A Hard Look at the Economic World Gen Z Inherited

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Earlier this year, we had JL Collins, the Godfather of Financial Independence, on the show, and there was one question we seemed to disagree on: Are the dollars and cents of life actually harder today than they used to be, or does it just feel that way?

This prompted a listener to ask for a deeper dive: The official Boomer vs. Zoomer cage match of economic strife to understand, all else held equal, how the financial worlds these generations grew up in are different (and, more intriguing, the striking ways in which they’ve never been more alike). Today’s episode is a then-and-now analysis into housing, education, wages, inflation, and investing—and I think it’s going to surprise you.

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Our show is a production of Morning Brew and is produced by Henah Velez and Katie Gatti Tassin, with our audio engineering and sound design from Nick Torres. Devin Emery is our Chief Content Officer and additional fact checking comes from Scott Wilson.

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Transcript

Transcript

Katie:

A few weeks ago, a listener had reached out, and they asked us to dig into something that had come up earlier this year in our interview with JL Collins. So we'll link to that episode in the show notes. Because when JL graduated from college and entered the workforce, it was the 1970s—and what do we know about the 1970s?

Well, inflation was high. The market was in a period of going sideways. And when JL went to buy a home in the 1980s, interest rates were high. Disco and cocaine were also popular, I hear, but I didn't ask him about his experience with either of those things. So we'll leave that up to the imagination.

But I mused in our conversation that in a lot of ways it sounded a little similar to what young people are up against today. There were a lot of parallels and the listener who emailed in wrote, hey, yeah, can you actually maybe blow out a bigger comparison of the Baby Boomers and Gen Z? Is it actually harder today than it was back then, or does it just feel that way for everyone? So that's what I'm going to attempt to do today in an episode called Economic Trauma Wars, where we're going to figure out which generation faced a more complicated financial puzzle.

This is The Money with Katie Show and I'm your host, Katie Gatti Tassin. As a millennial, I like to think that I have no skin in this game, so consider me your unbiased game show host. But before we can dive in, I do have a few key categories of interest:

So first, it feels like we need to define an age range that would be relevant because in some ways we are facing a bit of an uphill battle because we're attempting to make generalizations about tens of millions of people, which makes precision impossible. I'm relying on a lot of different data sources for these numbers. Obviously things are going to vary significantly by state, race, gender, but my intent is to build something that's directionally accurate at the national population level. So while two people might both be Baby Boomers, the life experience of someone who's born in 1946 is very different from that of someone who's born in 1964. You also see this kind of slippery slope in the millennial Gen Z discourse because the youngest millennials may actually have more in common with the early Gen Zs than they do with older millennials who graduated into the post-2008 economy.

And it's also important to nail down which years of historical data we care about. Even though there were Boomers being born in the 1950s, we don't really care what was doing in the 1950s, right? Because Boomers weren't buying houses then they were little kids. We want to know what housing costs when Boomers were the same age that Gen Z is now. So for that reason, I'm going to use middle of the road age 21 as the point at which I will take a cross section of history and compare a few different things to get just a nice wide snapshot of the general vibe. In other words, what was the world like in the chunk of time when the Boomers were turning 21, and what is the world like for 21 year olds today?

And the next we have to figure out which big puzzle pieces we feel like are worth examining to make sense of a bigger picture. And there are a few that I'm going to talk about. You can probably guess them. Housing, education, becoming parents, wealth building via investments, the workforce in wages, and inflationary conditions.

So who are we talking about when we talk about the Boomers? We're talking about people who were born between 1946 and 1964, and as of the 2020 census, there were 73 million of them. So Pew Research calls it a group that has always identified with their youth, which I guess makes sense, like baby is in the name. And even within this generation, there are major differences to the point that there was actually a small movement to call the people born between 1954 and 1965 “Generation Jones” because they were thought to be so different from the people born between ‘46 and ‘54.

This is also the group that's often tied to various social movements like those for women's rights, civil rights, gay rights. But as Louis Menand points out in the New Yorker, all of the people at the forefront of those movements were older—sometimes a lot olde— like Betty Friedan, Gloria Steinem, John Lewis, Malcolm X, MLK, Jr. They were all silent generation. And he pointed out that when the youngest boomer graduated from high school, Ronald Reagan was president and the Vietnam War had been over for seven years. So in other words, it wasn't that long ago. And the countercultural reputation that the generation as a whole usually gets might be a little bit misdirected.

