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New Low for SK

finn

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Whenever these questions come up you need to ask yourself: "HOW THE HELL DO THE GERMANS DO IT." Their standard of living is every bit as high as ours and yet their tool industry thrives. Stahlwille is paying their employees a hell of a lot more than US $20/hour and let's not even get into fringe benefits which are like 5X those given in America.
I lived in Germany for three plus years. Most of our factory workers, including both the foundry workers and assembly line workers, were Turkish citizens, who lived in apartments in their own Turkish part of town. At the time, most, or at least many, didn’t own a car, but relied on public transportation to get to work. There were a smattering of Italians in the mix of these lower paid manual labor jobs. The office workers, Engineers, Purchasing, and Finance people were German, but only the professional level people , ie group leaders and department heads had single family houses.

Same goes for our suppliers, like Bosch, Mahle, Kolben Schmidt, etc.. Mostly Turks working in the tough, low paid positions. It’s not like your pre conceived notion of elves working in the Black Forest.

Since the time I returned to the US, a lot of those factory jobs have moved to the former East Germany, Poland, Romania, etc, where labor was cheaper.

I seem to recall reading that Japan wasn’t a lot different, with many of the “lower skilled” positions being filled by foreign workers from Thailand, Malaysia, and the Philippines.

As for Stahlwille, they are based in Wuppertal, and have three factories in Germany, but also have a subsidiary in China (as do many other German companies). Interestingly, they don’t list where in Germany their factories are located, but after reunification, there was a huge push to develop the former East. Wages were dirt cheap there, so many companies closed or “froze” Western factories and expanded to the East with government subsidies.
 
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Meursault74

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That was just a number I tossed out because i saw some factory workers striking in the news a while back over 45 an hour wages. Just a reference point. As far as the living like kings though, compared to most of the rest of the world, its not that innacurate.
Isn't pay just relative? I mean if that was the norm for a guy putting screws in a radio on a production line, then an auto tech diagnosing cars and unscrewing and screwing in replacing parts should get what $100 an hour?. What about a surgeon screwing together some bones then $1000 / hr?

The wages can't exist in a vacuum.

Later this year, here in California fast food worker min. wage will be $20. The workers seemed happy about that. I'm wondering what's going to happen when the dust settles on this mandate.
 

teagueo

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I think Germans get more for their taxes, especially not funding crazy amounts of military operating overseas. Autobahn road quality, free education and partially free healthcare comes to mind.

I spent 2 years abroad (by pure luck) and in many places (Europe and Southeast Asia), I found you can have an excellent quality of life. The US is still probably the best place to live if you like consumerism and owning nice things.

I'd like to see an accurate avg hourly wage of each country compared to basic costs (housing, water, etc.).
 

neophyte

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All very true, but what I was getting at is what drives the prices so high overall. Government 100% plays a big role in costs being high as well. Elected thieves. As far as the general population im referring to us having a "need" for things that are a lot more unnecessary. Expensive phones, expensive housing and vehicles, expensive clothes etc. How many people snub their nose at second hand clothes for example. Or there are the people who go broke making sure they always have the newest Iphone, then are furious if they dont get a raise and blame cost of living being high, not their own choices. Then on a larger scale are unions collectively doing the same thing. When wages go up, who ultimately pays for the increase? We all know it surely wont be shareholders in a major company, they will just raise prices to cover costs. But at what point can we say, I have enough, or I dont need all this extra such as cable, super fast internet, or a 1400 dollar cell phone. What Im presenting is that we flew right past happiness and dove head first in to servitude chasing a high we will never be able to maintain and it continues to drive the cost of living sky high, but not a "true" standard of living. Hence the American manufacturing sector having trouble with wages.
Most clothes are complete sh!t nowadays.
I grew up with an army surplus store that had been in business close to 100 years.
They literally had surplus clothing going back that far.
Clothing, and even military clothing, steadily declined in quality over the decades.
You can even see this in old photographs.
Clothing a 100 years ago, was made from better cloth.
The clothing also had extra cloth, because it was meant to be adjusted over time, if someone gained or lost weight, or if the clothing was given or sold to someone else.
Clothing was also much looser in cut, allowing it to be worn by a larger number of body types.
There were much better tailoring services available.
Most decent department stores had multiple tailors who would adjust a suit, or even regular clothing, within a week of the clothing being purchased.
Some stores still have this, but it’s a smaller number of high end stores, and it can take longer for adjustments to get made.
There also used to be tailoring services that were more readily available, such as “invisible weaving” were were new thread would get hand woven into worn or torn areas of suit fabric.
Good luck finding that easily available anymore.

