Inflaaaaaaaation

[Kron3007]

Two people working would get the family over poverty and take away food stamps.

Two people working was definitely not needed in the 1950's. Doesn't that in fact help somewhat confirm what paultuttle stated?

One can have a 1950's standard of living today quite easily: Let's try 1950's medicine at 1950's prices and incomes compared to 2020's medicine at 2020's prices with 2020's incomes. Let's try 1950's wives as cooks compared to take-away food today. Hell, McDonalds was an improvement in many places! [though not in New York :-)] Nobody ever bothered to measure household productivity and compare it to market productivity. And 1950's cars at 1950's prices with 1950's income and so on ... . One gets the picture.

Be that as it may, productivity and earnings [not wages, which are only a part of earnings], properly deflated, as I expounded upthread, have moved together since the 1950's.

One of the problems IMHO with your take is housing availability. Even if a family of 4 were satisfied with the equivalent of the 1953 median income of $4200 (just under $48,000 now), you have a problem finding a house. My hypothetical family qualifies for a $300,000 mortgage, which means that IF you live in one of the urban areas you have trouble finding a home at all. If you move to where the cheaper homes are (if you can afford the upfront moving costs), you can't get a job. Sort of a Catch-22 for hordes of people.

Good question, jimbo. Standard of living -- well-being -- depends upon income and all relative prices. Has nothing to do with inflation, except as something that depresses real incomes.

Still, we can ask why houses cost so much. As usual, the answer is: us! Homeowners have made it politically difficult to build more houses in places people want to live, so as to have an increase in the prices of their houses.

But even here,  towns and cities emerge which do not have restrictive zoning. Some exist already. I think Houston is one, but that doesn't matter so much as many, many little Houstons. That's actually quite easy technologically even if you don't have desert all around you: Build up! That's dirt cheap.

So long as there is political competition, no bad deed goes unpunished.

We've never had it so good!

The world is falling apart around us, but other than that you are technically correct. 

[marshwiggle]

Two people working would get the family over poverty and take away food stamps.

Two people working was definitely not needed in the 1950's. Doesn't that in fact help somewhat confirm what paultuttle stated?

One can have a 1950's standard of living today quite easily: Let's try 1950's medicine at 1950's prices and incomes compared to 2020's medicine at 2020's prices with 2020's incomes. Let's try 1950's wives as cooks compared to take-away food today. Hell, McDonalds was an improvement in many places! [though not in New York :-)] Nobody ever bothered to measure household productivity and compare it to market productivity. And 1950's cars at 1950's prices with 1950's income and so on ... . One gets the picture.

Be that as it may, productivity and earnings [not wages, which are only a part of earnings], properly deflated, as I expounded upthread, have moved together since the 1950's.

One of the problems IMHO with your take is housing availability. Even if a family of 4 were satisfied with the equivalent of the 1953 median income of $4200 (just under $48,000 now), you have a problem finding a house. My hypothetical family qualifies for a $300,000 mortgage, which means that IF you live in one of the urban areas you have trouble finding a home at all. If you move to where the cheaper homes are (if you can afford the upfront moving costs), you can't get a job. Sort of a Catch-22 for hordes of people.

Good question, jimbo. Standard of living -- well-being -- depends upon income and all relative prices. Has nothing to do with inflation, except as something that depresses real incomes.

Still, we can ask why houses cost so much. As usual, the answer is: us! Homeowners have made it politically difficult to build more houses in places people want to live, so as to have an increase in the prices of their houses.

Yes, this is true. The same people living in developer-built homes that was once open space are now howling about evil developers taking away remaining "open space."

Also, investors are buying up large tracts of developer-built homes and converting them to rentals or long-term investments which also reduces the supply of housing.

Still, I would also make the point that homes built today have a lot more intrinsic value than homes built in the 1950's so construction costs are higher. Insulation, higher and safer electrical services, cable connections. More so than compared to homes built in the 1900's which didn't even have plumbing.

Interesting analysis here:
House size over time

New homes in Canada and the US are big and getting bigger.  The average size of a newly constructed single-family detached home is now 2,600 square feet in the US and probably 2,200 in Canada.  The average size of a new house in the US has doubled since 1960.  Though data is sparse for Canada, it appears that the average size of a new house has doubled since the 1970s.

While at the same time
Household size over time

The average American household consisted of 2.5 people in 2022.

That's down from about 3.3 in 1960.

So, houses have been getting bigger as the number of people living in them has gotten smaller.