But anyway, regardless, Baby Boomers control the US economy because they are such a large rich group and they turned 21 between 1967 and 1985. So flash forward, we'll get our parallel between the Boomers and Gen Z who were born between 1997 and 2012. They're also about 70 million strong. They're roughly the same size, and our oldest Gen Zers turned 21 in 2018, and they will continue to do so through 2033. So for those of you who are trying to hold these two time periods in your head, that means our comparison set is going to be 1967 through 1985. What was the world doing in that time period? And then 2018 through 2033, which means we are smack dab in the middle of the Gen Z world that we are comparing.

Okay, we'll get to all those comparisons right after a quick break.

So now that we know who we're talking about, let's start with the thing that's on everyone's mind: housing. It's not enough just to compare the cost of houses then to the cost of houses now, because obviously that is a dumpster fire. You don't need my podcast to tell you that. But what we can do is expand our frame of reference to look at a few different factors. I think this one is going to surprise you a little bit.

So the first is what's the nominal cost of a home? The second is what is the 30 year mortgage rate? And so by extension, what does it cost to borrow the money that you would need to buy that home? The third is the median mortgage payment as a percentage of median income. And what's the median size? So what is the bang for your buck that you are getting? How much are you paying per square foot? And then finally, how many years of income would you need? How many years of the median income to save to get your down payment, assuming you're going to put 20% down?

So at this point, I do need to shout out an anonymous user on Reddit who built a lot of this data into a beautiful spreadsheet and then shared their chart. I did independently confirm enough of the numbers they were using to feel confident that their math does stand up. So we'll link to it on the show notes if you want to take a look for yourself. But shout out to this person because they made this very easy for me.

So given our timeframes, I'm going to look at 1965. The chart uses increments of five years, otherwise I'd look at 1967. 1985, which is the end year of our Boomers turning 21. 2020 again in lieu of 2018 because five-year increments, and 2024 because it's obviously not 2025 yet. So drum roll please.

Across all four of these years, the time when the largest portion of median income was required to service the median mortgage payment was 1985. In 1985, the median home cost $82,800 and the rate was 12.9%. So the median mortgage payment was 37% of the median income, which was $23,620.

But here's the thing, if you're ready to turn off this episode, hang on. A 20% down payment in 1985 required about 70% of the median income. So to put another way, if you're making the median income in 1985 and you saved 70% of it somehow, maybe you're living in your mom's basement and eating all their food, you've got 70% of your income socked away, that would be enough to put 20% down on the median home. Or maybe more realistically, you're saving 35% of your income for two years so you then have that median down payment, which is pretty reasonable.

But today a 20% down payment requires 108% of the median income. So that is to say if you're saving at that same rate, maybe you're doing that 35%, it now takes three years to put down 20%, that's 50% longer, and the percentage of median income required to service the payments on that home isn't much better than it was in 1985. It's at 34% rather than 37%.

So this is because obviously if the home costs way more, I believe it's north of $400K today; yeah, 20% of that number is going to be a lot bigger and wages have not grown at the same rate. So in that respect, comparatively, it's actually quite similar to the 1980s, although today your down payment takes 50% longer to save, assuming all else held equal, simply because the house is so much more expensive.

Now, things were relatively affordable in both 1965 when the median mortgage payment was only 17% of median income and 2020 when the median mortgage payment was 20% of median income. It's also worth pointing out, I think that while houses are larger now, you do get less bang for your buck given their similarities. I wanted to compare the price per square foot between 1985 and 2024, and in 1985 you paid $43 per square foot, which is about $128 today. But today you don't pay $128 per square foot. The median cost is $181 per square foot, which is about 40% more in real terms.

So my verdict is that servicing a mortgage today is almost as expensive as it was when the youngest Boomers were turning 21, but the price per square foot is now 40% higher and it takes 50% longer to save a down payment. So the cheapest time to buy a home as defined by the lowest amount of media income needed between 1965 and today was in 1965. And so, alright, that result is probably pretty predictable. You may not be that surprised by it, but in 1985, the median repeat buyer, so someone buying their second home was about the same age as the median first time buyer in 2024 at age 36. So even if we wanted to quibble over which factors are most important or what the causes are, the outcome is that people today are buying their first home later in life. The median first time buyer in the 1980s was 29, which means in the time it took them to buy a home and presumably trade up, today's 30 somethings are still saving for their first one. And until then it's happy, fun times and moms paid off basement.

