The media coverage of the fact that Alexandria Ocascio-Cortez can’t yet move to Washington because she can’t afford to rent an apartment is another Versailles circa 1788 moments. Washington has so long been expensive that even before working-class AOC stormed the barricades there have long been stories of Congresscritters who live in their offices in DC rather than rent an apartment. The most famous case is Paul Ryan. As Kentucky representative Andy Barr said in 2015, “I think there’s more than you might expect. There’s quite a few of us, particularly the younger members with young families back home in our districts. There’s quite a few — men and women.”
Nevertheless, AOC’s disclosure had the effect of putting a sympathetic face on how housing costs chew up the budgets of young and not-so-young people. Yet is is hardly news that more and more people are living with their parents because they can’t earn enough to live independently. From MarketWatch:
Over roughly the past two decades, rent prices have increased 61%, while incomes for younger households have only risen 31%, according to an Apartment List study. That explains why 7.9% of non-student millennials receive financial assistance from family members to pay their rents. A study from Zillow ZG, +3.01% estimated that 22.5% of millennials are living at home with their parents.
Moreover, socio-economic status influences the reasons people choose to move. People with college degrees are more likely to move for a job, while people without higher education are inclined to move to find somewhere that is more affordable, another Apartment List study found.
Americans are moving to new cities at the lowest rate since World War II, with just over 11% of people choosing to relocate in 2016 down from roughly 20% in the 1980s. And factors such as restrictive land-use laws, which have driven up housing costs along the coasts in particular, have made it far more difficult for people with fewer financial resources to make a move.
And notice that this piece focuses on the rental market. As an aside, one of the big defects of the US housing market is that with short job tenures, workers are more likely to have to move to find work. And even when employers relocate them, the subsides aren’t anything like what they used to be (for instance, picking up a loss on the sale of a house). A seller can easily have 6% to 7% transaction cost versus his ~20% equity. Even if he has a profit on the sale, selling and buying homes eats into any equity appreciation.
It’s not clear that “socio-economic status” is the right frame for the college educated moving to get jobs more than high school graduates. On the one hand, given how economic mobility has dropped in the US, those with college degrees are much more likely to come from higher-income families where the parents will help them get set up, anywhere from lending them money to move and make a rental deposit to buying them an apartment. But another factor could be that jobs for high school educated people have shorter average lives than those for people with more education, and so it’s not worth it to move away from where you have a personal network and support if the payoff is questionable.
The MarketWatch data is over too short a time frame to give a full picture of how far the standing of blue collar and lower-middle-class workers has fallen. From a 2013 post by Lambert:
But my first real jobs came after I was ejected from the university — it was the early 70s — and I went to work in the mills. Not dark satanic mills, or metal sheds out in the ‘burbs, but multistory brick factories, in town, with tall windows placed next to the power source of the Atlantic Searboard Fall Line: Mills scattered across New England and the Northeast from Bangor to Augusta, Lowell, Fall River, Providence, Hartford. Though manufacturing then was nothing like it had been, it was also nothing like it is today; you could look in the Want Ads and get a job. Today, those brick mill buildings are condos, or artists’ colonies, or business incubators, or outlet stores, and kids get jobs in retail or fast food. Back then, on minimum wage, I could afford my own apartment, and have money left over for books.
Lambert had more detail in his Labor Day post this year:
The frontage of the first mill I ever worked at; the first full-time job I ever had.
I had made a list of jobs from the Classified Ads in the Providence Journal — there were pages of them — and this place was first on the list. They hired me, despite my long hair, immediately, for $2.25 a hour. (The ad said “will train,” which I would have needed for any job except shelving library books.)
That wage was more than sufficient for me to reproduce my labor power: I could afford an apartment of my own, close to the East Side, if not on the East Side proper, and could cook for myself, take the bus to work, get morning coffee, buy plenty of books, and even the occasional beer. I was then, I suppose, 22 or 23. After a year, they raised my wage to $2.35.
By contrast, when I started out at Goldman in 1981, like pretty much everyone in my MBA class who went to Wall Street, I shared an apartment. But even then, even in the wake of the fiscal crisis, Manhattan housing was pricey.
And as I pointed out:
And recall that many of the basics are much more costly in real income terms than they used to be. A reader who bought his first car in the 1950s pointed out how it took not all that many weeks for an average earner to buy a Volkswagen Beetle outright. Cars and housing are much more pricey in real income terms than they were when people who were born in the 1940s and 1950s were young.
For all of you old farts in our readership, can you give some examples of what major budget items cost in the stone ages of your youth, say in terms of how many weeks or months of work it might have taken you to save to buy it, or alternatively, what sort of lifestyle you had in your 20s and how much stress (if any) you had in paying for the basics (housing, food, transportation, etc.)? Thanks!