In 1961, my family had 6 people in a 900 sq. ft. house. Now two of us live in a condo that is only slightly smaller, with way more amenities. (I grew up with one black and white TV and no cable. Now we have high speed internet and streaming services on a big flat screen TV like everyone else.)

If a family now wanted to live in the style of my parents, it would be easy on a single income, without a professional job, and maybe even without being full-time. Our expectation inflation is what drives economic inflation.

[Parasaurolophus]

I'm not convinced it would be easy to support a family of six anywhere in Ontario, let alone southern Ontario, on a single non-professional income, even in a 900 square foot apartment. There may still be some vehicle assembly plants where you can just about manage a sufficient salary (though I'm skeptical), but I doubt retail or the service industry will cut it.

[dismalist]

Here is a pretty thorough compilation of data on incomes in Canada over time and across provinces.

https://wowa.ca/average-income-canada

Scroll down a bit to the graph titled "Income in Canada". It goes from 1976 to 2020, showing mean and median income deflated by the CPI, which overstates inflation, thus understating real income growth.

Real median income in Canada has grown nicely since 1996. It was in the previous 20 years that median income stagnated amidst fluctuations.

We seem to have an idyllic sense of the past which doesn't correspond to reality. I don't know whether the cause is psychological or social psychological or political or what.

[Juvenal]

How things are going on?

I can only say, as my POV, "Mutantis mutantur, etc.."

[Kron3007]

Here is a pretty thorough compilation of data on incomes in Canada over time and across provinces.

https://wowa.ca/average-income-canada

What that shows is that income has grown about 25% since 1996.  During this same time, housing has gone up by much, much, more....

Scroll down a bit to the graph titled "Income in Canada". It goes from 1976 to 2020, showing mean and median income deflated by the CPI, which overstates inflation, thus understating real income growth.

Real median income in Canada has grown nicely since 1996. It was in the previous 20 years that median income stagnated amidst fluctuations.

We seem to have an idyllic sense of the past which doesn't correspond to reality. I don't know whether the cause is psychological or social psychological or political or what.

[dismalist]

Here is a pretty thorough compilation of data on incomes in Canada over time and across provinces.

https://wowa.ca/average-income-canada

What that shows is that income has grown about 25% since 1996.  During this same time, housing has gone up by much, much, more....

Scroll down a bit to the graph titled "Income in Canada". It goes from 1976 to 2020, showing mean and median income deflated by the CPI, which overstates inflation, thus understating real income growth.

Real median income in Canada has grown nicely since 1996. It was in the previous 20 years that median income stagnated amidst fluctuations.

We seem to have an idyllic sense of the past which doesn't correspond to reality. I don't know whether the cause is psychological or social psychological or political or what.

I take it this is what you want to say:

What that shows is that income has grown about 25% since 1996.  During this same time, housing has gone up by much, much, more....

House prices are already taken into account in the price index used to calculate real income. If your use of housing takes up a larger share of your spending than the median household, your real income has gone up less than that of the median household. Only if you are a housing addict has your real income gone down.

[Wahoo Redux]

We seem to have an idyllic sense of the past which doesn't correspond to reality. I don't know whether the cause is psychological or social psychological or political or what.

My wife has a great little anecdote about her dad, who was a bit of a skinflint, spilling ink on his best work shirt and going to J.C. Penny and being outraged that a shirt cost $12 (this was sometime in the 1980s).  He had taken a $5 bill with him.

My father would not buy coffee from Starbucks.  He could not comprehend why someone would pay a $1.25 or whatever it was for coffee.

My wife was apoplectic that her new prescription glasses cost over $200.

When my brother-in-law got a new job I treated the fam to two pizzas, cheese-stuffed breadsticks, a two liter of Diet Coke, and two orders of chocolate lava cakes----when the generous tip was thrown in I was out $90.  My nephew saw this and said, "Ninety dollars!" which caused everyone else to freak out. 

When I was in high school, a Big Mac cost, according to Google, $1.30.

What I told my wife, which she did not accept, is "When everything seems like it costs way too much you've reached middle age."

[filologos]

What I told my wife, which she did not accept, is "When everything seems like it costs way too much you've reached middle age."

I guess I'm middle-aged then. In high school, I was always frustrated with my baby-boomer mother because her idea of what things should cost was always about 40-70% of what they really did. "Six dollars for a fast-food meal? That's so expensive!" But now I think it should cost $6 and it costs $9 or more, so I'm more sympathetic than I used to be.

[dismalist]

People bitch about rising individual prices as a matter of salience, probably for some particularly noticeable price changes. The bitching does not seem to be related to the share of income spent on the bitched commodity price, eggs, e.g., or even gasoline. There is no bitching about falling prices, or prices rising less than the average. We have asymmetric bitching!

