only up ~25% since 2000, but used cars are now almost as expensive as new whereas they used to be available for half the price or less),
???
There's clearly a "Used cars and trucks" category.
>and underweight housing (basically doubled since 2000, worse if you need to move to a HCOL major urban center for employment).
The index is called "Consumer Price Index for All Urban Consumers", not "Consumer Price Index for Young Urban Professionals". Not everyone is a recent graduate who recently moved into a high COL city and paying for a market rate apartment. For every person fitting that criteria, there's probably also a retiree who owns their house and/or lives in a rent controlled apartment.
> The index is called "Consumer Price Index for All Urban Consumers", not "Consumer Price Index for Young Urban Professionals". Not everyone is a recent graduate who recently moved into a high COL city and paying for a market rate apartment.
The discussion here is about the cost of living difference for tech workers who I assume are clustered around NYC.
$45K in NYC in 2005 is not equivalent to $73K today for most such people. It is likely closer to $100K today, as the above poster said.
that's a pretty localized in time issue re: used cars. There's still covid supply issues being felt in the downstream used market as a result of underproduction for 2+ years.
This doesn't account for the fact that cost of living doesn't rise at the same rate everywhere. You can't just use national statistics for this. It's entirely possible that in NYC the cost of living went up more than 2x since the 2000s.
The same is also true if you use 2005 or 2009 as your start date. I agree there is variance in theory, but in practice it has been about the same as the national.
>and making everything in the “basket of goods” worse.
Given that food, energy, and shelter makes up the bulk of the CPI, I'm not sure how this can be done. The most plausible thing I can think of is "food is less nutritious than before", but I doubt that's an actual factor. "Food is getting less nutritious so I'm forced to shop at whole foods" isn't exactly a popular sentiment.
The first is you're using the Nationwide averages as opposed to the regional numbers for New York where a lot of these increases are much greater than on the nation.
The second thing is the way it includes housing is by using a thing called the owners imputed rent. And what that does is it tries to back out the rental from a housing unit. The problem is in New York City rent has been rising way faster than that.
30 is the cpi's consistently underestimated a number of its own provisions because of the way it does hedonics and substitution. It basically says that while meat might have risen 50% people switch to fish now and it uses in lower value for inflation.
The CPI over the last 30 years have been so massively game it's almost useless anymore
>The first is you're using the Nationwide averages as opposed to the regional numbers for New York where a lot of these increases are much greater than on the nation.
Another commenter has pointed out new york house prices actually rose slower compared to the rest of the country.
>The second thing is the way it includes housing is by using a thing called the owners imputed rent. And what that does is it tries to back out the rental from a housing unit. The problem is in New York City rent has been rising way faster than that.
Most Americans own their home. OER might not be perfect, but pretending that they pay market rent doesn't make much sense either. Even for people who don't own their home, new york has rent control, which provides similar inflation protections compared to owning a home.
>30 is the cpi's consistently underestimated a number of its own provisions because of the way it does hedonics and substitution. It basically says that while meat might have risen 50% people switch to fish now and it uses in lower value for inflation.
The part about hedonic adjustment is misleading. While it's true that such adjustments are used. It's only used for small minority of categories (basically clothes and technology), and doesn't include stuff like food (like in your example).
Meanwhile the part about substitution is straight up false:
Read that link. The BLS says "yes we try to adjust for the substitution, but really we are trying to calculate a basic level of satisfaction:
> In January 1999, the BLS began using a geometric mean formula in the CPI that reflects the fact that consumers shift their purchases toward products that have fallen in relative price. [It continues by saying it allows substitution withing categories and not between categories.]
This is exactly what I was saying. It has become a cost of living index, not a measure of inflation anymore. The hedonic adjustments can be laughably hand-wavy (it is a very difficult problem on how you measure inflation when using CPUs -- the real answer is you shouldn't and CPI's basked is a bad bad way to do it). That FAQ is always pretty funny and defensive (a lot of "give us a break -- it doesn't really affect anything much").
> Even for people who don't own their home, new york has rent control, which provides similar inflation protections compared to owning a home.