And we could probably actually take that whole argument down a completely different rabbit hole about the role that housing plays in the US and how we think about its role in individualism and its tie-ins to wealth building and all the ways in which housing has kind of morphed into something that it probably shouldn't be.

But we'll save that for a future episode. And in the meantime, staying on task here, we're going to move on to education and income. Alright, so part of the housing equation obviously pertains to wages, right? We were looking at median incomes, but before we get to wages, I want to focus on education and more specifically, what type of education someone needs in order to earn the median wage.

So a few things that I set out to explore. Number one, how has the average education level changed? Number two, what's the median income for people with and without a college degree? And of course, what does that college degree cost? So in 1965, our oldest Boomers were turning 21. About 70% of adults aged 29 or younger had completed high school, but only 11% had completed college. So another way to think about this is one in 10 in 1965 had completed college, but by 1985, 20 years later, 85% of adults had completed high school.

So that's moving in the right direction pretty decidedly and a little less than 20% of adults had completed college. So just in that 20-year period, the rate of those with college educations roughly doubled.

Alright. So by 2021, which is sadly the last available year I could find from the census data, 90% of adults in the US had completed high school. So a slight bump from 1985 and 38% have a college degree. In other words, the percentage of the population with a college degree has roughly doubled again since 1985, from less than 20% to almost 40%, which might be due at least in part to it being more legally and culturally acceptable for women to attend higher education.

But here's where things get interesting. It's the relationship between these degrees and the wages you can earn with them. So back in 1965, you made about 24% more. If you had a college degree by 1985, you were making 47% more than those with only a high school diploma. This is wild. As of 2024, the median income of someone with a college degree is about 84% higher than the median income of someone with only a high school degree. Put another way, a college degree is based on this measure of value at aka the income you can earn once you have one, it's a lot more valuable today than it was in 1965 or 1985, and a lot more people have them.

So I was kind of surprised to see that it appears as though the opposite relationship is true. So before we can assess the value of a degree fairly, it feels like we need to understand both how much more you can generate in lifetime earnings if you have one, as well as what you'll pay for it, because the cost of this degree definitely makes a difference.

Unfortunately, I couldn't find reliable data for the average annual tuition cost of a public four year university in 1965, maybe because it was fairly rare, but I was able to find it from a reliable source for 1985, which was $1,318 per year for tuition and fees. But in 1980 dollars, so in 2024 money, this is like around $4K. So that means the total cost of a college degree in 1985 was about $5,000 over four years, and the median worker without a college degree earned about $15,000 per year, while the median worker with a college degree earned about $21,000 per year. So that is to say, if you think about these numbers, you put them all together, the median earnings difference in a single year would theoretically be enough for you to earn back the entire investment that you made in college. As in if you are judging your ROI on going to college as money invested in the degree itself compared to additional money that the degree enables you to earn the medians in a single year of work would make that look like an amazing trade.

So let's flash forward to the world today. Hello. The cost of your average public four year university's tuition and fees in 2024 is about $10,000 per year for in-state tuition and $29,000 per year if you're going to a public university out of state. Now, keep in mind this does not include room and board costs, though to my knowledge, neither does the 1985 figure. So I do think we're comparing apples to apples in that sense. But the in-state out-of-state thing makes a humongous difference in total costs. We are talking $40,000 for four years of tuition versus $120,000.

So for example, using medians, the weekly earnings of someone today who has completed high school is $916, and for college graduates it's 1,684. So it's like over $700 more per week. Now, this is for all workers 25 and older, and in case you're wondering about some college or associate's degrees or whatever, those wages are slightly higher than high school only. They earn about a hundred dollars more per week if you have a little bit more education at the median level.