Look at this beautiful graph: https://www.aei.org/wp-content/uploads/2022/07/cpi2022junea-3.png?x91208

College cost increases are right up there!

Plenty of stuff hovers around zero price increases or even declining prices, while the average inflation rate is 75% between 2000 and 2022. This includes new cars, clothing, cellphone services, computer software and TV's. Computing power per dollar, also used in the home, but not obviously contained in the graph, "has probably increased by a factor of ten roughly every four years over the last quarter of a century (measured in FLOPS or MIPS)". Nobody bitches about these.

Even the cost of housing, that's rent and imputed rent here, is only inflating at the average rate. [That lags and averages volatile house prices.]

Average hourly wages, which understates compensation growth on account bennies are left out, grows faster than overall inflation.

Noting individual price changes is about relative price changes, not inflation.

To figure out one's own evolution of material well being, it's best to concentrate on one's dollar income relative to published inflation, perhaps re-weighting price changes with one's own spending shares, and not on the price of eggs, nor even on the price of houses alone.

[Wahoo Redux]

Fascinating graph.

[Kron3007]

Here is a pretty thorough compilation of data on incomes in Canada over time and across provinces.

https://wowa.ca/average-income-canada

What that shows is that income has grown about 25% since 1996.  During this same time, housing has gone up by much, much, more....

Scroll down a bit to the graph titled "Income in Canada". It goes from 1976 to 2020, showing mean and median income deflated by the CPI, which overstates inflation, thus understating real income growth.

Real median income in Canada has grown nicely since 1996. It was in the previous 20 years that median income stagnated amidst fluctuations.

We seem to have an idyllic sense of the past which doesn't correspond to reality. I don't know whether the cause is psychological or social psychological or political or what.

I take it this is what you want to say:

What that shows is that income has grown about 25% since 1996.  During this same time, housing has gone up by much, much, more....

House prices are already taken into account in the price index used to calculate real income. If your use of housing takes up a larger share of your spending than the median household, your real income has gone up less than that of the median household. Only if you are a housing addict has your real income gone down.

Well, all I can do is speak to my observations.  In the last 10 years, houses have approximately doubled in value around here.  Median income has not done anything close to this.  I don't know how the numbers in that link were calculated, but they do not reflect reality where I am.  Perhaps I need to move to Saskatchewan....

[Kron3007]

I'm not convinced it would be easy to support a family of six anywhere in Ontario, let alone southern Ontario, on a single non-professional income, even in a 900 square foot apartment. There may still be some vehicle assembly plants where you can just about manage a sufficient salary (though I'm skeptical), but I doubt retail or the service industry will cut it.

Agreed.  Where I am, even a small townhome would cost too much to buy on most single incomes.  It would be hard to make it work, let alone save for retirement or anything.

[dismalist]

Here is a pretty thorough compilation of data on incomes in Canada over time and across provinces.

https://wowa.ca/average-income-canada

What that shows is that income has grown about 25% since 1996.  During this same time, housing has gone up by much, much, more....

Scroll down a bit to the graph titled "Income in Canada". It goes from 1976 to 2020, showing mean and median income deflated by the CPI, which overstates inflation, thus understating real income growth.

Real median income in Canada has grown nicely since 1996. It was in the previous 20 years that median income stagnated amidst fluctuations.

We seem to have an idyllic sense of the past which doesn't correspond to reality. I don't know whether the cause is psychological or social psychological or political or what.

I take it this is what you want to say:

What that shows is that income has grown about 25% since 1996.  During this same time, housing has gone up by much, much, more....

House prices are already taken into account in the price index used to calculate real income. If your use of housing takes up a larger share of your spending than the median household, your real income has gone up less than that of the median household. Only if you are a housing addict has your real income gone down.

Well, all I can do is speak to my observations.  In the last 10 years, houses have approximately doubled in value around here.  Median income has not done anything close to this.  I don't know how the numbers in that link were calculated, but they do not reflect reality where I am.  Perhaps I need to move to Saskatchewan....

The price of a house, to be clear, does not enter a cost-of-living index directly. Rather, rent and imputed rent do. It takes a while for house price increases to affect average rents, but the timing smooths the fluctuations in house prices.

Buying a house is a place to live + a speculative investment. That's not why prices of houses are high, but it is why they fluctuate like crazy. [Tulips anyone?] When you buy an expensive house, you are paying a high rent to yourself! Decide if it's worth it. An alternative is to choose a smaller, cheaper house and speculate with the left over cash! Renting smooths out these fluctuations. I know that it's more fun to own than to rent, which is one reason everyone wants to do it. Wait for a house price trough, another speculation.

