I think that there are two core problems that generally go unaddressed in answers to the $140,000 question.
The first is simple, unemployment. It's calculated in a way that is very favorable to the government[1], because the government decides how it's calculated and generally wants to look like things are going well. Labor force participation, a statistic that more accurately captures the share of the productive population that is being squandered, has fallen precipitously from 2005 to around 2015, enjoyed a slight increase from 2015 to 2019, and then taken a nosedive afterwards, never recovering to its 2019 high. Since 2005, a full four percent of the population - one out of 25 people - have dropped out of the labor force. This is the sort of thing that affects everything, from the national psyche to the social fabric to, of course, our ability to use the country's human resources efficiently.
The second is a bit of a forbidden topic, but it is inextricably intertwined with the housing market, which is the core piece of evidence cited by both sides of the debate. Our grandparents, and often parents, found it relatively easy to buy houses in neighborhoods where they would be comfortable raising children and leaving their doors unlocked. While it's true that much of the public belief in rising crime is illusory, it is also true that a lot of that is due to a substantial decrease in social trust producing fewer opportunities for crime, which is very net-negative for quality of life. Going from a shoplifting rate of 40 per 100,000 in a country where you can browse as you please to a shoplifting rate of 40 per 100,000 where you need to ask an employee to unlock the merchandise for you is not a lateral shift. Likewise, going from a housing market where a two bed, one bath house costs two years salary to a housing market where a two bed, one bath house costs two years salary but only in neighborhoods whose schools are not safe for your children, is not a lateral shift.
Put simply, the core sentiment behind the "things are really bad" camp is that leaving your doors unlocked went from a near-universal social good to a luxury possessed only by the ultra-well-off, who seem to excoriate anyone who asks why they're now the only ones who get to have it.
I'm not strictly positing a cause for these two trends, nor taking a side in this debate, but they are the two main arguments I have seen from people who believe that things are worse now than in the past, and I have not seen them addressed by people arguing otherwise.
Namely, people who have dropped out of the labor force due to demoralization or other factors are not counted as unemployed.
The first is simple, unemployment. It's calculated in a way that is very favorable to the government[1], because the government decides how it's calculated and generally wants to look like things are going well. Labor force participation, a statistic that more accurately captures the share of the productive population that is being squandered, has fallen precipitously from 2005 to around 2015, enjoyed a slight increase from 2015 to 2019, and then taken a nosedive afterwards, never recovering to its 2019 high. Since 2005, a full four percent of the population - one out of 25 people - have dropped out of the labor force. This is the sort of thing that affects everything, from the national psyche to the social fabric to, of course, our ability to use the country's human resources efficiently.
Prime age employment to population ratio is a better measure, and it does not show a decline since 2005.
The measure that you picked goes down if the population gets older and includes a larger share of retired people (which it has) or if more people age 16-24 are in school rather than working (which has also been happening).
That's interesting - I don't see employment-population ratio used very often in cases like this.
I would argue, however, that factoring out an increase in university attendance isn't necessarily good practice for determining the degree of economic immiseration. During recessions, the general sentiment is that more people will pursue a higher degree than they would otherwise prefer in order to avoid a bad labor market. The share of the population getting into debt or burning generational capital (and, often, losing the prime years for starting a family) out of fear of a bad economy isn't orthogonal to how bad things feel and are, especially for young people.
Provide more public goods for families. Remarkably small things can matter a lot.
What public goods do you have in mind?
Rory Sutherland has this theory that when women entered the workforce there was extra money in the two worker family that had to go somewhere. One place it went was a slightly nicer house, and that over time the price of a family home rose to take up some of the extra family income. I’m not sure if this idea is particularly useful for solving the problem though
Setting aside AI, what do we do about it?
If we do consider AI, how does the analysis change? My guess is that either we'll have enough abundance that these questions of cost and living standard aren't relevant or we'll have other more important problems to worry about.
Internet arguments like the $140,000 Question incident keep happening.