Of course, now, if you were to do this as cheaply as possible, let's say you have no scholarship money, but you do live near a state school, you can live with your parents for free. You could theoretically get a public school bachelor's degree going there for all four years. Obviously there are other workarounds where you go to the community college for two years and then transfer. So your degree is from the four year university, whatever, whatever. But you could go to that school for four years, get that bachelor's degree for $40,000 on average. We know the median worker with a high school diploma earns about $48,000. Today, will the median worker with a bachelor's degree or higher earns about $90,000, give or take, I'm rounding up.

So theoretically, if that degree costs $40,000 in total, it's really not that dissimilar from the spread that we saw in 1985. Theoretically, one year of earning $90,000 in lieu of $48,000 makes your $40,000 investment look excellent. But again, this assumes you are getting the degree as cheaply as humanly possible.

The all-in costs of a college education today can be more than $40,000 per year if you go out of state or you live on campus. I mean, we didn't even get into private universities. That stuff's just bananas. But I thought this comparison of using the value of the degree in the job market can help make the difference look maybe slightly less drastic, even though all of the numbers are much bigger. But of course, this confluence of factors is more complicated than I'm making it sound because when you look at people, perhaps Gen Zers who are 21 this year, well, they've probably already got the student loans.

So if for whatever reason they were not getting that college education as cheaply as humanly possible and instead have student loan debt, the average being around $37,850, this impacts things like your debt to income ratios which influence the housing factor above. It's going to make it harder to buy a home if you have really any sort of debt to income ratio that's going to make a lender look twice at you. Right?

So all in education, my verdict is that it was a lot cheaper for the Boomers to get college degrees, but they as young people really didn't stand to gain as much from them as the Zoomers do today. So put another way, someone without a college degree today is that a much steeper disadvantage in the job market than someone without a college degree in the 1970s or 1980s, which I think is an interesting angle to this, right? There's almost two ways to frame it. You can frame it like, yeah, Gen Z getting college degrees today are getting this piece of paper that is theoretically way more valuable than it used to be as far as it impacts your earning potential. But the flip side of that is that for those who just want to get a high school education or who do not want to go to college, they are at a much steeper disadvantage like a high school diploma is not really worth what it used to be worth on the job market.

So I assume your head is sufficiently spinning at this point. We will get right back to this after a quick break.

All right, next up parenthood. I wanted to look at the experience of becoming a parent and family size. I'm resisting the urge to turn this into a second-wave feminism deep dive. Please clap. Instead, I want to examine the average family size just briefly because obviously we covered this in depth with the birth rate panic episode and the average costs of childcare and types of childcare used. In 1965, the average US family had 3.3 people. By 1985, we were down to the 2.7, and by 2020 2.5, and it really hasn't changed much since then. So at the population level, things actually don't look that different between 1985 and 2020 family sizes. I mean pretty much unchanged.

But what's interesting is what happens when you start looking at how the incidents of big families have changed. In 1965, 6% of households had five or more kids. By 1985, that was already down to 1.5% and it's been more or less around that number ever since 11% of families in 1965 had three kids compared to 7% in 1985 and 5% today, generally it's fair to say families are getting smaller and having multiple children is less common than it used to be. If you are about to interject with something about the birth rate panic, by the way, check out the episode from two weeks ago where we dive way into this tiny subset of the data specifically.

So okay, a little inside baseball. Originally I wanted to dive deeper into the demographic data here and try to unpack just how different family structure is today compared to 40 or 50 years ago, mostly because I'm kind of tired of hearing about the era of the stay-at-home mom. I wanted to demonstrate that the single income household with the stay at home mom has literally always been a statistical minority, but I fear that's going to take us too far off track.

So we're going to save that for another time, and instead we're going to jump to average costs of childcare. Now, this was an interesting rabbit hole because it made me realize that people in the 2020s are up against the exact same bullshit that people in the 1980s were up against. Listen to this excerpt from a timeline of how childcare has changed in the US over time: “1970s, as the need for daycare grew exponentially, a push for universal childcare took place from 1969 to 1971, a coalition of feminists, labor leaders, civil rights leaders, and early childhood advocates worked with Congress to legislate universal childcare policy, but their efforts failed when President Nixon vetoed the Comprehensive Child Development Act of 1971.” Side note to Nick, my audio engineer, do we need a Nixon drop like our Reagan drop?

