In response to an article from CNBC arguing that millennials are harming the economy by not spending more money, AOC replied that it’s not by choice. “[We’re] not stingy. [We’re] broke,” replied the woman who earns a salary of $174,000 per year. “And low wages, poor work standards, high cost of living, and a runaway student loan crisis have everything to do with it.”
Not stingy. Broke.
And low wages, poor work standards, high cost of living, & a runaway student loan crisis have everything to do with it. https://t.co/rmSaALnQkZ
— Alexandria Ocasio-Cortez (@AOC) October 7, 2019
And to some extent, she’s correct. The cost of living, when it comes to housing and rent prices, are rising faster for millenials than prior generations, and that’s especially true when it comes to college costs. And for that, you can blame the kind of government meddling that AOC supports.
For Most of American History, College Costs Did Not Rise
In the 21st century, skyrocketing college costs have become the third thing certain in life – but it wasn’t always this way. In fact, for most of American history the inflation adjusted cost of college tuition was mostly constant. Paradoxically, it was government efforts to make college more affordable that have sent costs into the stratosphere.
As I noted elsewhere, in the 1971-72 academic year, it cost $10,742 to attend a private four-year school, and $2,510 to attend a public one. Community college cost $1,126. A Nearly a decade later in the 1980-81 academic year, the costs were lower: $10,438, $2,320, and $1,128 respectively. (All figures in 2015 dollars)
What changed? Subsidies. If the government subsidizes $1,000 of my tuition, a college can justify raising tuition by as much as $1,000 without me feeling any pain. And in the process, that higher sticker cost creates demand for more tuition subsidies, creating an endless feedback loop between increased aid and costs. A study from the New York Federal Reserve found tuition to increase 65 cents for every dollar in federal aid given.
The federal government began subsidizing tuition as early as 1965, but it was the 1978 Middle Income Student Assistance Act (which expanded subsidies from the poor to the middle class) that marked a turning point in college costs. Since 1978 college costs have increased 1,225% while inflation has increased 279%.
Instead of nationalizing higher education or bailing out student loan debt like AOC and Bernie Sanders wants, why not simply rollback counterproductive policies that will only exacerbate this crisis into eternity?
Housing and Rent
The student debt crisis has played its role in reducing millennial homeownership rates below prior generations at this stage in their lives. According to the Federal Reserve, the average $30,000 in student loan debt delays the average graduate’s path to homeownership by 7.7 years. The average baby boomer was 25 when they purchased their first homes – millenials will be 35. The problems created by this new debt burden aside, housing costs are still rising faster than wages in 80% of the country (which is a problem that affects everyone).
Millennials purchasing their first home today pay roughly 39% more (inflation adjusted) than baby boomers purchasing their first home in the 1980s. And that’s just the buyers. Most are renting, and seeing those prices rising far more drastically. A millenial renting today pays an average of $1,358 per month, while a Gen-Xer at the same stage in their life would’ve paid $850 in inflation-adjusted dollars, and the Silent Generation paid less than $500.
What’s to blame? Onerous government regulations making it increasingly difficult to build. In many major cities regulations make it literally impossible for their housing construction to keep up with population growth. To demonstrate the absurdity in America’s most liberal city, one man in San Francisco spent over five years and $1.4 million attempting to convert his laundromat into new housing – before finally giving up and selling it.
Zoning laws saw a sharp escalation from the 1960s to 80s, and briefly took a halt in the Reagan era before lawmakers put the pedal to the floor.
As The Atlantic’s Lyman Stone writes:
Today, strict land-use rules—whether framed as rules about parking, green space, height limits, neighborhood aesthetics, or historic preservation—make new construction difficult. Even as the American population has doubled since the 1940s, it has gotten more and more legally challenging to build houses. The result is that younger Americans are locked out of suitable housing
A 2004 study by John M. Quigley and Steven Raphael of U.C. Berkeley on “Regulation and the High Cost of Housing in California” found home prices and rental rates to be 30-50% higher in the most regulated cities relative to the least regulated. An artificial 50% increase in home prices can’t be offset by any reduction in avocado toast spending, unfortunately.
Ironically, federal housing affordability spending is nearly double in the states with the most zoning and land use laws than what it is in the least regulated states. The federal government is attempting to fix problems that state and local governments created, and that’s emblematic of the Democratic Party’s solution to millenial woes. As the Party of “the government IS the problem,” we ought to be the one dominating the narrative surrounding these issues, or else the likes of Bernie Sanders will craft the opposite (bogus) narrative.
As For The Rest of Her Claims…
Regarding AOC’s claims of low wages – it is true that wages have appeared to stagnate for male earners (and only male earners) since the 1970s, but this is largely reflective of a growing share of total compensation coming in the form of healthcare benefits. In other words, this shift from pay in the form of wages to fringe benefits is the result of rising healthcare costs (which is a subject for an entirely different essay).
And lastly, I’d be curious to see why she thinks that work standards are declining. If she means in terms of safety, she should be made aware that workplace fatalities and injuries have been trending downward for decades.