(or, “the angst created by too much time debating politics with my parents”)
Yet again, a post authored nearly a year ago but never published. I’m posting now for archival purposes.
Since shelter-in-place began, I’ve been fortunate enough to escape my apartment in San Francisco to live at home with my 70-year-old parents. This arrangement has been generally agreeable (and again, incredibly fortuitous), save a few, tense Zoom lessons, recipe mishaps, and an ongoing disagreement about the economic outlook of my generation. My parents, not so different from the presumptive Democratic nominee, feel their hard work, both in accumulating wealth and in advocating for civil rights for women, LGBT, and people of color, has made the world undeniably better, particularly for their children. Yet, as my generation endures the second catastrophic economic event in our short adult lives, it’s worth taking a look at the current economic circumstances my generation is coming of age within.
By looking at the two greatest sources of opportunity and wealth – education and housing – it’s easy to see how different the modern economy looks for today’s young people. These differences, fueled by decades of tax policies designed to protect existing wealth, threaten to create a cycle of inequality that will ultimately weaken our economy and our democracy. In order to create a fairer America, one with the type of consumers our economy counts on, we need to implement tax policies directly aimed at creating opportunities for all generations.
Education has always been the key to the American dream and for much of the last century, this has come in the form of a college degree. For my parents, who graduated undergrad in 1970, the reality of a college education was drastically different than it is today. These changes, caused by ballooning administrative costs, a lack of state and federal funding and oversight, and the refusal of elite colleges to expand available seats, has resulted in a less valuable experience across most metrics (see: Table 1) This starts with the competitiveness of the application process – UCLA’s acceptance rate, for example, has decreased by 62 percentage points since 1980. Once accepted, the average cost of college for full-time undergraduate students has increased by 143% resulting in nearly $25k per student in debt. To cap it off, students who graduate can also expect a 60% lower ROI (see table).
Upon graduation, my parents, young firebrands as they were, moved to the Bay Area and accepted jobs in the government, each earning around $13k a year. Realizing their income would not be their key to accumulate wealth, they took the next step in the American dream and acquired a home. Due to affordability, this option is much less realistic today. As a whole, while the median starting salary has stayed the same, the median home price has doubled. For those living in cities (a growing percentage), the picture is even worse. In SF, where both my parents and I moved after college, the median home price is $1,299,000, and average rent is $1,858 month. Millennials, juggling rising rent, poor job prospects, student loan debt, and lack of access to credit are increasingly less likely to purchase a new home – among 25-34 year-olds, homeownership has fallen 10% since 1980.
|Starting Salary (in 2017 Dollars)||$52,335||$50,219|
|Admission Rate (UCLA)||74% (1980)||12%|
|Tuition (in 2017 Dollars)||$9,818||$23,091|
|ROI on Tuition||~6x||~2x|
|Medium Home Cost (in 2017 Dollars)||$113,000||$221,800|
|Home Cost / Salary Ration||~2x||~4.5x|
|Median Rent (in 2017 Dollars)||$718||$901|
The result of both of these trends will be a nasty cycle of inequality that threatens both our economy and our democracy. The highly competitive, resource-intensive education system is now catering itself to the richest families – in the Ivy League’s 2013 class, five of the eight colleges had more students from the top 1% of the income scale than the bottom 60%. The result of decreased access to the real estate market will be both less diversified and overall wealth combined with whiter, more boring cities. One obvious answer, to encourage young people to live further from the tech-rich urban centers they currently work in, is unlikely to result in increased equality or opportunity. That our largest generational demographic group is saddled with debt and unable to access critical tools for wealth building will result in weaker consumer spending and higher fluctuations in the economy in times of crisis. Americans who are fortunate enough to have their parents pay for their college education (disclaimer: this includes me), or are able to access/inherit a lump sum of cash for a down payment will be lightyears ahead of their peers in economic opportunity. The result of that opportunity will be greater stability, risk-taking abilities, and general wellbeing.
To avoid this cycle of inequality, it is critical to implement economic measures that expand opportunity and provide stability for young America. This should involve massive investments in educational pathways (college or otherwise) and new housing in high-opportunity areas. To increase the livelihood of young people, we must also raise the minimum wage (perhaps while eliminating payroll taxes) and expanding access to healthcare. These changes can be paid for by directly targeting inequality – raising capital gains taxes and the limit on the amount of mortgage debt on which interest payments are deductible and leveling the top marginal income tax bracket and estate tax exemptions to 1980’s levels. We can further target exclusivity by withholding funding from cities that refuse to build new homes or tax universities who don’t grow freshman seats. These measures are the necessary path to create true opportunity for all generations of Americans.
Note: A special shout-out to Scott Galloway for much of his analysis and advocacy on this issue. Much or my comparisons in this post use data provided by Professor G.