[Nixon Drop]

Katie:

Alright, back to the quote: “As a result for the next three decades, direct federal support for childcare was limited to policies targeted at low income families. At the same time, however, the federal government offered several types of indirect support to middle and upper class families in the form of tax incentives for employer-sponsored childcare, and several ways of using childcare costs to reduce personal income taxes. In the 1980s, as children of the Baby Boomer era began having their own children, the need for daycare rose dramatically. Families were faced with a severe shortage of quality daycare facilities.”

Sound familiar? I think I've seen this film before and I didn't like the ending. Here's where shit gets really exciting. Another quote: “In the 1980s under the Reagan administration, the balance of federal childcare funding shifted as expenditures for low income families were dramatically reduced.” Love that for us.

“While those benefiting middle and high income families nearly doubled.” So cute. So demure. “Such measures stimulated the growth of voluntary and four profit childcare.” Yeah, we all know how well that worked out, much of which was beyond the reach of low income families. These families received some help from the childcare and development block Grant passed in 1990, which allocated $825 million to individual states. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 replaced it with time limited public assistance coupled with stringent employment mandates, acknowledging the need for expanded childcare to support this welfare to work plan, Congress combined several programs into a single block grant, the Childcare and Development fund.”

I'm sorry, Personal Responsibility Act is so fucking bleak. Oh my god. Clinton was truly neoliberal icon for the ages. Here's the final zinger. Are you ready for this? Unlike the United States, these countries, they're talking about France, Denmark, the usuals: “These countries use childcare not as a lever in a harsh mandatory employment policy toward low income mothers, but as a means of helping parents of all classes reconcile the demands of work and family life.”

So the verdict is sucks, then sucks. Now very little has changed. It was really, really hard to find reliable data about the costs. I think maybe in part because people approached it differently in the 1970s and 1980s. I have talked to so many elder Boomers who were like, yeah, I just dropped you off at the neighbor's house all day. But I did find one source that said it was about $40 per week in the 1980s, which is around $120 per week today, or about $500 per month, which is obviously a lot less than most parents today are spending, but it's still pretty bad.

You hear the explanations of what was going on in the 1980s and the feminists and labor leaders in the 1970s fighting for universal childcare, and it's just so striking how similar the descriptions are.

Okay, so the last major thing I want to compare is investment potential and possibility. And it's worth calling out explicitly from the jump that today the richest 10% of Americans own 93% of the stock market. So it's not like we have become this beacon of egalitarian wealth building opportunity and access, but still it's worth acknowledging that this might be the only arena of personal finance where I would say Gen Zers have been dealt decidedly a better hand.

So the 1970s right around when the Boomers were turning 21 were when we saw the invention of the 401k and the IRA, those little defined contribution menaces that we love to hate, that would replace the defined benefit plan also known as the pension. So this was really the beginning of that great risk shift that transitioned responsibility for retirement from the institution to the individual. It's a very interesting time in financial and economic history for that reason.

By 1990, 20% of the US population invested in the stock market, and today that number is closer to around 60%. So we've covered the inequality piece of it, but it is true that three times as many Americans invest in stocks as they did in the 1980s, which is great except for the fact that all may not be well and good on the western front, Investopedia summarizes it like this. They say, well, “Investors now have a plethora of investment opportunities. The accompanying risks are also greater. The globalization trend has led to a closer relationship between world markets, as is demonstrated by the synchronized correction in global markets during the tech wreck of the early two thousands and the credit crisis of the late two thousands. This means that in a global storm, there may be virtually no safe haven. The investing world is also much more complex now than it has ever been. A seemingly small event in an obscure overseas market can trigger a global reaction worldwide as a result of these developments. Investing is a bit more challenging, but convenient exercise now than it was in the 1970s.”

Translation, yes, you can much more easily access public markets today than you once could. We talk about this all the time, how you can literally whip out your pocket supercomputer. You can download a roboadvisor app, hook up your bank account, and in minutes, you can have cheap diversified access to the market. That is nothing short of miraculous, but the ways in which the world have changed around that also means you probably face a more complicated set of risks than your average boomer investor did in their twenties. And I have to say, I think it's also, I'd be remiss if I didn't mention that obviously that all is predicated on you having the wages to invest.

