Wednesday, September 27, 2006

Is Life Better?

Last week there was a column in the NY Times titled "Life is Better; It Isn't Better: Which Is It?" (Sorry, link is for a Times Select article you have to pay to read.) The article talked about the way economists measure our living standards and whether they are improving or not. There are many statistics we all read that make the case one way or the other-- that incomes are down or flat for the middle class when adjusted for inflation, and that our living standards are worse than those of our parents, on the one side. Then the other side says the middle class is doing better and better, pointing out that things like snowblowers and cell phones are accessible to almost everyone today, and weren't in the past.
These technological advances are what make it hard to measure changes in the Consumer Price Index, which is how inflation is measured-- the article points out that as new consumer products are introduced and adopted more and more widely, they are eventually added into calculations of the CPI-- but by the time they are added, the prices of those products have already dropped dramatically from when they were first available, and this leads to an overstatement of the inflation rate.
But in recent years, the article states, new products have been incorporated into the index earlier in their lives, so inflation numbers should be more accurate. And the conclusion is that in recent years, growth in incomes is not great-- averages show healthy increases because of huge gains among the top earners, but medians show that the majority of workers aren't enjoying those increases.

How do you feel about this issue personally? Do you feel like you are getting ahead of inflation with your earnings? Do you feel that your life is "better" economically than that of your parents' generation?

It's hard for me to answer this question myself--as a single, childless person, it's pretty hard to compare my situation to that of my parents at my age. But I think all the new technology in our lives today has changed our priorities. Yes, the cost of education and housing has skyrocketed recently, but our definition of a middle-class lifestyle has expanded. We now expect to have video games, cellphones, internet service, and cable TV. People don't cook as many meals at home. And I haven't seen any official stats to support this, but I suspect that people spend way more on clothes than they used to, with the spread of mid-range designer brands and expensive sneakers, etc. If I had time to do more research on this, I would want to see some pie charts showing the percentage of household spending on cars, housing, education, food, and other "stuff" and see how it's changed over time. And also, how does it relate to changes in household income? Or more importantly, household income per adult worker, since in more and more families, both parents work?
I think standard of living can't just be judged by comparing year to year averages. At any given time, it's also about where people see themselves in relation to their peers, and how hard they have to work to stay there. Thoughts, anyone?


Anonymous said...

Your single, child-free status in comparison to the previous generation is right on point -- it hasn't been that long that not getting married and procreating has been a socially viable circumstance. You are free to spend your earnings on yourself, which would have pegged you in the pre-feminist years as selfish, immoral, and/or defective.

mOOm said...

At the moment my salary isn't keeping pace with inflation...

I am much better off than my parents were at this stage of life (my father married when he was older than I am now). Neither could afford to rent their own apartment and boarded with families... This wasn't in the US though... (Britain and Australia).