This is one of the huge issues. (1) Not sure if you live near NYC, but ask any new yorker about how much rent control has helped -- the answer is usually pretty low. don't have a heart attack looking at this rental rise in the last 5 years https://comptroller.nyc.gov/reports/spotlight-new-york-citys...
However that isn't the important part - rent control shouldn't effect measures of inflation -- this is precisely why CPI is bad. You can't legislate away inflation, you mere push the money around and prices rise asymmetrically but you still have the fundamental issue that CPI no longer even tries to measure -- too many dollas chasing too few goods. So you stop some of using those dollars on housing -- they just bid of something else instead.
CPI is a terrible horrible very bad measure of inflation. Its been that way since the 70s at least when the concept was turned on its head.
These are NYC tech workers. "Food" isn't broccoli beef stir fry at home for $8. It's dinner at Del Frisco's for $300.
You need to understand that when people bitch about the "cost of living", they're not speaking in broad terms. They're speaking in specific terms, inclusive of their insane budgetary choices that they believe are mandatory to be seen as high-status.
Yes, you can live just fine on the median income. But in order to have your ego stroked as the super important high class person that you obviously are, you have to spend some money. Choosing to live in NYC in the first place is certainly part of that, the rest is just gravy.
Can we stick to stats over caricatures? If we’re going to go by “gut feel,” the stereotype is that the status climbers primarily go into finance, consulting, medicine, and law - not engineering.
My work at FAANG and FAANG-adjacent companies would suggest that it’s far more probable that a random e.g. finance professional is driven primarily by perceived status than a software engineer.
The media and general public still openly poke fun at tech titans like Mark Zuckerberg and even Jeff Bezos in a way that they would never do to e.g. Jamie Dimon. The perceived statuses are still incomparable, and I think any competent Gen Zer knows it.
How about medical appointments with nurses instead of doctors?
I wonder if there is a similar measure for time kids spend in school. My kid comes home early every Wednesday, and there’s are ~15 other early dismissal days during the school year too.
I would bet almost everything that relies heavily on labor has been increasing in price faster than official figures for the basket of all goods and services.
"Food" listed in there is not food at all. Thats some cheap filler that isn't really affected by inflation that much because of its just cheap garbage subsided by govt.
Look at the junk in this section for exampe
> Cereals and bakery products
And ofcourse all the items in fruits and vegetables had the highest inflation.
>And ofcourse all the items in fruits and vegetables had the highest inflation.
A simple check shows this is false. The "Cereals and bakery products" category went up by 28.6% since January 2020, compared to 17.9% for "Fruits and Vegetables". You get similar conclusions if you use compare against January 2005.
I had a feeling someone would dredge up a basic calculator and make this argument.
The problem with your retort is it ignores the very context I outlined above. The present rate of inflation appears more manageable, but because most of it is driven by absurd inflation in shelter and transport costs (homes and cars), those two areas are starkly higher than inflation overall - as much as 50% or more, in some metros.
So while your napkin math makes for a good soundbite, the reality is that it just hides the complex truth of inflation. So yes, while $45k might be inflation-equivalent to $73k today, that purchasing power is significantly different. $43k in the 2000s could buy you a starter home in most states, albeit not in most metros; nowadays, $73k can’t even cover basic necessities in many states and all metros, not without significant sacrifices.
The thing you always need to keep in mind about CPI is that it’s a weighted average for the ENTIRE COUNTRY. Like, retirees in Florida who own their own homes have a very different relationship with prices than young renters in NYC. It really only makes sense to use CPI and other inflation figures when you’re talking about the whole country.
No one cares that they can buy a 4k TV for $400. We want healthy food that we can regularly afford. That costs $400 a week for a family. These government indexes are incredibly warped.
If you assume a family of four with both children aged 9-11 and the parents a male and a female aged 19-50, the USDA says [0] it costs only $250.10 with a low-cost plan, $314.90 with a moderate-cost plan and $380 with a liberal plan. All three of these plans each support "a healthy diet through nutritious meals and snacks at home" [1] and would cover everything -- no restaurant budget required.
As in "people feel as though they want to be paid more"? You may find the idea interesting and resonant, but how does that affect anything? It's still true that they're on more than journalists, regardless of how they feel.
