dilemmanade
Thursday, April 10, 2008
 
Housing costs...Posted by C

Kevin sez: "[R]ising average earnings have, over time, increased the percentage of income that families are willing (and able) to spend on housing."

I don't think so. And I don't understand why Kevin says so.

Only if the rise in earnings were outpacing significantly the rise in the cost of living would it result in more money for anything-- housing or otherwise. And that isn't happening for most people.

There is another, simpler explanation: People are paying more for housing because they have to, not because they want to. Just like for gasoline or any other commodity.

It may be that the rich or upper-middle class are willing and able to be spending a higher percentage of their (growing) income on housing, but not the rest of us.

Why, then, has housing gone up more than some other commodities, if it isn't because of demand fueled by ever more prosperous workers?

What has happened is that there has been a shift in the relative value of capital and labor in the system, in our entire society. That's the forest that's so hard to see because of all the trees. There was no secret meeting where "they" decided to make it so. There wasn't a popular vote on the matter. And why it happened would be at least as much a sociological question as an economic one, involving factors from ideology to the minimum wage to the NRLB, to name a few. But it's happened. The value of stock overall, and the value of real estate overall, have gone up relative to the value of an hour of (non-managerial) work. A lot.

We should see it, even if we can't explain it or know what to do about it.

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