James Surowiecki is one of the smartest business writers around, and his latest debunking of commonly-held myths about the American consumer shows why. According to data he cites, the high debt-level of the American consumer is not because of their fondness of gadgets, SUVs, or flat screen TVs — no the main culprit is the high cost of housing and medical care.
Citing Elizabeth Warren, he notes:
Most interestingly, as Elizabeth Warren has argued, the idea that most Americans have been spending frivolously on consumer goods actually isn’t true. Instead, a hefty chunk of the increase in consumption in recent decades has been the result of higher housing prices, the rising cost of medical care, more spending on education, and childcare. A generation ago, Warren says, basics (housing costs, health insurance, transportation, education, and taxes) accounted for fifty-four per cent of the average family’s income. Today, they account for seventy-five per cent of it.
Surowiecki speculates that the average American consumer doesn’t actually have much room to save more. And while he’s not specifically talking about youth populations, stories like these are of particular resonance around DECODE offices, as we’ve spent much of our recent years trying to highlight the issues facing Young Independents (those living away from home and who have not started families of their own). Many wonder as to why young people have been putting off taking on many of the trappings of adulthood. Could it be that it’s just really expensive?
In Canada we’re insulated (to a certain degree) from the rapid explosion in health care costs in the U.S. But the explosion in housing costs is something that afflicts just about every major urban centre in the country. For almost 50 years, the notion that families live in homes they own has been almost sacrosanct. Could this expectation cause people to defer starting families?
Samir Khan Consumer, Couples, Generation X, Generation Y Economy, United States