Life is pretty good but doesn’t feel so great
A so-called cost of thriving index gets the numbers wrong, but the message is right
Oren Cass, director of the think tank American Compass and a former Mitt Romney adviser, sparked a debate recently when he published a chart illustrating what he called the cost of thriving index. The chart compares median income of men with the costs of four major spending items — housing, transportation, health care and college — and found that the typical man doesn’t earn enough in a year to cover those four costs.
Commentators on both the political right and left were quick to point out the problems with Mr. Cass’ graph. For one thing, most workers aren’t paying college tuition at any given moment. Mr. Cass also included insurance premiums in health care costs but didn’t count employer contributions to those premiums as income. Finally, Mr. Cass only looks at the median male worker. This ignores the substantial income gains that working women have enjoyed.
So Mr. Cass did overstate the affordability crisis. But this shouldn’t obscure the fact that changes in living standards over long periods are very hard to measure. When incomes are rising fast and new conveniences are becoming widely available, as in the 1950s and 1960s, it’s easy for people to see that their lives are materially better off than those of their parents. But in an age of slow income growth and rising inequality, it’s harder to see progress.
For example, consider the rise of dual-income couples, which I mentioned above. Some have depicted this as a trap. Because the increased purchasing power of dualincome couples (and single women) has raised prices, it has made it harder for single-income couples and single men to thrive. It’s not clear how much the decreased viability of those lifestyle options should count against rising living standards.
Also, changes in the quality of what people consume can be hard to take into account. Inflation measures, which are used to calculate so-called real income and wages, include some adjustment for things like bigger houses, safer cars and better televisions. For example, the average new singlefamily home was about 40% larger in 2010 than in 1980.
Simply including house prices in the inflation numbers misses out on this important change. But to what extent do people actually want these bigger houses? Many certainly enjoy the extra space, but some might have little choice but to buy more space than they want because of restrictive zoning regulations.
Even though those in the middle class have bigger houses, more cars and better heart disease treatments than in the past, the set of goods that people feel like they need to be successful in life might be increasing even faster. If half of families go from one car to two, the other half might feel as if they missed out even though average living standards rose. Rising inequality could therefore be making lots of people feel poorer even if they’re richer on paper.
In the mid-20th century, none of this mattered much — inequality stayed low even amid brisk growth. But many middle-class Americans now find themselves in a world where income growth is tepid, double incomes and college degrees aren’t optional and the standards that define middle-class success in the popular imagination keep rising. Add to that increasing out-ofpocket medical costs, college tuition and rent. In a frustrating environment like this, telling people to look at real median income statistics isn’t a great comeback.
So Mr. Cass might not have had the right numbers, but he had the right message. The costs of health care, college and rent need to be brought down. Otherwise, too many Americans will continue to feel squeezed.