Grad students should save for retirement

[dismalist]

consumer price index (use to do the inflation adjustment) traditionally does not include housing - the main point of contention.

CPI rental imputation has a high weight of nearly a third in the whole index. House buying prices [see Case-Shiller Index] turns into imputed rents with a lag of about a year and a half, interesting episodes aside.

Younger people are not worse off than the corresponding cohort half a century ago. They just live in less space but get more pizzas to go. They also have I-phones.

[Stockmann]

They just live in less space but get more pizzas to go. They also have I-phones.

It's not just less space, it also has consequences like delaying having children (possibly forever) because they can't afford both rent and a child - the way housing costs have gone really is life-changing for the young, like having substantial numbers of young professionals wanting to flee the cities driven basically solely by housing costs, cancelling or delaying having children, etc. Also, it's not just housing, it's the cost of healthcare sans Medicare, and the cost of college. Stuff that really impacts the young - the cost of housing, of healthcare sans Medicare and of college - has ballooned in cost. The taxes the young pay also to a large extent go to paying for Social Security, Medicare and debts incurred by previous generations. Let them eat avocado toast I suppose...

[dismalist]

They just live in less space but get more pizzas to go. They also have I-phones.

It's not just less space, it also has consequences like delaying having children (possibly forever) because they can't afford both rent and a child - the way housing costs have gone really is life-changing for the young, like having substantial numbers of young professionals wanting to flee the cities driven basically solely by housing costs, cancelling or delaying having children, etc. Also, it's not just housing, it's the cost of healthcare sans Medicare, and the cost of college. Stuff that really impacts the young - the cost of housing, of healthcare sans Medicare and of college - has ballooned in cost. The taxes the young pay also to a large extent go to paying for Social Security, Medicare and debts incurred by previous generations. Let them eat avocado toast I suppose...

Alas, that's factually incorrect. Real median household income of all age groups has risen noticeably in the last ten years or so.

https://www.advisorperspectives.com/dshort/updates/2020/09/21/median-household-incomes-by-age-bracket-1967-2019

Taxes are levied on income levels, not growth rates. The young pay little tax because their incomes are small compared to older people.

It is sometimes amazing how widely anecdotes and systematic data diverge.

[Parasaurolophus]

I make as much now as my mother did (as a doctor) when she bought her first house. The house cost $60 000 at the time. The same house is currently on the market for $400 000. And that's in one of the cheapest parts of this country.

I live in the most expensive part of the country. A small house here costs a minimum of $1.1 million. Most houses currently on the market, however--perfectly normal houses, not mcmansions--actually cost closer to $2mil or more. The average family income here is something like $60k.

[dismalist]

I make as much now as my mother did (as a doctor) when she bought her first house. The house cost $60 000 at the time. The same house is currently on the market for $400 000. And that's in one of the cheapest parts of this country.

I live in the most expensive part of the country. A small house here costs a minimum of $1.1 million. Most houses currently on the market, however--perfectly normal houses, not mcmansions--actually cost closer to $2mil or more. The average family income here is something like $60k.

Relative prices change for many reasons. Sometimes weird things happen, like with tulips. Apartments and attached houses in Vancouver, e.g., have not increased in price nearly as much as detached houses. Look at the pretty graph at the bottom of this https://dailyhive.com/vancouver/metro-vancouver-home-sales-april-2020

It is true that if one were insistent on living in a detached house one's standard of living might well decline. But there is no reason anyone should have sympathy with that consumption pattern if there are reasonable -- to to the rest of us -- substitutes.

Now me, I need caviar and as there are no -- for me -- adequate substitutes, and because I am not rich a large share of my income goes to caviar, a rise in the price of caviar really hurts me. But no one should have sympathy with me. :-)

[Parasaurolophus]

The thing about Vancouver is that the 'attached houses' aren't actually in Vancouver. They're mostly in the 'burbs, where your commute time gets significant. And they're still hard to afford if you're not earning substantially more than the average family income. The housing stock in Vancouver and the environs is mostly detached homes, and there's a shortage of all kinds of housing, including rental stock (a studio near where I live was recently listed at $2600/month, and snapped up in a day because there's a serious housing shortage in this village).

And while condos are generally cheaper, they're not family-sized. You're talking $500-600k for one bedroom, if you're lucky.

The housing market in Vancouver also got really hot over the last year (although condo prices went down a titch). According to the real estate board, the current benchmarks for detached homes is $1.8 mil, for townhouses it's $947k, and for apartments it's $738k.