The two sides say:
The economic data is correct. Real wages are indeed up. Costs for food and clothing are way down while quality is up, housing is more expensive than it should be but is not much more expensive relative to incomes. We really do consume vastly more and better food, clothing, housing, healthcare, entertainment, travel, communications, shipping and logistics, information and intelligence. Most things are higher quality.
But that does not tell us that buying a socially and legally acceptable basket of goods for a family has gotten easier, nor that the new basket will make us happier.
This post is my attempt to reconcile those perspectives.
The culprit is the Revolution of Rising Expectations, together with the Revolution of Rising Requirements.
The biggest rising expectations are that we will not have to tolerate unpleasant experiences or even dead time, endure meaningful material shortages or accept various forms of unfairness or coercion.
The biggest rising requirement is insane levels of mandatory child supervision.
Table of Contents
The Revolutions of Rising Expectations
Our negative perceptions largely stem from the Revolution of Rising Expectations.
We find the compromises of the past simply unacceptable.
This includes things like:
These are mostly wise things to dislike. They used to be worse. That was worse.
Not that most people actually want to return. Again, Rising Expectations.
Doing this requires you to earn that ‘normal income’ from a small town in the midwest, which is not as easy, and you have to deal with all the other problems. If you can pull off this level of resisting rising expectations you can then enjoy objectively high material living standards versus the past. That doesn’t solve a lot of your other problems. It doesn’t get you friends who respect you or neighbors with intact families who watch out for your kids rather than calling CPS. And while you might be okay with it, your kids are going to face overwhelming pressures to raise expectations.
Is the 2025 basket importantly better? Hell yes. That doesn’t make it any easier to purchase the Minimum Viable Basket.
The Revolution of Rising Requirements
That then combines with the Revolution of Rising Requirements.
In addition to the demands that come directly from Rising Expectations, there are large new legal demands on our time and budgets. Society strongarms us to buy more house, more healthcare, more child supervision and far more advanced technology. The minimum available quality of various goods, in ways we both do and don’t care about, has risen a lot. Practical ability to source used or previous versions at old prices has declined.
The killer requirement, where it is easy to miss how important it is, is that we now impose utterly insane child supervision requirements on parents and the resulting restrictions on child freedoms, on pain of authorities plausibly ruining your life for even one incident.
This includes:
We can severely cut expenses in various ways, but no, contra Matthew Yglesias, you cannot simply buy the 1960s basket of goods or services or experiences if you want to live most places in the United States. Nor if you pulled this off would you enjoy the social dynamics required to support such a lifestyle. You’d get CPS called on you, be looked down upon, no one would help watch your kids or want to be your friends or invite you to anything.
Whose Line Is It Anyway?
You don’t get to dismiss complaints until those complaints are stated correctly.
A rule for game designers is that:
People are very good at noticing when things suck. Not as good at figuring out why.
As in, I actually disagree with this, as a principle:
No. If you want to address people’s concerns rather than win an argument, then it is you who must identify and state their concerns accurately.
Not them. You. It’s up to you to figure out what the actual problems are.
Their job is to alert you that there is an issue, and to give you as much info as they can.
If this involves them making false claims along the way, that is good data. Notice that. Point that out. Do not use it as a reason to dismiss the underlying complaint that ‘things suck.’ There’s something that sucks. Figure it out.
What you definitely do not want to do is accept the false dystopian premise that America, the richest large country in human history, has historically poor material conditions.
Thus In This House We Believe The Following
However, due to rising expectations and rising requirements:
All of that is before consideration of AI, which this post mostly excludes.
Real De Facto Required Expenses Are Rising Higher Than Inflation
When people say the data are lying to you, or the data is wrong, they’re almost always wrong. Jeremy here responds to one such attempt from the previous go around. The data are what they are.
Yet the voters are not wrong. The practical ‘cost of living’ has gone up.
Voters realize this. They hate it. Inflation is now ~2.5%, but the annual rise in the cost of the basket of goods and services we insist you purchase or provide is higher. The new basket being superior in some ways is nice but mostly irrelevant.
