On Twitter, folks have been supporting and piling on to a guy whose bottom line was that we are able to afford much less now than we could in 1990 (I won’t link to it because he’s not a public figure). The piling on has been by economist-like people and the support has been from… others?
Regardless, the claim can be analyzed in a variety of ways. I’m more intimate with the macro statistics, so here’s one of many valid stabs at addressing the claim. I’ll be using aggregates and averages from the BEA consumer spending accounts.
The broad composition of consumer spending has changed somewhat in the past 30 years. Below is the breakdown of consumer expenditures in 1990 and 2021. In 2021 we spent less of our income on housing, transportation, off-premises food and drink, clothing, and home furnishings. In 2021 we spent more of our income on health goods, recreation, and financial services and insurance. All of that’s well and good, but we want to know the quantity of goods and services that the average person affords.
It’s easiest for us to think about the quantities that we can afford 2021 as a proportion of goods in 1990. Below are the inflation-adjusted quantities of consumption per capita.* These use the quantity indices and not the chained price indices, so there is some basket composition inaccuracy. But the all-around message is the same. On a per-person basis, we consumed more of everything in 2021 than we did in 1990 (except education, that’s driven by demographics).
We are SO MUCH richer in terms of communication, recreation, and household furnishings. That is, we interact with other people more, we leisure more, and we have nicer amenities inside our homes. I feel a bit silly breaking this down further because the numbers are so fantastic. There is another cluster of consumption types that we consume in excess of 50% more. They are clothing, health, and financial services. The worst progress has been in transportation, food, and housing. Those only increased by 25% or more per person.
The only popular type of consumption that is omitted from the above list is international travel. Of course, Covid-19 threw a wrench into those numbers in a big way. Prior to the pandemic, the average person was traveling internationally by 60% more than they were in the year 1990. But these expenditures composed about only 1.1% of expenditures in 1990.
Suffice it to say that any claims about the stagnating living standard in the US are way overblown. We can do more in so very many ways. To boot, we know that the price index quality adjustments are imperfect. The above statistics only present what can be measured in a systematic and comparable way. Consider how life is different now in very practical ways in contrast to the 1990s:
- Phone calls were mostly made from home. If you left something off of the grocery list, then you couldn’t call home to ask what was needed. And you can forget about timely notification of emergency services when you were outside of the home.
- Our medicine was less effective and there was less variety.
- Photos were limited. Each photo consumed film that could only be used once before a refill was purchased. Then, the film had to be developed at the cost of time and money.
- We didn’t have navigation apps. We had a map or printed/written directions. We spent a lot more time being lost and figuring out how we’d get to a destination ahead of time.
- There was more lead in the air. Our IQs weee lower and our behavior was worse relatedly.
- Cars were less fuel efficient. They were also more dangerous for people both inside and outside of them.
- Media rental was in the form of a physical VHS cassette. It wasn’t delivered. You had to physically go to the store to rent it. Your options were whatever the store had on the shelf. If someone else had already rented the item that you wanted, then you just had to wait until next time.
- Tv’s were smaller and certainly blurrier.
- Music was on cassette, disk, or the radio. If you didn’t carry your physical library, then you depended on the whims of the radio. For that matter, podcasts didn’t exist. NPR or AM radio was the primary source of listening to other people talk and it was on their schedule, not yours.
- Airline flights were less affordable.
- There was much less food variety. I remember Jello being a bigger deal. Avocados were mostly not a thing. You can forget about dragon fruit, cactus fruit, passion fruit, fresh figs, and the plethora of cruciferous vegetables that we now enjoy. Convenience foods were also in limited supply and variety.
* Yes, using the average rather than the median values provides a skewed level of consumption. But, using the average does not skew the rate of change. The rate of change between the average and the median are very, very similar.
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This confuses me… you’re showing that people spend more in 2021 than in 1990 on certain things, but that’s not necessarily an apples-to-apples comparison, is it? If spending on healthcare goes up, is it because we healthcare is more expensive? Same with housing, financial services (credit card debt?) food prices etc. Maybe people eat out more because of longer working hours or fewer stay-at-home spouses?
Maybe a better comparison would be the amount of discretionary vs. necessary spending? Or the price of a fixed basket of goods (2 bedroom house, loaf of bread, pound of beef, etc.)?
The pie charts are in nominal terms. The line graphs are in real terms.