Yes, of course. Within their choices, everyone does what they want. But that's not something worth bringing into a discussion, unless we bring it into every discussion as a point to note every time before continuing with the actual discussion.
But, isn't that the discussion? That is, why would someone earning 100k feel that it's not enough, when all economic comparisons, with peers or peer-adjacents, insist that it's a load of money? Maybe it is, and maybe it's not; but if you go on strike you're probably not convinced by what the Fed, the DOL, and HN say.
Do you think people should be compensated more because they feel poorer, regardless of the actual costs of living...? As an avid Scanlon reader I personally think you're misrepresenting her position
Nope, I don't have a particular view on what would be adequate compensation, although I'm reflexively with labor. But it might get to the heart of why people do what they do. Why go on strike when the math says you're being payed above average on a nationwide basis? People are funny that way. Very few are calculators, they're just people.
I reckon people want to be paid as much as they can bargain for, regardless of their relative income level. Besides, it's not just about pay, it's often about working conditions.
Yes, and double yes. How these people view (feel about) their working conditions is more important to them than any explanation of why they ought to, or ought not to, feel that way based on some measure of comparative economics or conditions. If they want, for whatever reason (either allergy or solidarity), a scent-free cleaning product and they're willing to strike for it; well, why not? It's a political negotiation, a bargaining. That's sensible to me. Everything is people and politics. It might be justified by math, but it's not driven by it.
Of course, but I think people do (and should) bargain for as much as they can get. I don't think it should be motivated by and only when workers "feel bad" about the economy necessarily.
measures of core inflation that sites like this use leave out many things that massively impact purchasing power - namely food, fuel, and interest rates. When factoring these in, the gp comment is quite reasonable, as those costs have soared in the last 20 years for the typical household.
And median wage in NYC is $74k (according to Google). Sure, Manhattan is different, tech salaries are different, etc. I'm not claiming that these specific workers should/shouldn't be paid more, just that it's really tone-deaf to claim that you can't live on <$100k, when more than half of New Yorkers do.
I'm curious about what portion of those that are living on $74k or less are doing so solo, and how many are only able to do so by racking up debt / getting support from family / etc.
I live in an area less expensive than NYC and, at least anecdotally in my circles, if you don't have a partner (or other assistance like roommates, parents, or something along those lines) it seems pretty damn rough to get by on ~70k.
I have a good job in the Bay Area, and I spend 4K a month. Of course if I were a family, there is no way I could support a wife in 4K a month but that is rare anyway. If she were working too, I could surely support a child in 6k a month. At this cost my life includes:
1. A Tesla Model 3, on which I spend 1k a month with insurance
2. 1.5k rent for a studio in a good safe location with utilities
3. Rest on groceries, eating out movies etc.
If I decided to get a cheap car, I could easily have 600$ or more to spend on housing etc.
So it would be tight but as a single 20s male, I would make it with 50k a year after taxes. Everything else just goes into savings. I think people have lavish tastes, or no control over their spending if they can’t make do with 70k a year after taxes.
>if they can’t make do with 70k a year after taxes
I don't think the median income is after taxes, is it? That would be more reasonable, for sure. My comment was made in reference to friends who make $70k/yr before taxes.
// 2. 1.5k rent for a studio in a good safe location with utilities
I actually can't think of an EU Capital where that's achievable anymore, bar possibly the socialist outlier of Vienna. In Dublin a good studio is at least 2k, and you'll pay 52% tax on earnings over €70k as well...
It's all about rent. If you've lived somewhere a while and have rent control, or you have roommates, or an unorthodox living situation (e.g. no kitchen), or can find a below-market unit, or some combination of those, you can survive on FAR less than someone who is moving to the city today and signing a new lease on a market-rate 1-bedroom apartment.
Sometimes it's like a half fridge and a two burner electric stove. Maybe you have an air fryer. Maybe you just microwave a lot of stuff. Or do like I do, eat a lot of simple uncooked meals, like fresh fruits and veggies, nuts, smoked fish, cheese, etc. I'm constantly amazed at how so many people assume everyone must eat exactly like they do.