Here’s a stark statement of much of this in its purest form, on the housing front.
Great Expectations
The two Revolutions combine to make young people think success is out of reach.
Millennials, in terms of many forms of material wealth and physical living standards, have much higher standards than previous generations, and also are forced to purchase more ‘valuable’ baskets of goods.
This leads them to forget that young people have always been poor on shoestring budgets. The young never had it easy in terms of money. Past youth was even poorer, but were allowed (legally and socially) to economize far more.
Today’s youth have more income and are accumulating more wealth, and mostly matching past homeownership rates, despite higher expenses especially for housing, and new problems around atomization and social media.
But that is paper wealth. It excludes the wealth of having families and children.
Expectations are out of control.
$587k is nuts. Claude suggests $150k-$250k depending on location, which seems reasonable as a combined household income for full-on life ‘success,’ and points out that trajectory is a factor as well.
When the debate involves people near or above the median, the boomers have a point. If you make ~$100k/year and aren’t in a high cost of living area (e.g. NYC, SF), you are successful, doing relatively well, and will be able to raise a family on that single income while living in many ways far better than it was possible to live 50 years ago.
Certainly $587k is an absurdity. The combination of Rising Expectations and the perception of Rising Requirements has left an entire generation defining ‘success’ as something almost no one achieves, while also treating ‘success’ as something one needs in order to start a family. No wonder young people think they can’t get ahead, including many who are actually ahead.
That’s in addition to the question of what constitutes a ‘good job.’ Most historical jobs, by today’s standards of lived experience, sucked a lot.
There’s also this: People reliably think they are poorer, in relative terms, than they are, partly due to visibility asymmetry and potentially geographic clustering, and due to the fatness of the right tail having an oversize impact.
These perceptions have real consequences. Major life milestones like marriage and children get postponed, often indefinitely. Young people, especially young men, increasingly feel compelled to find some other way to strike it rich, contributing to the rise of gambling, day trading, crypto and more. This is one of the two sides of the phenomenon Derek Thompson wrote about in the excellent The Monks In The Casino, the other being atomization and loneliness.
We Could Fix It
The good news is that a lot of this is a series of related unforced errors. A sane civilization could easily fix many of them with almost no downsides.
We could choose to, without much downside:
And so on. Again, this excludes AI considerations.
The bad news is there is no clear path to our civilization choosing to fix these errors, although every marginal move towards the abundance agenda helps.
We could also seek to strengthen our social and familial bonds, build back social capital and reduce atomization, but that’s all much harder. There’s no regulatory fix for that.
Man’s Search For Meaning
Matt Yglesias points out that this goes hand in hand with Americans putting less value on things money can’t buy:
This change in values is not good for people’s life experience and happiness. If being happy with your financial success requires you to be earning and spending ahead of others, and it becomes a positional good, then collectively we’re screwed.
And Zac Hill points out the other problems with people’s #SquadGoals.
There were ways in which I did not ‘feel’ properly successful until I stopped renting and bought an apartment, despite the decision to previously not buy being sensible and having nothing to do with lack of available funds. Until you say ‘this house is mine’ things don’t quite feel solid.
Many view ‘success’ as being married and owning a home, regardless of total wealth.
If those people don’t achieve those goals, they will revolt against the situation.
So this chart seems rather scary:
That leads to widespread expressions of (highly overstated) hopelessness:
Another issue is that due to antipoverty programs and subsidies and phase outs, as covered last time, including things not even covered there like college tuition, the true marginal tax rate for families is very high when moving from $30k to up to ~$100k.
How Do You Afford Your Rock And Roll Lifestyle?
Social media and influencing make all of this that much worse. We’re up against severe negativity bias and we’re comparing ourselves to those who are most successful at presenting the illusion of superficial success.
Welcome to the utter screwing that is the accelerated Revolution of Rising Expectations, in addition to the ways in which Zoomers are indeed utterly screwed.
