I noticed yesterday that the Atlantic's Yoni Appelbaum has a new book coming out next year called Stuck. It asks, "How did America cease to be the land of opportunity?"
Obviously I haven't read it yet, but it got me curious. Has America ceased being the land of opportunity? My own suspicion is that America was never quite the land of opportunity that legend has it, but gained that reputation because for a lot of immigrants it was a helluva lot better than what they had before.
But who cares what my suspicion is? I was curious about whether things have fallen apart in the past few decades for young people. Here are several metrics that make up what people think of as the American Dream. First, homeownership:
Are you surprised? Even with the growth of home prices, homeownership is the same among young people as it was in the '90s. Here is income:
There's a lot stagnation here thanks to the Great Recession, but that's in the past. Compared to 30 years ago, incomes of the youngest are up 30% and incomes of the next youngest are up 40%. That's not too bad. Here's a recent Fed report comparing income among generations:
Every generation has done better than the previous one, including both Millennials and Gen Z. Here is wealth, which was a big concern at one time but now looks perfectly normal:
Here is college:
College completion is far higher among young people than it was 30 years ago. It's nearly doubled during that time. Here is retirement:
Projections suggest that young people are likely to have a pretty prosperous retirement, although it may end up being a little less than Boomer retirement compared to average national income. Here is economic mobility:
This is from a 2015 paper, so it's a little dated, but it shows little change between children born in 1971 and Millennials born in 1992. Mobility hasn't improved, but neither has it declined. Finally, here is new business formation:
This series goes back only to 2005, and there's evidence that starting up your own business has declined over the long term. But more recently, after falling during the Great Recession, it's now at a higher rate than it was at the beginning of the century. These figures are not specifically for young people, but it's a good bet that most small business formation is done by the relatively young.
So . . . it looks like young people aren't really stuck. They've got legit problems with college loans and high housing prices, but overall they're doing as well or better than any generation in recent memory.
UPDATE: I've corrected the homeownership chart. I originally miscalculated the combined rate of the 18-24 and 25-34 age cohorts.
Every generation runs into the same obstacles the previous one did, but it's new to them. College is expensive (though what it paid vs sticker price not that much over inflation--but higher than it should be). What--I have to pay taxes now??? Housing costs so much more than living at home. What is my car insurance??? Kids are expensive and they don't sleep through the night!!! I need my own health insurance--next I'll have to get my own phone plan and pay for streaming--outrageous! How can I be expected to save for retirement....
There are real problems in each of those examples that should be dealt with, but overall, things not that much different. And if the family has built up generational wealth, then there's no big problems.
Yoni's a very smart guy. I'm sure his assertion is based on something. It might be a good idea to find out just what his thesis is before rebutting it.
Just sayin'
Yeah, I can't help but say it's probably inequality and lack of mobility. Some of these things Kevin cites are medians, which is good, but the rest aren't. Wealth is accumulated (and inherited) by the wealthy, for the most part - more so than previously (last I checked, our GINI coefficient was going up, not down).
It's kinda right there in the title: "Stuck." Yeah, things sure seem stuck on suck these days. Been that way for my entire adult life, unlike even the 90s when it wasn't.
More inequality, less mobility. We're stuck.
More corporate consolidation, oligopolies and monopolies, with declining quality of service. We're stuck.
Housing is financialized and undersupplied (at this point I'm worry that this is a forever problem, which has unending ramifications), locking more and more people out of homeownership (the only real vehicle of wealth building for a normal person) or sucking up an ever-greater share of income. The percentage of American households who are housing-cost-burdened just keeps rising to new record levels every year now. We're stuck. It's to the point now where I think inflation needs to weight housing even higher.
We're backsliding democratically, which is worse than stuck.
Shit's really shitty out there.
I think there are some areas, like research, that are kind of blocked off by older people so its more difficult for younger people to get funding and there are certainly geographic areas where young people have it harder to prosper, but overall Kevin makes a good case for things being OK overall. However, it wont get too much attention when you do positive stories. Note that this post is likely to get few comments.
Steve
My practice area is in tax and estate planning, in California, so that explains this anecdote.
I don't think you can do an analysis like this and say "...... except for housing."
"Housing" was everything that made the United States different from Europe, arguably since the US for formed and certainly from 1900 to 2000.
It led to an expectation unique in the First World, that somehow you would end up with a nicer house, bigger than your parent's house, and your kids would end up with a nicer house than yours.
It was probably obvious to many then, and its obvious in hindsight now, that regardless of whether, say, at age 30 the average American has $100K equity in a house, in 2024 that house is either smaller or much farther away from the center of whatever house that person's parents had in the 1970s.
Housing in desirable areas cannot simply grow for ever, and it isn't. You are going to have a "worse" house than your parents had unless they give you theirs.
I cannot tell you how many clients I have whose only real financial accomplishment in life was buying a place in Southern California, and I mean anywhere in Southern California, before 1975.
You can assume all Kevin's charts are not only accurate, but true, and there are still going to be many who feel "stuck" because the US housing gravy train is over.
Since, in Europe, they haven't had a housing gravy train in like 1000 years, they have all their own problems, but not this one.
Over there, its more of whether allowing the rich (from whatever country) to buy up everything is sound public policy. But that's not what this book is going to be about.
Actually, the home-ownership rate in the US is well behind most European countries, and Asian nations as well: https://en.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate
The gravy train isn't over if you can manage to get on board, but it's harder and harder to get on board now.
