There’s a new right-wing think tank on the block, and its leader is enjoying a moment in the sun. Oren Cass is the head of American Compass, and last week he put out a lengthy report accompanied by a viral Twitter thread arguing that, despite statistics showing that wages have grown over the years even after properly accounting for inflation, families are increasingly being hammered by a variety of costs. It’s a rallying cry for taking populist complaints seriously.
The document contains a variety of technical claims about inflation adjustments that have come under fire from his critics, but here I’ll view it through a much simpler lens. The concept at the core of Cass’s “Cost-of-Thriving Index” is merely to present five different data series together — numbers representing median male earnings, as well as college, transportation, health insurance, and housing, i.e. four expenses that a man who earns his family’s sole income might see as necessary to a thriving existence.
The eye-popping conclusion is that it would take 53 weeks of the median weekly male income ($1,026 in 2018) to pay for a year’s worth of these expenses today. Of course, there are but 52 weeks in a year.
But what do these numbers really mean?
I’ve taken the time to read over the explanations in the report and the sources it cites. Here are the details and limitations, which are crucial to understanding the bleak picture Cass presents:
A semester at a four-year public college, $10,025 in 2018. The idea here is that if you save a semester’s worth of costs each year, you can put two kids through college with 16 years of saving. Importantly, though, this number could be brought down significantly by the financial aid a student from a family in this income range would likely receive; it includes room and board, when many students at four-year public schools live off campus, quite frequently with their parents; and it assumes the kids won’t be earning any money of their own, winning scholarships, or taking out a single dollar in loans. Additionally, most American kids don’t actually go to four-year colleges — 15 percent of kids at public high schools don’t even graduate that on time, and of kids who do graduate from high school, about a third don’t enroll in college right away and another quarter go to two-year schools, which tend to be much less expensive. Some kids choose to go to more expensive private schools, too, but on balance it seems fair to say a father supporting a family of four on $53,000 doesn’t need to put aside $10,000 every year to make it possible for his kids to continue their education after high school. As a general rule, Fidelity Investments suggests saving $2,000 per child per year for a four-year public school: This will cover about half the cost, with the rest coming from other sources, including loans and aid.
Transportation, $8,849 in 2018: This is from “the federal Bureau of Transportation Statistics (BTS) estimates for the average cost of owning and operating an automobile driven 15,000 miles per year, which are taken from the estimates produced by the American Automobile Association.” The BTS cautions about changes in methodology over the years, and Cass’s own report notes that driving has changed over time (rising for a while and then falling somewhat more recently), but this probably works as a rough proxy of what it costs to own a car.
Health insurance, $19,616 in 2018: This is the total cost of the average employer-sponsored health plan, including the portion paid by the employer. As Stan Veuger of the American Enterprise Institute noted on Twitter soon after the report came out, it’s misleading to put this on a chart against “income” measured the way Cass measures it — via the Bureau of Labor Statistics’ reports on weekly earnings, which do not include benefits paid for by employers. The implication of the chart is that these health-care costs, like transportation or housing costs, come out of “income,” but employers are actually covering most of the bill. (For those without access to employer plans, mid-tier Obamacare coverage for a family of four making $55,000 costs less than $5,000 this year, which the report deliberately ignores, in part because “government provision is not a substitute for self-sufficiency.”) Further, benefits have grown considerably faster than wages in recent decades as health-care costs have risen, meaning that this problem becomes bigger in the more recent years of the chart.
Housing, $15,924: This is “the federal Department of Housing and Urban Development (HUD) estimate of Fair Market Rent for a three-bedroom housing unit in Raleigh, North Carolina,” chosen because it’s a pretty typical place to live by several metrics. Some type of nationwide average would have been preferable, but I won’t get hung up on that.
Where does this leave us? It’s undeniably true that housing, health care, and college are too expensive in this country, but because it exaggerates the cost of college and fails to include health benefits as compensation, the index overstates its case when it claims the four essentials to a good life are out of reach. And it completely ignores many other important expenses, from food to computers, whose prices have fallen. Also worth noting is that in treating male wages as the benchmark, it leaves out the upward trends in female work and pay, though these issues are discussed in the report itself (and get complicated because two-worker families take on new costs through daycare and the like).
In general: No one should defend America’s college costs, its health-care prices, or its big cities’ housing regulations, but the reality is not as grim as this viral chart suggests.