“How on earth could young people, whose wages are flat, costs of living skyrocketing, experiencing increased social instability via bigotry, addiction, + violence, expected to live shorter lifespans than previous gens dare question the larger economic forces in their lives?!” - Alexandria Ocasio-Cortez

My mission is to explore each of the above issues one-by-one to see if things are really as bad as AOC makes out. The last post addressed wages. This time it’s cost of living.

Inflation trends will tell us whether the US cost of living is skyrocketing. So what’s happening with inflation?

_2019 US Inflation Trends.png

Answer: not much. However, within the aggregate figure may be pockets of inflation for key expenditures, as in housing. Obviously the cost of housing has become ridiculously high in some coastal cities, like San Francisco, Seattle, and New York. But what does the housing inflation picture look like in the nation as a whole?

_2019 US Inflation Trends for Housing.png

Answer: not so bad. Still, a lot of people are “cost burdened” when it comes to housing:

_2019 Housing Cost Burden.jpeg

Basically, “cost-burdened” means paying more than 30% of household income on housing expenses.* What the above chart tells us is that the cost of housing is a burden for most households with incomes under $30,000 a year. About a quarter of US households earn less than $30,000 a year.

But that doesn’t mean every low-income household that spends over 30% of their income on housing is struggling. Close to half of US households with incomes under $30,000 consist of home-owning retirees, many of whom are doing just fine**.

Bottom line: the cost of living is not skyrocketing. But “cost of living” is too broad - the issue is cost of housing, which is indeed a burden in the big coastal cites and for a good number of low-income households. Whether that’s an indictment of capitalism is another matter.

* This is an obsolete formula from a time when households spent much more on food than they do now. If the cost-burden index were updated to account for less spending on food, the cost-burden threshold would be closer to 40% of income on housing. However, a 30% threshold still seems reasonable for the poorest households - those earning less than $30,000 a year.

** For the record, that group includes me. I’ve been spending more than 30% of my income on housing for years.