I missed it last week, but the Wall Street Journal had a nice column explaining the felt “squeeze” in a middle class that is earning more than ever, yet feeling precarious or constrained nonetheless.
Part of it is that rising fixed costs go to things that are not directly tangible. An extra $800 paid for health insurance premiums doesn’t feel like a lifestyle improvement but like a tax, at least until the improved medical care comes. Ronald Fryer writes:
The middle class is simultaneously better off and more financially strained than it has been in decades. The services that define 21st-century middle-class life—healthcare, child care, education—have risen two to three times as fast as overall consumer prices since 2000. This is the structural consequence of an economy that became extraordinarily productive at making goods but not at raising children or treating the sick. Meanwhile the gains—safer cars, cleaner air, longer lives—have quietly disappeared into what we consider normal. Psychologists call this hedonic adaptation: the tendency to absorb improvements into our baseline until they no longer feel like gains.
The antidote psychologists prescribe is mental subtraction: deliberately imagining life without what you take for granted. Try it with 1975. No air bags. A much higher risk of being robbed. Three television networks. We’ve adapted to these gains so completely they no longer feel like gains.
It’s not just that we’ve adapted to them, however. In many cases, the 1975 alternatives are no longer available. The 1950s lifestyle is not available to you, and where it is, it isn’t available at 1950s cost. Doctors can’t ethically prescribe treatments that have fallen so far below today’s standards of care. Cars can’t be made more dangerous than regulations have it. The price of lumber and land is such that builders hesitate to waste an entire lot on just 1,050 square feet of house. When you do find an old 1,050-square-foot home on the market, it is an old home — not the new one your great-grandparents bought — and it requires more repair and more expensive upkeep than their new-construction home did at the start of their life together.
Again and again, the big culprit in the math making sense for forming families is in housing. Despite the doubling of overall U.S. productivity since 1970, according to the Fed, construction and residential building productivity fell by roughly 50 percent between 1970 and 2024. When I look at single-family home construction, the biggest thing I see is that, apart from using a few major vehicles for lifting pallets of material, or occasionally lifting a roof, the vast majority of the work is based on the stick-built construction techniques that are over a century old. We’ve simply added power hand tools to the equation.