What is the affordability crisis all about?
Is it just a new buzzword for longstanding economic discontent? Is it a mirage, with Americans living better than ever but in shock at high prices? Or is there something the usual economic data is missing?
The latest New York Times/Siena University poll doesn’t definitively answer these questions, but it offers some important clues. Most of all, it suggests that “affordability” is about the rising price of entry for a middle-class life: buying a home; paying for child care, college and health care; saving for retirement, and so on.
These are familiar issues in American politics, but they add up to an entirely different problem under the all-encompassing label of affordability. The difficulty of purchasing a ticket to the middle class has created a sense that the economy isn’t working, even when the economy isn’t so bad by usual measures like growth or unemployment. Indeed, it may not even be useful to think about affordability as a problem with the “economy” or even “inflation” as conventionally understood. And it helps explain why the young people struggling to secure a middle-class life have expressed so much more dissatisfaction with the economy than older voters.
By a two-to-one margin, voters say a middle-class life is out of reach for most Americans. Whether voters are being realistic or not, their expectations aren’t being met: A majority say they can’t afford the life they think they ought to be able to afford. With numbers like these, it’s easy to see why affordability is poised to be one of the big issues in the midterm campaign. (You can read the full story on the poll here.)
When we asked voters what they were most worried about affording, they usually didn’t mention the costs of goods that surged in the wake of the pandemic, like gas, cars and food. Instead, they mentioned major expenses like housing, retirement and health care.
Overall, 51 percent of voters named one of those major middle-class essentials, from housing to raising children, compared with just 23 percent who named their monthly bills or other expenses, like groceries, utilities, gas or cars. Another 10 percent said something else — including vacations, Formula One tickets, taxes and legal representation — while a relatively affluent and older 16 percent of voters said they didn’t worry about affording anything.
Voters were also much likelier to say that the cost of these big-ticket necessities has “gotten so high that it has become unaffordable” than to say the same about other items, like food, utilities and transportation.
The significance of these big-ticket items helps explain a lot about the affordability issue, including the disconnect between the overall economic numbers and public opinion.
Usually, the strength of the economy is measured by economic growth or the number of jobs. But while concerns about housing or health care costs are undoubtedly economic — and while housing and health care represent big sectors of the economy — this is not a problem with “the economy” as ordinarily defined. They’re so different that you could craft solutions to help the economy or even inflation and still not make a dent in affordability. Indeed, the cost of these middle-class essentials has been rising for decades, even through periods of low inflation.
What makes these items so different? One factor is that they have relatively inelastic supply and demand: People still need medical care or a home in a recession; it takes a long time to train a new doctor or build a home. In part as a result, a tighter monetary policy to tame inflation, for instance, doesn’t do much to slow the growth of the cost of insurance or medicine. Higher rates can even make it more expensive to get a student loan or a home mortgage — something not measured by the Consumer Price Index.
The importance of the big-ticket necessities also helps explain the extraordinary dissatisfaction of younger adults. On question after question, they offer far more pessimistic evaluations than older age groups about the state of the economy and affordability. In recent years, they swung decisively toward Donald J. Trump, in no small part because they were upset over rising prices, and already seem to have swung back, even though they have to pay as much for eggs, gas and cars as anyone else.
What makes young people unique is that they’re the ones trying to buy a ticket to the middle-class life. The higher cost of housing or raising a family could make a young person’s most important life goals feel far out of reach. This has less of an effect on older people, who have already paid for many of these costs, have Medicare, and benefit from higher home values if they own a home.
Overall, a majority of voters under 45 say the cost of having a family “has gotten so high that it has become unaffordable.” Only 24 percent of respondents 18 to 29 said they thought they could afford the life they thought they “should be able to afford,” compared with 63 percent of voters over age 65. Similarly, only 27 percent of young respondents said they had achieved a middle-class lifestyle, compared with 66 percent of older voters.
The usual economic data doesn’t necessarily measure this specific challenge for young adults. While the economic data suggests that Americans’ incomes have kept pace with higher costs overall in recent decades, they haven’t kept up with housing, child care, health care and educational costs. These costs are borne disproportionately by young families, but the Consumer Price Index represents the average consumption patterns for the entire adult population — and less than half of households have a child under 18. Real median incomes might not have gone up to the same extent, or perhaps even at all, for a household trying to start or raise a family.
Housing stands out as the problem that’s most on the minds of young people. In an open-ended poll question, around half of them said they worried most about affording housing, more than every other item combined, including retirement, health care, education, bills, cars and food. Only 36 percent of young people said the home they would like was “within reach” (or they already owned it), compared with 76 percent of those over 65.
Despite their dissatisfaction, young people did not report feeling much worse financially than older voters: 64 percent of young people said their financial situation was secure, compared with 74 percent of those over 65. This suggests their primary problem isn’t the increasing burden of monthly staples, like food or gas, which would tend to strain all age groups in fairly similar ways.
Instead, younger people are frustrated because they’re being pushed further from realizing ambitions that older people attained long ago.
