When a book telling people to throw away almost everything they own becomes a best seller and the start of a spiritual movement, it’s a good indication we’re consuming too much. But it’s hard to reconcile this idea when so many families, even in some of the world’s most durable economies, feel like they are barely getting by.
Households have never had so many material goods, yet we hear constant reports of economic anxiety and feelings of hopelessness.
The problem is livings standards. Our expectations of what we should own have increased—but incomes, for many of us, haven’t kept up. The disconnect leaves households vulnerable and struggling.
There is no doubt living standards are rising. People around the world, of all income levels, are living longer, finding more leisure time, and enjoying more luxuries than at any time in history. Remember, only 30 years ago, air-conditioning was a luxury. Now it’s practically seen as a necessity.
It’s worth remembering that while many of these goods are also cheaper than they used to be, other, arguably more important, things are still relatively expensive, like education and healthcare.
It isn’t just the poor and middle class who feel overwhelmed by the burdens of having, or paying for, all this stuff. A series of well-to-do people have been admitting to no savings and claiming they can’t afford their needs. The poor and middle class are having a harder time, though. Their wages have barely budged as most income gains in recent years went to high earners.
What is remarkable is that even as income inequality widened, as has the gap in spending by rich people and poor people on non-durable goods like food, owning durable goods has become more common for everyone. The figures below show ownership rates for various goods by Americans in households at the poverty level, and in households earning the top 20% of income.
Not only have once-luxury goods become part of our basic standard of living, we are buying them in larger quantities. Owning a color television used to be a big deal. In the early 1980s, 40% of poor households didn’t have a single one. Now, almost 70% of poor households have at least two of them.
So why is there so much discontentment? Economists assume two things make people happy, stuff and free time. We’ve got more of each. The problem may be that it does not feel sustainable. Maybe we enjoy having lots of things, but only if we know we can keep buying them—because a drop in standard of living can feel worse than no improvement at all. And between Americans’ increased consumption and flat incomes, savings have fallen. In 2013, the median financial asset balance of middle-earning Americans (including retirement savings accounts) was only $5,500.
Life seemed fine in the 1980s without air-conditioning, internet, flat-screen TVs, or fancy private schools. The crucial question is: Are the basic necessities stretching households finances, or are households recklessly spending money on unnecessary things? It seems there is some of both.
It is easy to judge the spending habits of other households, but some things that appear to be luxuries are becoming more necessary. A more global, tech-driven world means a more competitive economy. In the past you could have argued that it was fine to send your child to the local public school (wherever you could afford to live) and only buy them cheap plastic toys. Now, getting a toe-hold on the economic ladder might require access to great schools and an arsenal of electronics.
But it is hard to rationalize the need for multiple TVs when the Federal Reserve estimates that nearly half of Americans can’t scrape together $400 in an emergency without borrowing or selling something.