Among the many things that mystify economists these days, the biggest might be the lingering perception, despite six years of ostensible recovery, that the average person is getting poorer rather than richer. Lots of culprits come in for blame, including the growing gap between the 1% and everyone else, negative interest rates (which starve savers and retirees of income) and the crappy nature of the new jobs being created in this recovery.
But one that doesn’t get much mention is the changing nature of the bills we’re paying. It seems that Americans are spending a lot more on health care, which leaves less for everything else. Here’s an excerpt from a MarketWatch report of a couple of weeks back, with two charts that tell the tale:
Share of consumer spending on health hits another record
The percentage of money U.S. consumers spend on health care rose in 2014 for the third straight year to another record high, according to one government measure.
Some 20.6% of total consumer spending in 2014 was devoted to health care, including prescription and over-the-counter drugs, annual figures from the Commerce Department report on personal expenditures show. That’s up from 20.4% in 2013.
Health-care expenses has been rising for decades regardless of government efforts to control costs. The percentage of consumer spending on health care rose from 15% in 1990, topping 20% for the first time in 2009.
With the health-care pie continuing to expand, consumers are paying the same or less as percentage of their spending on most other goods and services compared to 10 years ago.
Americans spend a smaller share of their money on cars and clothing, among other things. The percentage of money they spend on housing and going out to eat is basically unchanged over the longer run.
Not surprisingly, the only other major category to show a sustained increase in spending over the past 25 years is education. The share of money Americans spend on college has climbed to 1.59% from 0.9% in 1990.
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What this means is that we’re spending more on two big categories — health care and education — that don’t make us feel richer. Health care, of course, is just maintenance. It’s like changing a car’s oil or fixing a broken transmission, which only restores the status quo rather than enhancing it. Education, meanwhile, is just school. When we’re in college, we don’t feel richer if tuition goes up. So to the extent that those things are getting more expensive, and fun things like eating in restaurants and buying new shoes become less frequent as a result, we feel poorer — or at least less free to indulge ourselves.
This is the opposite of what technology in particular and progress in general were supposed to bring about. As a society advances, it should get better at producing life’s necessities, freeing up capital for life’s joys and making most people feel both richer and more free. As John Maynard Keynes famously predicted in his 1930 essay “Economic Possibilities for our Grandchildren”, another century of capital accumulation and advancing science would make it possible for most people to satisfy their basic needs with minimal effort and then go off and have fun. Wrote the economist/poet:
For at least another hundred years we must pretend to ourselves and to everyone that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight.
We’re fifteen years short of the century that Keynes predicted it would take, but the goal seems to be receding rather than approaching. That’s frustrating for all the people who have to work harder than ever just to feed their families. And if it goes on much longer the result will be a very vigorous search for culprits — which will be entertaining, even if it doesn’t pay the doctor’s bills.
32 thoughts on "Why We Feel So Poor, In Two Charts"
Is this satire? Health and education are overrated? The secret to happiness is capitalism? https://s-media-cache-ak0.pinimg.com/originals/e1/59/60/e15960429e2ef92fcdbc2faa7352d5fa.jpg On second thought maybe people do believe that.
Except for the Malthusian trap there is another factor with a more immediate influence playing at the global level that is causing a reduction of living standards in the western world : the establishment of an equal global free market playing field for all countries. Free market world competition inevitably causes also a levelling of average incomes in the world. Rich countries will as an inevitable consequence decrease in average income while poor countries will increase. The very existence of a country that is much richer than another is in fact a total anomaly in a free market globalized world. Such anomaly can’t exist very long in a free market world because market forces will inevitably force a levelling of this differences. So we are in fact evolving to a more natural state of things in the world. The existence of a country where living standards are much higher than the rest of the world is the real anomaly not the other way around as what most people in the west like to think. Such anomaly can only exist very temporarely. Other countries are eventually going to compete on the same level as the richer country which is inevitably going to reduce the living standards in the richer country while at the same time increasing the living standards in the poorer countries. So in fact the more immediate cause of decreasing of living standards in the western world is the huge increase in free market competition between countries in the world. In the western world people see their very high standard of living as compared to the rest of the world as a natural right while it is in fact a big anomaly that can’t exist for very long and is destined to eroded away to a more global equal level.
That the average person is getting poorer rather than richer has in the end only to do with the Malthusian trap. Humans as well as all animals are governed by one simple fact: in the long run births have to equal deaths. In the long run the economy will always move to the level of real incomes where birth rates equal death rates. Rapid improvements in technology can in the short run result in big improvements in the standards of living of the average person because population can only grow slowly. In the long run the increased income reduces the death rate and births exceed deaths and as a result the population grows. The growth of the population only stops when the average income for the people returns back to the subsistence level where deaths equal births. At the new equilibrium the only effect of technological change is the increase in the population and no lasting gains in living standards. A rapid change in technology can temporarily vastly improve living standards if population growth is much slower than the technological advancement but in the end population growth will always eat away all this improvements for the average person. In the long run there is always a new equilibrium going to be established where deaths equal births with the inevitable consequence that averages incomes return to the subsistence level. So if population growth is not in some way or another going to be stopped the inevitable result will be a deteroritating living standard for the average person since all other parameters have their natural limitations. Technological change can only create a temporarely advancement of living standards if population growth is not limited. If there is not going to be a definite stop to population growth then it is absolutely inevitable that every advancement of human living standards is in the end going to be totally annihilated by the growth of the population. The laws of Malthus are in the end as forcefull as the laws of Darwin.