Aa far as the $1400 cell phone goes, I suspect a lot of people use these instead of owning a separate computer in addition to a cell phone.
You also sort of need to replace your cell phone periodically.
You used to be able to just buy a new battery, but stand alone batteries used to cost more than it now costs to have Apple take your phone apart, and replace the more complex internal battery.
The operating systems for phones now also jerp getting “upgraded”, so the older phones in a lot of cases can’t even be used, or used easily, even if the phones would still function.
The “fancy phone” also has replaced multiple items you used to have or need, from a camera, to a music player, and a voice recorder, and a video recorder separate from the camera, and an address book and calendar, and phone book, etc.
Some people still own one of more of those things, way less than formerly.
 

neophyte

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Ill rephrase a little. People who genuinely are struggling and have already cut out the bs. I truly feel for them. But when people complain about wages and live in a half million dollar house driving a 80k truck. Its disgusting. That in and of itself is a huge reason costs are so high.
Half a million is what a sh!tty house average house costs in most of Philadelphia, unless the house needs significant renovation to sort of meet code.
 

JEdiag

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Isn't pay just relative? I mean if that was the norm for a guy putting screws in a radio on a production line, then an auto tech diagnosing cars and unscrewing and screwing in replacing parts should get what $100 an hour?. What about a surgeon screwing together some bones then $1000 / hr?

The wages can't exist in a vacuum.

Later this year, here in California fast food worker min. wage will be $20. The workers seemed happy about that. I'm wondering what's going to happen when the dust settles on this mandate.
It is going to be interesting for sure, I have noticed in Ohio where certain areas are paying 15 an hour for fast food workers menu prices immediately shot through the roof.
 

JEdiag

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^This is important. For instance, how many weeks pay buys one a mortgage, or rent, or groceries, or a car etc. compared to the U.S.
Absolutely. Would be a great thing to see but hard to balance. How would you equalize a block house in romania vs a 4k sq ft house in america or a flat in an upscale neighborhood. I would love to see the results though. That would be very interesting.
 

M6erfan

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It is going to be interesting for sure, I have noticed in Ohio where certain areas are paying 15 an hour for fast food workers menu prices immediately shot through the roof.

And when sales slow automation will be even more prevalent. It's all about return on investment . . .
 

M6erfan

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Absolutely. Would be a great thing to see but hard to balance. How would you equalize a block house in romania vs a 4k sq ft house in america or a flat in an upscale neighborhood. I would love to see the results though. That would be very interesting.

Compare them to a block house in America? Although I think those are highly subsidized in both countries. Better, I think, to go by average home costs, in general. Perhaps that wouldn't be accurate though. Not sure really.
 

JEdiag

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Most clothes are complete sh!t nowadays.
I grew up with an army surplus store that had been in business close to 100 years.
They literally had surplus clothing going back that far.
Clothing, and even military clothing, steadily declined in quality over the decades.
You can even see this in old photographs.
Clothing a 100 years ago, was made from better cloth.
The clothing also had extra cloth, because it was meant to be adjusted over time, if someone gained or lost weight, or if the clothing was given or sold to someone else.
Clothing was also much looser in cut, allowing it to be worn by a larger number of body types.
There were much better tailoring services available.
Most decent department stores had multiple tailors who would adjust a suit, or even regular clothing, within a week of the clothing being purchased.
Some stores still have this, but it’s a smaller number of high end stores, and it can take longer for adjustments to get made.
There also used to be tailoring services that were more readily available, such as “invisible weaving” were were new thread would get hand woven into worn or torn areas of suit fabric.
Good luck finding that easily available anymore.

Aa far as the $1400 cell phone goes, I suspect a lot of people use these instead of owning a separate computer in addition to a cell phone.
You also sort of need to replace your cell phone periodically.
You used to be able to just buy a new battery, but stand alone batteries used to cost more than it now costs to have Apple take your phone apart, and replace the more complex internal battery.
The operating systems for phones now also jerp getting “upgraded”, so the older phones in a lot of cases can’t even be used, or used easily, even if the phones would still function.
The “fancy phone” also has replaced multiple items you used to have or need, from a camera, to a music player, and a voice recorder, and a video recorder separate from the camera, and an address book and calendar, and phone book, etc.
Some people still own one of more of those things, way less than formerly.
I bought a pine phone online brand new for 200 and it does all of those things. And when I broke my work phone, i bought a new one for 100 through my provider because ot was the cheapest smrt phone they offered. Didnt have to make payments on it to cover the cost and it wasnt 1400. It still does what the other over priced phones do, except for making me look cooler to my friends or giving me that status people are dying for these days on their social media.
 