That’s two groups of loadbearing mechanisms raised here on top of the general Revolutions of Rising Expectations and Requirements arguments earlier.
There are also real problems, as I will address later at length, especially on home ownership and raising children. Both are true at once.
Our Price Cheap
Want to raise a family on one median income today? You get what you pay for.
Is there a lot of slack in the typical household budget if you are willing to sacrifice?
Yes. You can buy things like cars that cost less than the average. There are limits.
It is always interesting to see what such lists want to sacrifice. A lot of the items above are remarkably tiny savings in exchange for big hits to lifestyle. In others, they do the opposite. People see richer folks talking to them like this, and it rightfully pisses them off.
You can see the impact of the Revolutions in the replies, only some of which is about the smaller crazy asks. No, you can’t really do this. The world won’t allow it and to the extent it does it will treat you horribly and your kids will not accept it.
Another example of the gaffe of saying what you actually think about what to cut, as he complains about kids being ‘entitled to 37 pencils’:
The thing about pencils is as you use them they disappear. You need another pencil. There are many places in education we can likely cut, and no you do not ‘need 37 dolls’ and we used to have far fewer toys and that was fine, but pencils?
It Takes Two (1)
Thus, people increasingly believe they need two incomes to support a family.
They’re noticing something sucks. Assume they’re right. Figure out what it is.
A change can be good. That doesn’t get you out of dealing with the consequences.
In this case, the consequences are that the second income gets factored into the Revolutions of Rising Expectations and Requirements.
Absolute affordability of being a one-earner family with kids has fallen, because again:
First, some brief questions worth asking in advance:
It Takes Two (2)
Even if you could somehow execute on the above plan to survive on one income by having life suck in various ways, that plan also takes two.
Not two incomes. Two parents.
Hey baby, want to live on one income, Will Ricciardella style? Hey, come back here.
Telling young men in particular ‘you can do it on one income’ via this kind of approach is a joke, because try telling the woman you want to marry that you want to live in the style Will Ricciardella describes above. See if she says yes.
If So, Then What Are You Going To Do About It, Punk?
The question ‘so what are you going to do about it?’ is still a very good one.
What do you do if families have the option of two incomes, and we set Expectations and Requirements based on two incomes, and you want to get by with only one? Adjusting how you spend money, and using the other parent’s time to save some money, will only go so far.
If you want one income households and stay at home parents to be viable here, I would say four things are required, in some combination. You don’t need all four, but you definitely need #1, and then some additional help.
I usually discuss these issues and questions, especially around #4, in terms of declining fertility. It is the same problem. If people don’t feel able to have children in a way they find acceptable, then they will choose not to have children.
On the marginal tax rates, consider these graphs.
That’s all obviously terrible policy, but it also means that you can obviously support a family on one $30k income if you could have done it on two $30k incomes, since your net benefits take home pay is not substantially lower after child care.
Alternatively or additionally, from a policy perspective, you can accept that you’re looking at two income households, and plan the world around making that work.
The big problem with a two income household is child supervision.
Ideally you do all of that anyway, it’s badly needed, and you open up both choices.
Now, back to the question of what is going on.
The Revolution of Rising Expectations Redux
What should we make here of the fact that spending on food, clothing and housing (aka ‘necessities’) has collectively declined as a percentage of income, and also the food is way better and the houses are bigger?
The definition of ‘necessity’ is not a constant, as the linked post admits. The ‘necessities’ that have gotten cheaper are the ‘necessities of the past.’ If things like education and health care and cell phones are de facto mandatory, and you have to buy them, then they are now necessities, even if in 1901 the services in question flat out didn’t exist.
That’s not to downplay how much the past sucked. It sucked a lot. Go see Hamnet or Train Dreams or The Housemaid.
But there are other ways it didn’t suck. In large part that was because you were allowed to suck without the rug being pulled out from under you for the crime of not having a rug, and also you didn’t have to compare to all the families with fancy rugs.
Life is vastly better. Life also really sucks compared to Rising Expectations.
Setting aside AI, what do we do about it?