I should also add that renters have few protections here.

[dismalist]

The thing about Vancouver is that the 'attached houses' aren't actually in Vancouver. They're mostly in the 'burbs, where your commute time gets significant. And they're still hard to afford if you're not earning substantially more than the average family income. The housing stock in Vancouver and the environs is mostly detached homes, and there's a shortage of all kinds of housing, including rental stock (a studio near where I live was recently listed at $2600/month, and snapped up in a day because there's a serious housing shortage in this village).

And while condos are generally cheaper, they're not family-sized. You're talking $500-600k for one bedroom, if you're lucky.

The housing market in Vancouver also got really hot over the last year (although condo prices went down a titch). According to the real estate board, the current benchmarks for detached homes is $1.8 mil, for townhouses it's $947k, and for apartments it's $738k.

I want caviar, and that downtown! :-)

Yes, I am worse off, but cannot ask for sympathy.

[Parasaurolophus]

The thing about Vancouver is that the 'attached houses' aren't actually in Vancouver. They're mostly in the 'burbs, where your commute time gets significant. And they're still hard to afford if you're not earning substantially more than the average family income. The housing stock in Vancouver and the environs is mostly detached homes, and there's a shortage of all kinds of housing, including rental stock (a studio near where I live was recently listed at $2600/month, and snapped up in a day because there's a serious housing shortage in this village).

And while condos are generally cheaper, they're not family-sized. You're talking $500-600k for one bedroom, if you're lucky.

The housing market in Vancouver also got really hot over the last year (although condo prices went down a titch). According to the real estate board, the current benchmarks for detached homes is $1.8 mil, for townhouses it's $947k, and for apartments it's $738k.

I want caviar, and that downtown! :-)

Yes, I am worse off, but cannot ask for sympathy.

I dunno, downtown Vancouver is sad.

Circling back to grad students, they really struggle on their stipends. Even sharing with two or three others, most of it goes to the rent. And that's if they can find a place in the first place, since (literally) hundreds of people show up to showings, apartments are snapped up in a day or two, and application forms have you declare your income (and landlords just go with whoever's is highest).

And since even groceries are expensive here, even a frugal grad would struggle to save much unless they had a huge stipend (which, of course, some programs do offer).

[dismalist]

The thing about Vancouver is that the 'attached houses' aren't actually in Vancouver. They're mostly in the 'burbs, where your commute time gets significant. And they're still hard to afford if you're not earning substantially more than the average family income. The housing stock in Vancouver and the environs is mostly detached homes, and there's a shortage of all kinds of housing, including rental stock (a studio near where I live was recently listed at $2600/month, and snapped up in a day because there's a serious housing shortage in this village).

And while condos are generally cheaper, they're not family-sized. You're talking $500-600k for one bedroom, if you're lucky.

The housing market in Vancouver also got really hot over the last year (although condo prices went down a titch). According to the real estate board, the current benchmarks for detached homes is $1.8 mil, for townhouses it's $947k, and for apartments it's $738k.

I want caviar, and that downtown! :-)

Yes, I am worse off, but cannot ask for sympathy.

I dunno, downtown Vancouver is sad.

Circling back to grad students, they really struggle on their stipends. Even sharing with two or three others, most of it goes to the rent. And that's if they can find a place in the first place, since (literally) hundreds of people show up to showings, apartments are snapped up in a day or two, and application forms have you declare your income (and landlords just go with whoever's is highest).

And since even groceries are expensive here, even a frugal grad would struggle to save much unless they had a huge stipend (which, of course, some programs do offer).

Must be worth it to the grad students going there. :-)

[Durchlässigkeitsbeiwert]

Younger people are not worse off than the corresponding cohort half a century ago. They just live in less space but get more pizzas to go. They also have I-phones.

Having the same living standard as people half a century ago, despite cumulative growth in real GDP per capita over 50 years, indicates that either:
1) economists completely fail to properly calculate real GDP growth per capita
2) none of productivity gains were captured by this group

I-phones are already implicitly included in comparison: I suspect them to be part of "Telephone hardware, calculators, and other consumer information items" entry in the CPI that is deflating for the last decades. So, they reduce inflation making 2021 dollar look less depreciated relative to 1971 dollar, thus making millennials look wealthier.

[Stockmann]

They just live in less space but get more pizzas to go. They also have I-phones.