JEdiag

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And when sales slow automation will be even more prevalent. It's all about return on investment . . .
Mcdonalds around here has kiosk you can order from now so they dont have to pay someone to run the register. We definitely have some interesting times ahead. Hard to predict what will come of it all
 

JEdiag

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Compare them to a block house in America? Although I think those are highly subsidized in both countries. Better, I think, to go by average home costs, in general. Perhaps that wouldn't be accurate though. Not sure really.
It would be tough to do it accurately. That all goes back to the standard of living concept. What another country sees as good we call poverty. It would be really interesting to figure out what the base line would be.
 

neophyte

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I bought a pine phone online brand new for 200 and it does all of those things. And when I broke my work phone, i bought a new one for 100 through my provider because ot was the cheapest smrt phone they offered. Didnt have to make payments on it to cover the cost and it wasnt 1400. It still does what the other over priced phones do, except for making me look cooler to my friends or giving me that status people are dying for these days on their social media.
I buy the most expensive iPhone I can afford at the time, but then make sure to buy the one with the largest amount of memory, and will purchase an older model if it has a larger memory for the same price.
I then use the phone till it starts becoming problematic for apps etc due to older specs.
I’m currently using an iPhone 8.
I also make sure to buy a stock of screen protectors and cheap cases, so I can keep phone protected from breakage.
I’ve tried “cheaper” phones, and have had more issues with those phones.
 

JEdiag

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I buy the most expensive iPhone I can afford at the time, but then make sure to buy the one with the largest amount of memory, and will purchase an older model if it has a larger memory for the same price.
I then use the phone till it starts becoming problematic for apps etc due to older specs.
I’m currently using an iPhone 8.
I also make sure to buy a stock of screen protectors and cheap cases, so I can keep phone protected from breakage.
I’ve tried “cheaper” phones, and have had more issues with those phones.
And that is a smart and utilitarian way of doing it. That makes sense. What doesnt is jumping on the new one everytime its released so you can show everyone how cool you are. And i dont have an issue with iphone specifically in that arena just easy to use as a reference because of how well known they are and the overall cost. Im sure the newest galaxy is the same price.
 

vssjim

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I lived in Germany for three plus years. Most of our factory workers, including both the foundry workers and assembly line workers, were Turkish citizens, who lived in apartments in their own Turkish part of town. At the time, most, or at least many, didn’t own a car, but relied on public transportation to get to work. There were a smattering of Italians in the mix of these lower paid manual labor jobs. The office workers, Engineers, Purchasing, and Finance people were German, but only the professional level people , ie group leaders and department heads had single family houses.

Same goes for our suppliers, like Bosch, Mahle, Kolben Schmidt, etc.. Mostly Turks working in the tough, low paid positions. It’s not like your pre conceived notion of elves working in the Black Forest.

Since the time I returned to the US, a lot of those factory jobs have moved to the former East Germany, Poland, Romania, etc, where labor was cheaper.

I seem to recall reading that Japan wasn’t a lot different, with many of the “lower skilled” positions being filled by foreign workers from Thailand, Malaysia, and the Philippines.

As for Stahlwille, they are based in Wuppertal, and have three factories in Germany, but also have a subsidiary in China (as do many other German companies). Interestingly, they don’t list where in Germany their factories are located, but after reunification, there was a huge push to develop the former East. Wages were dirt cheap there, so many companies closed or “froze” Western factories and expanded to the East with government subsidies.
I remember talking with some Germans and other Europeans from that region back when the wall and eastern block was under threat of coming down and they had said the real felling was why do we have foreigners we don't want living in Germany when we could have low cost workers that are German next door in East Germany. So they kind of felt the US get rid of the commies and Russians was great and we have a place that will be a cheap labor force for awhile anyway in that area of Germany and other close by European countries also that are not migrants to do manual labor jobs.
 
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2ndGearRubber

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Isn't pay just relative? I mean if that was the norm for a guy putting screws in a radio on a production line, then an auto tech diagnosing cars and unscrewing and screwing in replacing parts should get what $100 an hour?. What about a surgeon screwing together some bones then $1000 / hr?

The wages can't exist in a vacuum.

Later this year, here in California fast food worker min. wage will be $20. The workers seemed happy about that. I'm wondering what's going to happen when the dust settles on this mandate.

The business will NOT be taking a drop in profit. So prices will increase at minimum to cover the labor costs, probably rounded up plus a little extra for the profit margin.