I'm amazed when someone assumes others must eat out every meal if they don't have the ability to broil a roast in their home. Though I shouldn't be amazed - the inability of people to understand lives that work differently then their own seems widespread.
Nah this is just false. I'm a founder and pay myself less than our employees, 70k does just fine. I define just fine as 'enough so you don't have to be distracted by coupon clipping for daily necessities, and can still travel on trips and buy splurge purchases like a fancy rice cooker or designer couch or fancy cocktails.'
I live alone in a 2br. I don't have assistance from family or a partner.
Now, I do not live in a luxury building, and I am not building up a nest egg from my salary. And I rent. But when people think about the costs of NYC, a lot of people forget that you don't need a car, car insurance, or gas.
Where you get into trouble is if you're paying a stupid large amount for rent. It is very possible to pay 1-2k / month in rent. Most people who move to the city at that budget live with roommates initially, but most find a really good deal, sometimes rent controlled, organically through networks after a year or two of living here. Deals are hard to find as they should be, but certainly exist, and most longterm locals have a great deal.
[on a salary of 70k] “I am not building up a nest egg from my salary”
You are robbing from your future to live in the present.
This might be ok for you specifically as you are making a gamble on your ownership of the startup paying off. Perhaps you have a family safety net. Or Perhaps you are ok with taking the risk that you don’t have enough money in your older years.
It’s not really ok for standard employees to live that way. The USA social contract is that each person must self-fund their own retirement. Deferring that savings to “later” has truly staggering costs in compound-interest-years lost.
I didn't make any claims other than saying that in my circles I see some of my friends and colleagues have trouble making it by on $70k. I'm not sure how you would be able to tell me that I'm wrong about that. I'm happy that you are able to make it on $70k, though.
>I didn't make any claims other than saying that in my circles I see some of my friends and colleagues have trouble making it by on $70k. I'm not sure how you would be able to tell me that I'm wrong about that.
Okay, then let's make this rigorous.
Falsifiable Claim: People live a life of struggle on 70k a year in new york, where struggle is defined by constant worries of physiological needs, safety, and security, as categorized in Manslow's hierarchy of needs. https://www.simplypsychology.org/maslow.html
Falsified by counterexample.
QED.
For a lot of people, they may mean 'struggle' in the sense of living below where they want to be, which is relative. Maslow's hierarchy is helpful to categorize.
I personally could live off less than €1k/month for everything, before buying a house that reduced my costs by around €400/month.
Just because it's possible, doesn't mean most are willing to take the set of preferences in my head that allows me to be so cheap and rewire their own brains like that.
"Official" inflation numbers are fraudulent and have always been. Real life situations is what matters, because we're dealing with real people.
The Soviet Union "officially" had the highest production of food per capita in the world, yet they had to import food. Because you cannot eat government statistics.
Does that account for increased housing prices? It probably doesn't, because housing prices (cash price, per the fed) more than doubled since 2005: https://fred.stlouisfed.org/series/NYSTHPI
If you did a 30 second search, you'd see it's factored into the CPI, with "Shelter" (which further breaks down into rent and owners' equivalent rent) making up 36% of the CPI basket.
One possible issue is that the largest component (27% out of 26%) is `OER`, which can be detached from reality.
Unless owners are completely in the loop in terms of the rental market (which they likely are not, they don't rent), they may not come up with good estimates for what an equivalent rent would be.
Yes, it's in there. But also, IMO, oer is a dreadful metric. It's very laggy, and more opinionated that it ought to be. Rent is rent, but oer seems neither fish nor fowl. It's a wild survey guess that's off by 6 months.
I meant the original source, the inflation calculator site. Anyway, thanks for the figures. House prices more than doubled but I guess other things must have become cheaper to compensate.
House prices aren't part of the CPI, but housing (ie. rent and owners' equivalent rent) is. The former is an investment but the latter is the thing you actually consume.
False. $45k in 2005 is only $73k today, when adjusted for inflation[1]. Even if you use the most generous interpretation of "2000s" to mean 2000, that's only $82k.
[1] https://www.usinflationcalculator.com/