It's not just less space, it also has consequences like delaying having children (possibly forever) because they can't afford both rent and a child - the way housing costs have gone really is life-changing for the young, like having substantial numbers of young professionals wanting to flee the cities driven basically solely by housing costs, cancelling or delaying having children, etc. Also, it's not just housing, it's the cost of healthcare sans Medicare, and the cost of college. Stuff that really impacts the young - the cost of housing, of healthcare sans Medicare and of college - has ballooned in cost. The taxes the young pay also to a large extent go to paying for Social Security, Medicare and debts incurred by previous generations. Let them eat avocado toast I suppose...

Alas, that's factually incorrect. Real median household income of all age groups has risen noticeably in the last ten years or so.

https://www.advisorperspectives.com/dshort/updates/2020/09/21/median-household-incomes-by-age-bracket-1967-2019

Taxes are levied on income levels, not growth rates. The young pay little tax because their incomes are small compared to older people.

It is sometimes amazing how widely anecdotes and systematic data diverge.

Actually, my point is that inflation is not the same for the old as form the young so "real" incomes calculated using the same inflation are, well, wrong because they de facto experience different inflation rates because they don't spend on the same things. For example, the old basically aren't affected by college costs, which have risen far faster than overall inflation, so "their" inflation wouldn't include college costs, but young people's effective inflation would. Medicare also partly shields the elderly from healthcare costs (which have also risen faster than overall inflation) whereas the young have no such protection. Also, my point about taxation is that public spending in the US is heavily skewed towards the elderly, including the wealthy elderly, states cutting back on spending on HE to give the affluent (including the affluent elderly) tax cuts being a good example. On the other hand, if the young voted perhaps fiscal policy wouldn't be a huge transfer of wealth from the young to the old...

[dismalist]

They just live in less space but get more pizzas to go. They also have I-phones.

It's not just less space, it also has consequences like delaying having children (possibly forever) because they can't afford both rent and a child - the way housing costs have gone really is life-changing for the young, like having substantial numbers of young professionals wanting to flee the cities driven basically solely by housing costs, cancelling or delaying having children, etc. Also, it's not just housing, it's the cost of healthcare sans Medicare, and the cost of college. Stuff that really impacts the young - the cost of housing, of healthcare sans Medicare and of college - has ballooned in cost. The taxes the young pay also to a large extent go to paying for Social Security, Medicare and debts incurred by previous generations. Let them eat avocado toast I suppose...

Alas, that's factually incorrect. Real median household income of all age groups has risen noticeably in the last ten years or so.

https://www.advisorperspectives.com/dshort/updates/2020/09/21/median-household-incomes-by-age-bracket-1967-2019

Taxes are levied on income levels, not growth rates. The young pay little tax because their incomes are small compared to older people.

It is sometimes amazing how widely anecdotes and systematic data diverge.

Actually, my point is that inflation is not the same for the old as form the young so "real" incomes calculated using the same inflation are, well, wrong because they de facto experience different inflation rates because they don't spend on the same things. For example, the old basically aren't affected by college costs, which have risen far faster than overall inflation, so "their" inflation wouldn't include college costs, but young people's effective inflation would. Medicare also partly shields the elderly from healthcare costs (which have also risen faster than overall inflation) whereas the young have no such protection. Also, my point about taxation is that public spending in the US is heavily skewed towards the elderly, including the wealthy elderly, states cutting back on spending on HE to give the affluent (including the affluent elderly) tax cuts being a good example. On the other hand, if the young voted perhaps fiscal policy wouldn't be a huge transfer of wealth from the young to the old...

Correct, the increase in the cost-of-living depends upon consumption patterns. Experiments with price indices for various age groups suggests that the differences among them are not great.

College: Now college is an investment, no? So an increase in its price means nothing for the present standard of living, only for the future standard of living. If it's not worth it, don't do it. Of course, to the extent college is consumption, it should be weighed more heavily for young people. :-)

No need to worry too much about the young paying for the old, for the young will get old and the new young will pay for them.

Taxation disfavors the old because the old higher incomes. All that practice working makes for higher productivity and higher incomes. So, it's the old who bear the tax burden most heavily. Rightfully so, I might add. We do have a progressive tax system.

There are certainly individuals made worse off by individual price changes, but the group of young people are not worse off than, say, thirty years ago. Quite the contrary. Just look at all the i-phones. :-)

[Stockmann]

Now college is an investment, no? So an increase in its price means nothing for the present standard of living, only for the future standard of living.

Sorry, but this statement doesn't even make sense - whether it's an investment or not, it costs real money, the label doesn't change the fact that it costs people money and, more to the point, that it costs a lot more now than it did when the boomers were young.