IMO aside from the inherent instability of currency over the last 50+ years, the issue is a growing population chasing a finite amount of "cheaper" real estate. Thus the price of cheaper real estate rises due to demand, making it absorb a larger % of a workers income.
 

Meursault74

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The business will NOT be taking a drop in profit. So prices will increase at minimum to cover the labor costs, probably rounded up plus a little extra for the profit margin.

IMO aside from the inherent instability of currency over the last 50+ years, the issue is a growing population chasing a finite amount of "cheaper" real estate. Thus the price of cheaper real estate rises due to demand, making it absorb a larger % of a workers income.
Is the price of a burger fries and a drink going to get to the point where customers just say f-ck it and don't buy anymore? It's not really a necessity and it's something you can do for yourself rather easily. I haven't had fast food in a very long time, so I don't care myself. Mostly just curious. My mindset it when food prices rise I still need to eat and will have to get it as I have no other easy options. I don't however need to pay for the additional overhead/labor for my food to be prepared and served to me. I still have to pay for all the ingredients at the market, but not the final steps of cooking/ assembling a burger.

On the labor side, they may automate more and/or work fewer employees harder. Part of me thinks of the adage be careful of what you wish for where those workers are involved. It's going to be interesting.
 

zendriver

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Mcdonalds around here has kiosk you can order from now so they dont have to pay someone to run the register. We definitely have some interesting times ahead. Hard to predict what will come of it all
They’re going in almost everywhere at fast food, because it makes sense.

The customer orders it themselves pays for it and then picks it up when it’s ready

Otherwise, the customer stands there and gawks at the overhead menu, then verbally places their order to a worker (who could be making food )who punches it in a computer, then takes their money, which makes no sense at all anymore
 

JEdiag

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They’re going in almost everywhere at fast food, because it makes sense.

The customer orders it themselves pays for it and then picks it up when it’s ready

Otherwise, the customer stands there and gawks at the overhead menu, then verbally places their order to a worker (who could be making food )who punches it in a computer, then takes their money, which makes no sense at all anymore
Eventually there will be very few lower level positions left for those just starting out or in high school. I wonder how that will pan out. I know from a farming perspective there are not anywhere near as many square bales being produced any longer due to labor shortage. Now most farmers are only round baling. What in the world are high school kids doing now for part time jobs anyways?
 
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JeepYJ

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What in the world are high school kids doing now for part time jobs anyways?
Well since throwing square bales is now a thing of the past (for many more reasons than kids not wanting to load wagons) and walking beans has also went away (again not because kids don’t want to do it) and paper routes are pretty much nonexistent (again not because kids don’t want to do it) there are still plenty of jobs kids can do. Retail and restaurant jobs are still hiring kids. My high school aged kid works on a farm after school and weekends year round. Right now he’s helping to get the spring tillage tools and planters all prepped for planting season. He drives the fuel trailer around, cuts grass, runs a grain cart, drills cover crops, equipment maintenance and whatever else needs to be done from disassembling grain bins and moving the to construction projects. He throws square bales here at home with me for free😂 and he’d rather be at work.
 

2ndGearRubber

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Is the price of a burger fries and a drink going to get to the point where customers just say f-ck it and don't buy anymore? It's not really a necessity and it's something you can do for yourself rather easily. I haven't had fast food in a very long time, so I don't care myself. Mostly just curious. My mindset it when food prices rise I still need to eat and will have to get it as I have no other easy options. I don't however need to pay for the additional overhead/labor for my food to be prepared and served to me. I still have to pay for all the ingredients at the market, but not the final steps of cooking/ assembling a burger.

On the labor side, they may automate more and/or work fewer employees harder. Part of me thinks of the adage be careful of what you wish for where those workers are involved. It's going to be interesting.

There's certainly an equilibrium point like any econ101 demand curve. I think a large part of what they are selling is convenience. For.instance if Burger King didn't have a drive through, first come first severed, obviously their business would drop. Or if their turn around for a burger and fries was 30min, again, a drop.

I'm not sure the model or society at large would accept higher paid and thus higher quality workers in food, even if it made economic sense.
 

bobg03

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I think having the latest greatest I Phone is the equivalent today of someone who made it and is doing good, It used to be your first house or a new luxury car. Today it's the newest I phone... :cool:

For the record, I own an Android...
 

zendriver

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Eventually there will be very few lower level positions left for those just starting out or in high school. I wonder how that will pan out. I know from a farming perspective there are not anywhere near as many square bales being produced any longer due to labor shortage. Now most farmers are only round baling. What in the world are high school kids doing now for part time jobs anyways?
It’s not (or at least shouldn’t be ) a companies responsibility to provide jobs for anyone

Not sure why any farmer would prefer small square bales over round bales anyway. Since most animals operations are much, larger round bales, are easier to bale up transport store and feed. If they do want, small bales is automated.