Also, houses just suck now compared to those build 50 years ago. It's not just the quality of materials (rapidly farmed SPF lumber now instead of hardwoods and old growth conifers - and admittedly some things are substantially better). It's mostly that contemporary architecture and design is fucking godawful. Because of the market distortions, there is no incentive for builders and lazy architects to do anything except build boring, less-than-attractive housing. The only exterior wall that will have reasonable design these days is the one that faces the curb. The other 3 are terrible and ugly, and are reflections of poor (or simply lazy) interior layout choices. But people are desperate for housing, so there's no impact on the bottom line of these lazy builders and designers. So in a way, it's a race to the bottom on quality.
It's saying something when the 1960s split-levels, which are themselves pretty sub-standard when it comes to design, are better or at least on par with modern design.
Back in 1963 a song titled "Little Boxes" was briefly popular. Give it a listen.
"and they're all made out of ticky-tacky
and they all look just the same."
Remember that the houses built in the '60s that are still standing were mainly the better built ones. If the survivors are "pretty sub-standard when it comes to design" try to imagine how bad the others were.
People bring this up all the time. Yes, survivorship bias.
However, entire tracts of housing that were built in the 1920s and 1930s are still there. My previous city, a small but inner suburb of DC, was almost entirely that size, age, and quality of housing stock. There are ENORMOUS swathes of the DC area that are similar, and that's just one example. The survivorship bias argument mostly applies to/holds weight with regard to non-residential buildings, IMO.
If there were a ton of houses built in the 60s (or 50s, or 40s, or 30s) that weren't up to snuff, we'd see a patchwork of construction dates in these places. That we don't and that the tracts from back then are largely homogeneous when it comes to construction dates, tells us that survivorship bias is not an issue. Please don't raise this what-aboutism except for cases where it actually applies.
Survivorship bias is a poor excuse for why modern home design is ass trash. It's entirely due to cheap money, extreme undersupply, and high profits. Shitty developers and builders crowd out the good ones in such a case - the market is set up for a race to the bottom.
Also note that what I mean by design is not quality of materials or construction, but the actual design itself - the architecture.
Housing aesthetics are certainly worse than they used to be. And the switch from building front porches to back decks probably negatively affected the sense of community. But I can’t believe houses are smaller now. The size homes people used to raise families in are completely unacceptable to most buyers these days. My wife (young Boomer) was one of six kids raised in a 1500 sq ft house built in the early 50s. Almost no one has that many kids anymore, but if they did they would never even consider her old house. And it’s still there in what is now a fairly nice part of a big Midwestern city.
We raised two kids in a 1700 sq ft house. While it was certainly comfortable there were times we chafed a little at the size and would have liked something a little bigger. On the other hand it’s a beautiful 100+ year old house from the Arts and Crafts era with all the beautiful wood details that entails. Our friends still compliment us a lovely house but almost every one of them lives in something newer and bigger.
Housing in desirable areas cannot simply grow for ever, and it isn't. You are going to have a "worse" house than your parents had unless they give you theirs.
In our biggest metros, it's probably true that land scarcity inevitably means that people's yards are going to become smaller on average with time. But that doesn't mean the shelter itself need be smaller (obviously humans know how to build upwards). Nor does it mean that quality need be inferior.
Sounds like a crisis.
Missing from this post is "upward mobility." One could ask "how easy is it for a person in, say, the bottom couple of economic quintiles to move to a higher economic quintile?" My understanding is that there's number of countries that measure out better on this metric than the U.S.
+1
As he often does, Kevin only looks at the last 20-30 years. In the post-WW II boom or economic "golden years" there was a lot more improvement for working people. Real wages increased much faster and inequality decreased. The debt/GDP decreased if anybody really cares about that. A lot of people bought houses through the GI Bill and there was a huge housing boom. Then Voodoo Economics took over as Republicans exploited racism. Real wages declined severely in the inflation of the 60's-80's (which the Fed did not prevent, contrary to legend). Since the early 90's the economy and prospects have been on a slow path of improvement, interrupted by the usual finance-caused recessions and short covid recession.
The fact is that while the standard of living is better now thanks mostly to technological progress, the improvement prospects for median and lower-income people are not what they were up to the 70's. Conservative and neoliberal economics have not been better for the majority.
You dont have to read the book or even understand the argument before you slay the strawman. In fact, its easier if you dont.
I’m old, so I’m fine. It was the land of opportunity for me. I work with a bunch of 20 something college grads and they all seem fine. Some married already. Always traveling this past summer for friends weddings too. So there’s that anecdote. Magic 8 ball says, “signs point to yes.”
The whole "young people can't afford to buy houses" think really irritates me. I was young in the 90s. It was hard to buy a house for young people back then. It's always kind of hard because young people don't have a lot of money typically. So that's still true today but not more so than in the past.
The part of this that bugs me is, I'm sure these trend pieces we've seen over the past 10 year all come from young people in the media who have moved to our most expensive cities (New York and Los Angeles). Of course young people in these cities can't afford to buy homes. But if you look across the entire country, well most places are not like New York and LA and yet the people in the media who live i n these places never seem to get that.
And yet the price of a home in most places has been going up much faster than earnings, and the price of entry (the down payment) as a multiple of annual salary has also been going up everywhere. It's not just NYC and LA.
Even in the cheapest city, the price to salary ratio is 1.9. https://constructioncoverage.com/research/cities-with-highest-home-price-to-income-ratios
The kids don't like the status quo...
The elders know no other game...
What's new?
Here is economic mobility:
Now compare US economic mobility with that of other high income countries. The US usually comes out dead last, depending on how shitty the UK is doing in any particular year.
https://en.wikipedia.org/wiki/Socioeconomic_mobility_in_the_United_States