Complaints about high house prices are like complaints about high stock prices, which means low rates of return on the capital expended. Anyway, the house price is not part of the cost-of-living and it should not be. The rent and imputed rent are and that's proper.

If you already own, you are better off with rising house prices -- just sell and buy something smaller. Spend the money saved on booze. If you don't own, buy something smaller than you wished, or rent and wait. This last being the Involuntary Speculator! :-)

ETA: Perhaps it's best to reiterate that a single price rising faster than nominal income doesn't mean you are worse off. It just means you can't rent as many square feet of living space, so do something smaller and enjoy something  else. If you spend all your money on housing, you can't be helped. It seems Big Mac prices have risen faster than median income in the US. That does not make me worse off if I don't spend much of my income on Big Macs.

[Kron3007]

Here is a pretty thorough compilation of data on incomes in Canada over time and across provinces.

https://wowa.ca/average-income-canada

What that shows is that income has grown about 25% since 1996.  During this same time, housing has gone up by much, much, more....

Scroll down a bit to the graph titled "Income in Canada". It goes from 1976 to 2020, showing mean and median income deflated by the CPI, which overstates inflation, thus understating real income growth.

Real median income in Canada has grown nicely since 1996. It was in the previous 20 years that median income stagnated amidst fluctuations.

We seem to have an idyllic sense of the past which doesn't correspond to reality. I don't know whether the cause is psychological or social psychological or political or what.

I take it this is what you want to say:

What that shows is that income has grown about 25% since 1996.  During this same time, housing has gone up by much, much, more....

House prices are already taken into account in the price index used to calculate real income. If your use of housing takes up a larger share of your spending than the median household, your real income has gone up less than that of the median household. Only if you are a housing addict has your real income gone down.

Well, all I can do is speak to my observations.  In the last 10 years, houses have approximately doubled in value around here.  Median income has not done anything close to this.  I don't know how the numbers in that link were calculated, but they do not reflect reality where I am.  Perhaps I need to move to Saskatchewan....

The price of a house, to be clear, does not enter a cost-of-living index directly. Rather, rent and imputed rent do. It takes a while for house price increases to affect average rents, but the timing smooths the fluctuations in house prices.

Buying a house is a place to live + a speculative investment. That's not why prices of houses are high, but it is why they fluctuate like crazy. [Tulips anyone?] When you buy an expensive house, you are paying a high rent to yourself! Decide if it's worth it. An alternative is to choose a smaller, cheaper house and speculate with the left over cash! Renting smooths out these fluctuations. I know that it's more fun to own than to rent, which is one reason everyone wants to do it. Wait for a house price trough, another speculation.

Complaints about high house prices are like complaints about high stock prices, which means low rates of return on the capital expended. Anyway, the house price is not part of the cost-of-living and it should not be. The rent and imputed rent are and that's proper.

If you already own, you are better off with rising house prices -- just sell and buy something smaller. Spend the money saved on booze. If you don't own, buy something smaller than you wished, or rent and wait. This last being the Involuntary Speculator! :-)

ETA: Perhaps it's best to reiterate that a single price rising faster than nominal income doesn't mean you are worse off. It just means you can't rent as many square feet of living space, so do something smaller and enjoy something  else. If you spend all your money on housing, you can't be helped. It seems Big Mac prices have risen faster than median income in the US. That does not make me worse off if I don't spend much of my income on Big Macs.

The average rent in my city is currently about $2000/month for a 1-bedroom apartment ($24k/year).    Average income according to your numbers is about $50k/year (before taxes).  This is not really affordable based on any financial advice I have heard.  Perhaps you coudl find something even smaller than a 1 bedroom, but it will still not be affordable for many/most people.

Rental prices were much lower even 10 years ago, an easy 30%, while average salaries were almost the same (according to your data, about 10% lower).  You can show me all the graphs you like, but I can tell you for certain that in my city, and most of Ontario, anyone who didn't purchase a home a while ago is much poorer now than they were ten years ago.  I think one of the problems with data like what you show, is that it pools all groups to show that everything is fine.  While things may be fine for home owners (who represent a large demographic), it is not fine for the next generation who are just entering the workforce unless they have generational wealth.  Grad students in our program now all need to have side jobs to live, that was not the case when I was a grad student (even though my stipend was lower).  The pain will likely show up in your graphs eventually, but the lag is too great to use to evaluate current conditions.