Does it really Matter anyway, the rural population of children is plummeted over the years

School kids nowadays mix sports, another activities to learn their life and work skills graduate and go to school to learn a profession or trade
 

JeepYJ

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I think having the latest greatest I Phone is the equivalent today of someone who made it and is doing good, It used to be your first house or a new luxury car. Today it's the newest I phone... :cool:

For the record, I own an Android...
If you keep a new $1400 iPhone for 24 months that’s $58.33/month. That is not the thing keeping someone from buying a home or new car.
And has been stated, for many people that replaces a landline, internet service, camera, cable TV service, postage stamps for paying bills, etc. it’s probably a really good value if you look at what you don’t have to buy.
 

bobg03

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If you keep a new $1400 iPhone for 24 months that’s $58.33/month. That is not the thing keeping someone from buying a home or new car.
And has been stated, for many people that replaces a landline, internet service, camera, cable TV service, postage stamps for paying bills, etc. it’s probably a really good value if you look at what you don’t have to buy.
I'm sorry you missed the sarcasm and irony that I was implying.

But heck I learned that I saved $1100 dollars buying an android that does everything I need and without that monthly $58.33. :D
 

dnschmidt

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Half a million is what a sh!tty house average house costs in most of Philadelphia, unless the house needs significant renovation to sort of meet code.
A half of a million dollars will not even buy you a burnt down fixer upper in the Bay Area. My house in Phoenix, which I bought in 1996 for $130,000 now, according to Zillow, is worth $555,000. To me this is insane. Housing costs is what's killing the American Dream and people. We had some financial dude come into our High School, Central District Catholic in the Oakland area of Pittsburgh, PA in my case, come into our classroom in 1968 and tell us that you should never buy a house with a mortgage that would consume more than 25% of your take home pay. Today that number exceeds 50% for most homeowners. I personally don’t know how young people survive today.
 

JeepYJ

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I'm sorry you missed the sarcasm and irony that I was implying.

But heck I learned that I saved $1100 dollars buying an android that does everything I need and without that monthly $58.33. :D
It’s mentioned on here frequently that the reason young people can’t afford a home is because of cell phones.
You can buy an older gen iPhone for way less money too that will do all you need too.
 

JEdiag

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Well since throwing square bales is now a thing of the past (for many more reasons than kids not wanting to load wagons) and walking beans has also went away (again not because kids don’t want to do it) and paper routes are pretty much nonexistent (again not because kids don’t want to do it) there are still plenty of jobs kids can do. Retail and restaurant jobs are still hiring kids. My high school aged kid works on a farm after school and weekends year round. Right now he’s helping to get the spring tillage tools and planters all prepped for planting season. He drives the fuel trailer around, cuts grass, runs a grain cart, drills cover crops, equipment maintenance and whatever else needs to be done from disassembling grain bins and moving the to construction projects. He throws square bales here at home with me for free😂 and he’d rather be at work.
Sounds like your raising him right. Kuddos.
 

JEdiag

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A half of a million dollars will not even buy you a burnt down fixer upper in the Bay Area. My house in Phoenix, which I bought in 1996 for $130,000 now, according to Zillow, is worth $555,000. To me this is insane. Housing costs is what's killing the American Dream and people. We had some financial dude come into our High School, Central District Catholic in the Oakland area of Pittsburgh, PA in my case, come into our classroom in 1968 and tell us that you should never buy a house with a mortgage that would consume more than 25% of your take home pay. Today that number exceeds 50% for most homeowners. I personally don’t know how young people survive today.
What do you think is driving up the home costs? Obviously it has to be a multitude of things, but it doesnt seem like it was that long ago housing costs were 50% or less than what they are now. Hell, maybe im just oblivious to how quickly time flies. Always possible
 

joel63

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Official US inflation numbers are gimped, and routinely have nothing yo do with reality, particularly if you live in an area were housing prices have hone up massively, like a major city.

$7.50 in 1994 may be around $15 an hour using official inflation numbers, but it’s $93 using the alternative Shadow Stats inflation numbers.
I find the Shadow stats inflation numbers high, so I usually split the difference, which still might put the inflationary value at around $40+/-.

At $40 an hour, one paycheck a month or so would probably be a month’s rent for a crappy studio apartment that doesn’t have much room, and is in an area were you have the occasional homeless person sleeping near your apartment, but not too many muggings or shootings.
I presume in a more rural area, rent may be cheaper, but expenses for a vehicle, and gas, and maintenance may be way higher, and absolutely necessary.

