Facing The Future

Republicans are flipping out after yesterday's court verdict and the likelihood that Gregoire didn't need it to win. That said, the election still hasn't been certified, and it will almost certainly face more court challenges from the Rossi camp. You know, the people who trust the voters more than the lawyers, or so they said when they were on top.

At any rate, whoever wins the governorship, they're going to have to deal with this. I'm not sure how, but my name wasn't on the ballot in November, and aren't we all lucky for that:

...A national report released yesterday, called "Out of Reach 2004," states that a full-time worker in King County must earn $16.04 an hour -- more than twice the state minimum wage of $7.16 -- in order to rent a modest two-bedroom apartment.

This "housing wage" is the amount a person working full-time must earn to afford the fair-market rent on a two-bedroom unit without paying more than 30 percent of his or her income in rent.

Minimum-wage workers in the county must work 90 hours per week to afford a two-bedroom unit, the report says, while statewide, minimum-wage earners are shut out of fair-market rent for even a one-bedroom unit. ...

Rising housing costs, particularly in the greater Puget Sound area, combined with low-paying jobs have forced many workers to pay half or more of their income to afford a roof over their heads, local and national housing experts said. Ideally, workers should not have to pay more than 30 percent of their income for rent, leaving money left over for health care, food, child care, transportation, savings and other living or emergency expenses, experts say.

Yet in Washington, the report says, a minimum-wage worker must work 80 hours per week to afford a two-bedroom unit at the fair-market rent. ...

...Bill Apgar, senior scholar at the Joint Center for Housing Studies at Harvard University, said while there "remains a broadly held perception that folks who can't afford rent are somehow deadbeats," the report is a stark reminder "that you can work full time and have a reasonable income and not even come close to an adequate home." ...

A Daily Kos diarist dealt with the same issue the other day. Though they were talking specifically about the cost of living in other states, the story is a familiar one all across the country:

...I am mainly looking at things over the last three decades (I was born in 1973). As an example, just before I was born, my father had gotten his masters degree in electrical engineering from Penn State University (a good school). He then moved to California and secured a job with a large firm out there with a starting salary of $18,000. In that same year he bought a house in Lomita, California for $30,000 and a used Porsche 911 Carrera (1 year old) for $6,000. In other words, for his one year worth of labor (ignoring taxes for the moment) he was able to purchase 60% of a house in a nice neighborhood in California or 3 Porsche 911's. Fast forward to today, and I have a friend that graduated with a master's degree in engineering from Princeton University (an even better school) in 2002. He was getting offers for starting salaries for around $60,000 or 3.3 x what my dad started out at. Here is a link showing starting salaries for electrical engineers in Los Angeles, CA. from monster.com...

As you can see, it is right around the $60,000 mark. However, based on today's prices, the SAME house in Lomita, CA. is selling for over $400,000 (and the neighborhood has declined) and a used Porsche 911 sells for around $60,000 (the lowest price I could find on autotrader.com for a 3 year old 911 was 56,000). So while salaries for the same professional job have risen by 3.3x, prices for comparable homes and cars in the same area have risen by factors of 13x and 10x, respectively. This means that for the same year of labor that my father had to give up, my friend could only purchase 15% of the same house (in a declining neighborhood) or only 1 Porsche 911 (as opposed to 3). Similar ratios apply to non-luxury cars as well. You could buy a new car from GM or Ford in 1973 for a couple thousand dollars and today you are lucky if you can find a new GM or Ford for under $20,000. The biggest family expenditures are housing, transportation, education and healthcare and all of the big four have been compounding at higher rates than the general level of wages for decades. In the case of education and healthcare, the rate of increase has actually been ACCELERATING over the last four or five years with no end in sight.

Another way to look at wages is to look at the minimum wage. The national minimum wage in 1973 was $1.90 and today in 2004 it is $5.15. That is an increase of 2.7 x over the last 31 years. ...

But the national average median sales price for an existing single family home in 1973 was $28,900 and the national average median price as of the third quarter of 2002 was $218,000. So while minimum wage levels have increased by a factor of 2.7x, the average median home price has grown by a factor of 7.5 x OVER THE SAME TIME PERIOD. ...

Here is another story. My grandparents bought their home in 1955 in a nice neighborhood in a Philadelphia suburb for $14,000. The home was brand new construction. My grandfather was a bus driver his entire life and retired with a pension. My grandmother did not work full time, but did work as a cashier a few hours a week for some extra spending money. They did not live large, but they had enough (on a bus drivers salary) to pay off their home comfortably within ten years (not thirty), take month long summer vacations most years, raise two kids and put their kids through college AND STILL SAVE REGULARLY. Fast forward to today, and they have recently sold their home for $290,000 despite the fact that: (1) the house is now 50 years old, (2) the neighborhood has declined, and (3) they have not made any additions or major renovations since they bought it other than to enclose a small back porch. Based on that price, a bus driver today could not even afford to LOOK at the house, much less pay it off comfortably in ten years!! So my grandfather was a bus driver and it bought him a certain quality of life that today's bus drivers cannot have. I am not begrudging him, just pointing out the reality of the situation.

So we have wage factors for the average family growing at rate X and cost factors (for the major expenditures) growing at multiples of X. This has been happening over decades and it is analogous to putting a frog in a pot of water and slowly turning up the heat. If you picture a V turned on its side, that is what the chart looks like as there is an ever widening gap between wages and costs. The American family has responded to this growing gap by eliminating savings, taking on more debt to support consumption and swelling the ranks of two income households. The housing bubble has pushed the day of reckoning forward as home equity has been tapped to support consumption / pay bills over the last few years like never before.

Where is all this leading?

Well, if the now established trend lines continue, with costs compounding a couple of percentage points faster than wages for another 20 or 30 years, then something has to give. The average family has gone from living comfortably on one blue collar wage to just getting by with two non-blue collar wages. There is no more room to run. ...

We have troubling issues to face as a nation, but with the current administration in power, the states are going to be very much on their own. I hope our next governor is up to the task of working on these issues with us, because no matter who it is, there will be no free pass on coming up with creative solutions to these problems.

Inauguration day is January 12th. January 13th, we start holding feet to the fire, metaphorically speaking. We'll give the poor blighter a few years before we come with the pitchforks ;)