If it's not worth it, don't do it.

Yeah, because there are all those manufacturing jobs with good health insurance, and all those white collar that only require a HS diploma... oh, wait, that was in the 1950's.

Of course, to the extent college is consumption, it should be weighed more heavily for young people. :-)

Again, jut because you stick whatever label to it doesn't change the fact it costs a lot more real wealth than it used to. If you're just going to arbitrarily "weigh" things to support the conclusion you want, then yeah, you can "prove" whatever point you like.

Taxation disfavors the old because the old higher incomes. All that practice working makes for higher productivity and higher incomes. So, it's the old who bear the tax burden most heavily. Rightfully so, I might add. We do have a progressive tax system.

Again, you're cherrypicking and looking at just one side of the ledger. Public spending heavily favors the old, including the affluent ones. So the low income elderly get quite a lot from overall, net fiscal policy and the affluent young get a very raw deal. The boomers, on the other hand, paid peanuts for college because the taxpayer largely picked up the tab.

Just look at all the i-phones. :-)

Somehow stuff like being able to afford to buy a home, being able to afford to start a family or having a modicum of job security (and therefore the possibility of actually making plans) sound more valuable to me.

[dismalist]

Now college is an investment, no? So an increase in its price means nothing for the present standard of living, only for the future standard of living.

Sorry, but this statement doesn't even make sense - whether it's an investment or not, it costs real money, the label doesn't change the fact that it costs people money and, more to the point, that it costs a lot more now than it did when the boomers were young.

Think! One doesn't include stock price or bond prices in the CPI. They are an investment, not a cost of living.

If it's not worth it, don't do it.

Yeah, because there are all those manufacturing jobs with good health insurance, and all those white collar that only require a HS diploma... oh, wait, that was in the 1950's.

Of course, to the extent college is consumption, it should be weighed more heavily for young people. :-)

Again, jut because you stick whatever label to it doesn't change the fact it costs a lot more real wealth than it used to. If you're just going to arbitrarily "weigh" things to support the conclusion you want, then yeah, you can "prove" whatever point you like.

But college cost is in the CPI! Government thinks it's consumption.

Taxation disfavors the old because the old higher incomes. All that practice working makes for higher productivity and higher incomes. So, it's the old who bear the tax burden most heavily. Rightfully so, I might add. We do have a progressive tax system.

Again, you're cherrypicking and looking at just one side of the ledger. Public spending heavily favors the old, including the affluent ones. So the low income elderly get quite a lot from overall, net fiscal policy and the affluent young get a very raw deal. The boomers, on the other hand, paid peanuts for college because the taxpayer largely picked up the tab.

And the young will get old ... .

Just look at all the i-phones. :-)

Somehow stuff like being able to afford to buy a home, being able to afford to start a family or having a modicum of job security (and therefore the possibility of actually making plans) sound more valuable to me.

This is about young people on average, not any one individual. Because of the increase in nominal income, so long as the non-existent price indices for age groups don't differ too much, the young are better off today than thirty years ago.

[clean]

At equilibrium, the return for a high school graduate, who does not expend the money for higher education, but goes to work directly, should equal the return on a college graduate (who has an expense - negative income if you will, followed by higher wages)  should equal out.

However, Long ago, it probably was in equilibrium, but federally insured student loans and government grants shifted that.  Then the states decided that Education was a private good, not a public good (where a well educated citizen base was a desired outcome) so since the 'benefits' are to the individual and not society, then the student should pay more than the state.  Please take a look at the percentage of state funding going to higher education from say 1960 to 2020, and the percentage of University expenses funded by the state vs tuition. 

  In high school it looked like being a doctor or attorney would create an insufficient return on investment (which was fine because I probably did not have the work ethic at that age to study and prepare for medical school).  Even in junior college, I looked into being an English PhD, and decided, even then, that it would not provide a sufficient return on investment... maybe better than working after High School, but not high enough to continue college.   

For me, I continued to live very much like a graduate student for the first 3 years of my career, living on my 9 month salary, and working summers to pay down what I had borrowed and begin to pile up savings in retirement. 

In graduate school, in PhD school, at least in the state and university I attended, I got paid tuition waivers and less than $750 a month (for 9 months) .  I lived on campus because off campus apartments were at least $450 a month. Needless to say, I was getting grants as well as loans to pay my expenses, and retirement was not on the horizon at the time.  (I didnt think that I would retire before 70 at a minimum... Now I know better!, but I still did not have sufficient income to save - given that I was going into debt)