Most people think the younger generation is stupid.
The reality, is they may be better at doing salary math quickly, and realizing the pay is much sh!ttier for similar jobs than it used to be.

There are also other issues that come into play.
A lot of schools don’t have shop classes.
If you’ve done shop work, and know you’ll get dirty, you may be more willing to accept it quickly
.
Sort of like shoveling **** out of horse stalls.
Someone who grew up riding horses will know what to wear, and how to quickly clean and maintain the stalls.
Someone who didn’t isn’t going to want to get their feet covered in horse **** for $3 a stall, especially if their don’t already have a decent pair of rubber boots.
If you gave dozens of horse stalls, and offer to show how the job can be done quickly and properly and actually profitably, and maybe front the cost of a pair of boots, or loan a pair, maybe someone will take the offer.
There are also other issues that come into play.
A lot of schools don’t have shop classes.
If you’ve done shop work, and know you’ll get dirty, you may be more willing to accept it quickly.


Shop classes were the only things that kept me in school.
The vocational programs were a Godsent.
My county had excellent vocational programs such as machine shop, auto mechanics, farm mechanics, drafting.
radio and TV repair, several classes in the construction trades, auto electrical and carburetion, just to
name a few. Most of these were half school day 2 year programs.
 

2ndGearRubber

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What do you think is driving up the home costs? Obviously it has to be a multitude of things, but it doesnt seem like it was that long ago housing costs were 50% or less than what they are now. Hell, maybe im just oblivious to how quickly time flies. Always possible

Lack of building "affordable" homes. After the second world war, housing on the single family level was produced en-mass to provide for the post-war baby boom, and subsidized by the government with loans for returning service members.

As population has increased, so did housing demand. However rather than build what was needed most, what is typically built on a section of available land is what housing will generate the most return. This is not inherently bad, but it means the market distribution of housing is top heavy, with more premium real estate being constructed and less entry level. This shifts the median point of housing cost. As the median shifts, and more people are priced out of the market for housing, demand for rental increases. Again, this increased demand drives rental pricing higher. As populations grow via reproduction and immigration, if housing does not grow at the same rate, prices will rise.


This ignores the "scam" of wealth building in housing as part of the American dream. If I buy a house with a $100000 loan amount on a 30 year term today, at 7.5% interest, I will be paying $701/month. The problem here, is that 701 x 12 x30 = $252360. This means over a 30 year fixed mortgage on $100k, I will be paying 150% MORE than the house is worth for the property. Thus when it's time to sell, most buyers are going to expect the equity to have become 250k. Which works well and good, once. The issue is that same house which costs 100k 30 years ago HAS to be worth 250k to have any equity built. Luckily due to lack of low cost housing production, our 100k starter home is now "worth" 250k! The problem is a 250k loan at 7.5%, now makes the payment 1745 per month, for the same home I lived in for 30 years paying 701/month for. $628200 is the new pay off for a loan of $250,000, at the same terms as the first buyer. So in 60 years, our 100K value home is now "worth" ~$630k assuming people end up with the equity they paid for. Some do, some don't. But the demand to purchase housing is partially driven by the idea of the American dream being defined by home ownership, as to accrue wealth rather than expend it via renting. All of these numbers IGNORE demand, which has also risen. These are just the "break even" numbers to have in the house what you paid for it.

On top of all of this, is lending. Lending is a necessary evil. It is difficult to acquire the capital outright to purchase a home. Thus lenders provide liquidity for the cost of interest. The problem is that with long terms and low interest rates buyers can justify much larger expense because over the course of a mortgage cycle the additional cost of total purchase price does not radically change monthly payment.

Consider buying a Nissan. The local Nissan dealer will offer 120/month loans. 10 years, on a Sentra. So if a buyer wants, and can justify, a 20k loan amount at 7.5%, that's a $400/month payment at a 5 year term. BUT if one can stick with 400/month for 7 years perhaps we can get into an Altima rather than a Sentra for 20k? It's only $400 month! And that's within your payment budget!

The same thing applies to homes. As credit is extended on longer terms, one can accept higher initial cost despite overall higher cost, because the additional cost is split over so many payments. Thus whether one is buying, or building, a homes price is distorted by the prism of longer terms. This allows easier justification of higher home costs, and higher building costs, which in turn move the median home upwards in cost.