And I think at this point I want to weave in some interview footage from a guy named Pete Stavros who works for KKR, of famed presence on the Money with Katie Show. But at a macro level, I can't stop thinking about what Pete Stavros said about how the world has changed since the 1970s. In particular, everything from investment to wages to labor. Here's the clip from the podcast, Kelly Corrigan Wonders that haunts me:

Pete Stavros:

The miracle of compound interest in reverse, which will tie into employee ownership and wealth inequality. The way we got into this mess on wealth inequality is around the lack of stock ownership by most Americans. So if you go back, the Federal Reserve gives data on household wealth, and in 1989, which is the first year they give us data, the top 10% of Americans had $1,000,000,000,007 of stock assets and the bottom half had nothing. 50 billion. Now compound that trillion seven gap over decades at 10% a year. And now we have a $30 trillion gap in the ownership of stock between the top 10% and the bottom half. Because if you don't sell your stock and it's just compounding in value in the way I just described, it's an exponential growth curve, not linear. And so that $30 trillion gap that we now have in the value of stock assets between the top 10% of Americans in the bottom half, fast forward that on a compound interest basis, another 30 years, and that's $300 trillion, which is many multiples. That's 10x the size of the US economy.

Kelly Corrigan:

So in a way, nothing could have been more predictable starting in 1989 than that. We would be right here right now.

Pete Stavros:

And Congress predicted it. So if you go back even before 1989, in 1974, as a part of something called the ERISA Act, Congress had a sub part of that law which encouraged worker ownership. It's called an ESOP. It's one of the more misunderstood terms in American business. People think, oh yeah, no, every company's got an ESOP. It's a stock option plan, it's an employee stock ownership plan. It's a defined term in the tax code and in ERISA, and basically I'm way oversimplifying…

Kelly Corrigan:

Good. We like it that way.

Pete Stavros:

If you share a meaningful amount of stock ownership with workers in this tax structure, which is complicated, you pay no federal income taxes as a company forever. Tax-free company forever.

Kelly Corrigan:

So somebody was like, this is going to work. The Pete Stavros plan will work. Somebody said it in 1974 and put it into the tax code.

Pete Stavros:

And if you read all the congressional testimony, they were predicting everything that's happened, which is workers are barely getting by on their wages and if they don't have savings, they can't invest in capital. And capital is getting more and more productive with technology. And so this is going to explode. I know we all love to complain about the government, but there were a lot of smart people in 1974 saying, we have to do something. This is not going to be the country we want.

Kelly Corrigan:

They can see it.

Pete Stavros:

They can see it. And then here we are in 2023 with…

Kelly Corrigan:

Living precisely…

Pete Stavros:

What they predicted.

Katie:

Basically the most benign, amoral explanation we can assign to things getting worse for regular people is that as technological processes made capital more productive, people who owned assets got richer at a rate that was way faster than wages were rising and absent any government intervention, the trend just kept getting worse. It keeps compounding. Or as economic journalist, Grace Blakeley would probably argue the government did intervene to make it worse.

So the reason it haunts me is because he basically highlights that Congress knew this entire time they predicted it, they knew it was going to happen, their writing has been on the wall. This was not a surprise.

And so at the end of the day, I guess it doesn't really matter who had it worse, right? Boomers, Zoomers, it just kind of is what it is now. And in some ways, today's economic puzzle presents similar challenges as yesteryears’, and maybe that's because the underlying dynamics haven't changed, they've just intensified. There has been no paradigmatic shift in the way we think about any of these things. Housing, education, wages, individual investment. It's just the same economic story playing out and compounding over time like Pete suggested.

So maybe it's anti-climactic or a bit of a bait and switch to end this episode by calling for intergenerational solidarity. But Boomers versus Zoomers is probably not the real story here. In both eras, Boomers and Zoomers faced off against the same profit maximizing forces and much of it exacerbated by the public private partnerships, these sort of worst of both worlds combinations of government funding fueling private interests, like student loans are maybe the most prototypical example of that.

It's not unlikely that whatever cohort of people is still three generations away is going to face an exacerbated version of the very same issues the Zoomers are dealing with today. If nothing else changes, and that of course assumes the planet holds up, fingers crossed.