Health care spending is high because health care prices are high. We need to stop pretending that the entity known as the corporation, whose fiduciary responsibility is to reward the shareholders, will benefit society as a whole. It’s not working, in fact it’s quite the opposite.
The bottom line is doctors cost to much..!! I feel that they must lower there paychecks and be ready to work like the rest of us for what is fair money not out of this world money…. and lower the costs of labor in hospitals…. as to many want to much to work. The whole industry needs to be look at and costs for schooling and everything should be slashed…. we need these people and if they make 20 to 30 dollars and hour that is big money..!! you can live like a king almost will that.
I worked for 3 bucks an hour at 15 and 16 years of age and I worked hard for it. Today no one would probably do that….. they would need 10 dollars at least. even that is good money people..!! you can live on that…. don’t lie you can…!! I did and less…. so please young people…. work hard and save you will be ok…. you must save though
I can say that when I look back 30+ years… I don’t even see as much inflation as I would have thought over those years…. I could live today on about the same money as then…. make 10 hour now verses 3 or 4 dollars then yes…. but my costs were about the same as now…. I could by spray paint for 50 to 99 cents a can then…. today I can still buy a can for 99 to 1.29 a can…. that shows that costs are not sky high for items…. its the greedy people who are pushing up the costs..!!
slash the hospital costs….. I say this…. and for many service sectors…. they get paid to much and the schooling is way to much.
put up less statues…. less unnessary spending… spend only to make learning quicker and streamline it. GET more people learning it then in and out to the real world…. to work…. not to be greedy and get rich…. you will GET RICH anyways… I know this.
PEOPLE WORK FOR REALS…. DO WORRY ABOUT THE PAY…. IF YOU HAVE A JOB…. KEEP IT AND YOU WILL PREVALE…. DONT GO INTO A PROFESSION JUST FOR MONEY…. DO BE GREEDY AND YOU WILL PREVALE.
the secret is to save any part of the money you earn…. anything you can…. buy silver and gold with it. don’t go out and blow your money…
It’s not that hard to feed your family. Of course, I immigrated to Canada years ago.
Studies indicate 80% of health problems are atibitable to unhealthy life style choices.
If you don’t like eating GMO Monsanto cancer food, that grocery bill is much higher.
Americans have no true free market clue of the cost of real good foods. Farm subsidies are bullshit much like debt driven healthcare for profit. Nice peace John.
Looks like pulling demand forward jut got a wake up call!
http://www.zerohedge.com/news/2015-03-28/finally-very-serious-people-get-it-qe-will-permanently-impair-living-standards-gener
The government, the bankers, and other cronies stole the productivity gains thanks to intellectuals like Keynes giving them the cover to do so.
Also what about the percentage of income going to taxes? I suppose it gets watered down by all the people that don’t pay federal income tax, but they still pay other taxes.
There is a fairly simple action that people can take to reduce healthcare costs. Here it is…
Minimize or avoid the consumption of the following:
Milk, Processed food, fast food, soda/sugary drinks (NONE), sugary foods, bad oils (soy, corn, canola, peanut, vegetable), wheat/bread, GMO products, drugs of any sort
Consume the following:
Quality proteins, fresh vegetables (DAILY), good oils (olive, avocado, coconut, clarified butter), fruit (modest amounts), drink water, lean organic
What you put into your body has a direct affect on your hormones and immune system. It all starts in your gut.
Actually, almost all health care costs throughout a life-time are a function of variables over which we exercise no control. Who our parents are and time. Yes, our life-styles influence our health and cost of health-care but only about five-percent of overall cost and longevity. And then there’s something to be said for quality of life too. I enjoy a good cigar. I also enjoy fatty foods like cheese. Neither are particularly healthy for me but they contribute a lot more to improved quality of life for me than they cost in medical care and longevity. Most people I know who are long-lived are also miserable and accomplish nothing in life of value to themselves or others. But they’ll likely live a long time. Or not. They might be hit by a bus. Most people I know who are not long-lived have had much more fulfilling lives relative to their years. Or think of it this way: it’s not what you eat but how you eat it.