It's really less complicated than we all think. Too many people need entry level housing. We, as a society, didn't build a whole lot. Don't even mention **** like Gary, Indiana - the housing needs to be where the demand for workers exists. Building a bunch of small houses near abandoned WV coal mines isn't the fix here. So if one wishes to correct home and rent prices downwards, one of two things has to happen. 1 - build more entry level housing, or 2 - reduce the population which needs such housing to meet the availability of current stocks of entry level housing. This is what can be done within the current framework, without radically upending how the housing market works within the United States.
 

micromind

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Fernley, Nevada, about 30 miles east of Reno.
What do you think is driving up the home costs? Obviously it has to be a multitude of things, but it doesnt seem like it was that long ago housing costs were 50% or less than what they are now. Hell, maybe im just oblivious to how quickly time flies. Always possible

Having spent a considerable amount of time in the trades, in my opinion, about 20% of the cost of a new house is unnecessary codes. About another 15% is new and/or increased taxes. Another 15% is insurance. Not just the cost of the insurance but the unnecessary regulations imposed by the insurance companies.

all this stuff is imposed little by little so no one notices.
 

M6erfan

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Joined
Dec 6, 2014
Messages
10,170
Location
'Merica!
Lack of building "affordable" homes. After the second world war, housing on the single family level was produced en-mass to provide for the post-war baby boom, and subsidized by the government with loans for returning service members.

As population has increased, so did housing demand. However rather than build what was needed most, what is typically built on a section of available land is what housing will generate the most return. This is not inherently bad, but it means the market distribution of housing is top heavy, with more premium real estate being constructed and less entry level. This shifts the median point of housing cost. As the median shifts, and more people are priced out of the market for housing, demand for rental increases. Again, this increased demand drives rental pricing higher. As populations grow via reproduction and immigration, if housing does not grow at the same rate, prices will rise.


This ignores the "scam" of wealth building in housing as part of the American dream. If I buy a house with a $100000 loan amount on a 30 year term today, at 7.5% interest, I will be paying $701/month. The problem here, is that 701 x 12 x30 = $252360. This means over a 30 year fixed mortgage on $100k, I will be paying 150% MORE than the house is worth for the property. Thus when it's time to sell, most buyers are going to expect the equity to have become 250k. Which works well and good, once. The issue is that same house which costs 100k 30 years ago HAS to be worth 250k to have any equity built. Luckily due to lack of low cost housing production, our 100k starter home is now "worth" 250k! The problem is a 250k loan at 7.5%, now makes the payment 1745 per month, for the same home I lived in for 30 years paying 701/month for. $628200 is the new pay off for a loan of $250,000, at the same terms as the first buyer. So in 60 years, our 100K value home is now "worth" ~$630k assuming people end up with the equity they paid for. Some do, some don't. But the demand to purchase housing is partially driven by the idea of the American dream being defined by home ownership, as to accrue wealth rather than expend it via renting. All of these numbers IGNORE demand, which has also risen. These are just the "break even" numbers to have in the house what you paid for it.

On top of all of this, is lending. Lending is a necessary evil. It is difficult to acquire the capital outright to purchase a home. Thus lenders provide liquidity for the cost of interest. The problem is that with long terms and low interest rates buyers can justify much larger expense because over the course of a mortgage cycle the additional cost of total purchase price does not radically change monthly payment.

Consider buying a Nissan. The local Nissan dealer will offer 120/month loans. 10 years, on a Sentra. So if a buyer wants, and can justify, a 20k loan amount at 7.5%, that's a $400/month payment at a 5 year term. BUT if one can stick with 400/month for 7 years perhaps we can get into an Altima rather than a Sentra for 20k? It's only $400 month! And that's within your payment budget!

The same thing applies to homes. As credit is extended on longer terms, one can accept higher initial cost despite overall higher cost, because the additional cost is split over so many payments. Thus whether one is buying, or building, a homes price is distorted by the prism of longer terms. This allows easier justification of higher home costs, and higher building costs, which in turn move the median home upwards in cost.



It's really less complicated than we all think. Too many people need entry level housing. We, as a society, didn't build a whole lot. Don't even mention **** like Gary, Indiana - the housing needs to be where the demand for workers exists. Building a bunch of small houses near abandoned WV coal mines isn't the fix here. So if one wishes to correct home and rent prices downwards, one of two things has to happen. 1 - build more entry level housing, or 2 - reduce the population which needs such housing to meet the availability of current stocks of entry level housing. This is what can be done within the current framework, without radically upending how the housing market works within the United States.

Lots of good stuff there.