“it’s not what you eat but how you eat it”
This couldn’t be farther from the truth. Many of the “modern” foods control you–there can be no moderation. Here is a good video on sugar, for example:
https://www.youtube.com/watch?v=moQZd1-BC0Y
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Quality of life? I follow the guidelines I provided and I can tell you that my cravings for junk are gone; I eat rich foods every day; and I’ve never felt better. Running, cycling, lifting are better–closing in on 2x body weight for the back squat. I eat cheese every day (just no milk drinking). I eat eggs with butter every day. Bacon whenever I want. Prime beef a lot. Burgers whenever I want. I crave vegetables. Fat is an important part of my diet. I don’t crave sugary foods, and I have no use or need for them. I can see people at work that are under hormonal distress (thyroid)–belly fat, dark circles under their eyes, wrinkled skin, … And I see what they’re eating and it’s sad. They don’t realize it can all be reversed through the hormonal instructions they are giving their body with Food. Yes, their quality of life sucks. This not not about your parents, it’s about what you put into your body on a regular basis. You might research food and genetic expression.
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Here is an interesting site. Scroll down and read about the people.
http://www.dietdoctor.com/
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I keep of list of drugs advertised on TV. The drugs don’t cure anything; they just manage symptoms of problems largely cause by bad diet–diets that create dysfunction in your body’s hormones. Here it is:
Mirapex, Eliquis, Celebrex, Lunesta, Humira, Abilify, Yaz, Cialis,
Viagra, Tamiflu, Lyrica, Androgel, Lipitor, Vioxx, Nexium, Cymbalta,
Yolo, Extenze, Stelara, Prozac, Paxil, Zoloft, Xarelto, Victoza, Latuda,
Crestor, Pradaxa, Rozerem, Enbrel, Xeljanz, Symbicort, Chantix,
Invokana, Belviq, Januvia, Breo, Anoro.
People need to wake up.
I couldn’t agree with you more, Tyrone. And I would add the following: eliminate smoking and reduce consumption of alcohol.
I’m assuming these figures include health care insurance premiums, in which case your advice (very good advice) won’t help much. For the past twenty years I’ve lived a very healthy lifestyle and needed no significant medical attention, yet I still pay exorbitant monthly premiums, otherwise one hospital stay could bankrupt me.
Sabbie….I am so sorry to hear your bad news. These insurance companies are nothing more than thieves, Stealing everything they can away from us.
Taxes are going up? Health care reformation, has made a dent in those who pay, pocket book… Taxation through the back door? Wages are less in percentage as compared to 1990s or 80s? More people saddle with all sorts of debt? The list is a long one… 1% folks and others, are definitely having my slice of the pie …
Wrong! You are poorer because you bought metals! Fools! Should have bought the S&P, morons keep pumping commodities and continuously are wrong.
Back in your box…….Bitch.
hanyol..Wrong…what happens when the S&P disappears off the radar screen? There is absolutely nothing left at all but blips on the screen. Commododities will be the only thing left standing and worth will be soaring. Do you think China is just nuts and want to throw away billions and billions of dollars? They are already the leading economy, what more do you need to be even a little concerned?concerned?.
Hanyolo is a gambler not someone who would buy insurance. Take your stocks to Mongolia and see what they are worth.
SoKalbankerpaidtrolldude is back, awesome! You need to add HHEEEEELLLOOOO to your posts.
The S&P and gold have an almost perfect inverse correlation. One goes up, the other goes down.
Another aspect of the rise in healthcare costs is that healthcare is being utilized more than ever. One reason is that people are becoming less healthy and another is that they are seeking the healthcare system more and more for their ailments. When I was growing up I rarely went to a doctor and I never went to an emergency room at a hospital. Today I hear of parents sending their kids to doctors and the emergency room easily 3 or 4 times a year, and for the most minor issues (“Just in case!!!!!”). Adults also used to just deal with their issues as a normal part of life, but now they go to doctors and take prescription medications, or maybe have surgery. As far as I’m concerned people with that mentality wouldn’t feel richer even if they won the lottery.
I have less of an opinion about education costs, however I do recall the “public” debates way back in the late 70’s concerning the better use of money – getting a college degree vs starting a business. Getting a degree usually got the edge, but that was when tuition at an “Ivy League” status school was about $15,000 per year. I doubt a college degree is worth it for most people now, considering the alternatives, but I haven’t heard any debates about that in decades. Again, the whole mind set of wealth and empowerment has been lost.
Another big problem with high health care costs now is that we have so many people consuming health care that pay Nothing for it. Illegal aliens & welfare people. So they jack up the cost to people that do pay for it. That’s how Obama ‘spreads the wealth around’, by making the middle class pay for those who will not pay. In the process, the middle class is shrinking because the high cost reduces the amount we can save or invest for ourselves. The goal of government is to get us all on welfare eventually so they have total control.
Yes, however, just like with education, prices for healthcare (education) increased in proportion to government involvement in the financing. If people had to pay for healthcare directly, as for most things, then prices/costs would necessarily be lower and/or fewer options would be available. With government enabling and underwriting the payments for both fields costs have go up because the government has potentially unlimitedly deep pockets. It all becomes a sick racket that affects everyone adversely.
Every TI e I buy something I can just feel Janet Yellen massaging my hemorrhoids.
well at least she’s doing _something_ to lower your healthcare costs!