I'll add to the 'home ownership as wealth building' part above. In addition to the mortgage costs, maintenance, insurance, and other expenses need to be factored in to home ownership. I lived in apartments, well into adulthood. I could afford to buy a very very nice home, but every single time I ran the numbers, it never worked out in favor of home ownership. Also, the other 'scam' is the mortgage interest deduction. For the vast majority that's a losing proposition.

On 'entry level' homes. There's a new subdivision going up a few towns over. Starter homes, completely vanilla, blah, and judging by the roofs, bare bones **** quality. Starting at $210 sq/ft. Four years ago similar starter homes were in the $90 sq/ft range. Seems to me like starter homes may be a thing of the past.
 
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M6erfan

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Joined
Dec 6, 2014
Messages
10,170
Location
'Merica!
Having spent a considerable amount of time in the trades, in my opinion, about 20% of the cost of a new house is unnecessary codes. About another 15% is new and/or increased taxes. Another 15% is insurance. Not just the cost of the insurance but the unnecessary regulations imposed by the insurance companies.

all this stuff is imposed little by little so no one notices.

I see sheets of plywood and framing sticks that are at least twice what they were a few years ago, and wonder how much that plays a part in new construction costs.

I just paid $80 for a sheet of 3/4" AC and over $4 ea for 2x4x8 sticks at the local lumber yard.
 

micromind

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Joined
Sep 24, 2023
Messages
3,023
Location
Fernley, Nevada, about 30 miles east of Reno.
I see sheets of plywood and framing sticks that are at least twice what they were a few years ago, and wonder how much that plays a part in new construction costs.

I just paid $80 for a sheet of 3/4" AC and over $4 ea for 2x4x8 sticks at the local lumber yard.

Material costs are indeed higher than they were a few years ago. Mostly for the same reasons.
 

2ndGearRubber

Well-known member
Joined
Mar 24, 2014
Messages
14,185
Location
Pittsburgh
Lots of good stuff there.

I'll add to the 'home ownership as wealth building' part above. In addition to the mortgage costs, maintenance, insurance, and other expenses need to be factored in to home ownership. I lived in apartments, well into adulthood. I could afford to buy a very very nice home, but every single time I ran the numbers, it never worked out in favor of home ownership. Also, the other 'scam' is the mortgage deduction. For most people that's a losing proposition.

On 'entry level' homes. There's a new subdivision going up a few towns over. Starter homes, completely vanilla, blah, and judging by the roofs, pretty bare bones quality. Starting at $210 sq/ft. Four years ago similar starter homes were in the $90 sq/ft range. Seems to me like starter homes may be a thing of the past.

While starter homes may be dwindling in number, they are critical to the health of the "trade up" phenomenon.

Much like a Snap-On tool box, one builds as they go. So a starter home is spun-off after X years, a more expensive home purchased, etc. Without an ability to retain some amount of equity, and with rental costs typically higher than a mortgage on an identical home, buyers are forced to wait longer to purchase their first home. This means they pay more for housing via rental with not additional utility aside from the freedom to move/leave easier. This additional expense also means saving for a first home takes longer, as expenses related to living are higher and thus savings as a % of income will be lower. Much like Snap-On has silly list prices to absorb your trade at what you paid, the price of housing must climb ever higher to produce equity for the original owner.

You're 100% right, dependent on location and market conditions buying isn't always the best path forward.
 

zendriver

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Joined
Dec 10, 2014
Messages
29,797
Location
Indiana
Sounds like the only real solution is for the government to subsidize the building of millions of small “starter homes” and then sell them to people with limited means with nearly no money down.

As it was in postwar America, the private sector has no intention of doing this on their own.

One can buy a reasonably priced starter home today, but it has removable wheels under it
 

Hakeem

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Jan 22, 2024
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1,246
Location
Chicago
I think the issue is that in the US, Housing is viewed as an investment, not as a home. One’s house is nearly always the most valuable asset one owns, and it is expected that the value will appreciate with time. For housing to become more affordable means that millions of Americans would become less wealthy. Municipalities rely on property taxes for their revenue, and they would likely struggle and default. Real estate is a major industry in this country and they constitute a powerful lobby. Hell, our former president and likely next president was a real estate guy. I don’t really see any impactful legislation happening for that reason.

Ultra Low interest rates made real estate an attractive investment opportunity. I’m sure you all have heard about hedge funds like Blackrock buying up single family homes en masse, thereby reducing the available supply even further and driving prices up.

Of note - the fixed 30 year mortgage that is ubiquitous in USA is not found in other countries. I believe they have to refinance every 5 years or something like that, any GJers that know for sure, please correct me. I’m not sure of the effects this has on the local real estate markets but I’d imagine it make real estate a less attractive investment.
 
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