So what type of changes would move the needle? Well, I kind of already alluded to it, but paradigmatic ones and I see two major areas of change if we are playing Katie as queen for a day again. The first is employee ownership. Now whether that's via standard ESOP model, ESOP that Pete described in his interview, which is effective in distributing the gains of the business proportionally to its workers, but very complicated to set up in its current form, or a more extreme like workers seize the means of production moment, never say never. It's pretty clear that as long as most people are relying on wages alone and stagnant ones at that their asset bases will never stand a chance. I think we've seen by now that the supposed free market forces that are supposed to keep wages competitive are just really no match for the speed with which capital is reproducing itself and ownership is how that power is consolidated and then distributed in small ways. In capitalism without ownership, you are barely better off than a futile serf working the land in perpetuity and earning ownership via your labor seems like a very logical place to begin, right? It's really the most obvious, although complex solution that I can see.

And the closest thing that we have to this right now is the way that middle class wealth functions with respect to equity in one's primary residence, which brings me to my second point, public ownership of public goods. I do not think there's a way around this one. The more I read, the more examples I see, the more case studies I come across, I just really do not think there's a way out of it rather than continuing down this path that is proven expensive and inefficient. Time and time again, industry and industry again, in which we tend to see the worst of both worlds come to fruition. Public goods should be publicly owned full stop. This means public universities are free or close to it for anyone who wants to go. You can still have private schools, but public schools that are already funded by the public's tax dollars should not then be sold back to us like a commodity. That just doesn't make any sense.

This also means the decommodification of housing. Now that one's going to be really, really difficult because this is so culturally entrenched, but increasing the availability of commodified homes that are available to buy or rent that are not on any sort of speculative for-profit market but solely exists to provide shelter.

So think about it this way, it's a model that says, rather than having the government subsidize building via giving tax credits or tax breaks to for-profit developers, because we for some reason assume they're insufficiently incentivized to build the houses we need, rather than giving tax breaks on mortgage interest to incredibly rich people who really don't need it, which again, just serves to incentivize more, borrowing more debt, more precarity, or literally sending down payments to young people, giving them cash… Rather than doing any of that complicated indirect stuff, use that money to directly fund the development of homes that can be bought or rented at-cost, like build a ton of supply. This is something that worked really, really well in Vienna, Austria. It's an interesting case study. We can put a little article in the show notes, but Singapore, obviously their government functions very differently than ours does. But there are interesting examples around the world where the government just invested directly in creating supply and their housing crisis kind of went away.

But again, that is a huge, huge paradigm shift from the way that we think of housing now, which is like a profit center, a profit center for someone, whether it's the family that lives in the house or the speculative investors who are buying up the inventory and then reselling it. I mean, if you think about the mortgage interest deduction alone, that costs the government $70 billion per year in lost revenues, particularly because the people that are benefiting most are those who are in the highest tax brackets. Who knows how much these new programs would cost? But if you just cut out the profit driven middlemen, this could be a major, major change. And it would mean we stop thinking about our homes like piggy banks.

But as long as we continue to treat housing as a for-profit good, I don't see any other way other than uphill battle of perverse incentives. And hey, if you completely disagree with me, email me and tell me why you think I'm wrong. Email me and tell me what I'm not seeing here.

But I can't see a way out of this paradox. Housing cannot be both affordable for everyone and an asset that is constantly rising in value. The point is markets are not the best way to provide the things that every single person in society needs to live a dignified life. But our kind of economic and cultural insistence that everything functions as a market actually introduces a lot of artificial markets in places where they would not naturally exist. And as a result, all sorts of suboptimal outcomes, particularly when the government has one foot in and one foot out.

It seems to me that these changes would really pave a path toward a more dynamic economy. One in which people are not using half of their income to keep a roof over their heads, or attempting to save hundreds of thousands of dollars for college. You'd have a more engaged workforce, you'd have more entrepreneurship as well. If we decouple healthcare from employment, you'd get less reliance on debt, less reliance on credit. You'd have more money velocity in the system as people would have higher wages, fewer necessary demands on those wages. Wealth probably would not be as concentrated with just a few people in industries. And I don't think it's a stretch to say we'd probably see more innovation too. The rate of which some researchers say has slowed substantially since the 1980s, and I don't think that's a coincidence.

That's all for this week. I'll see you next week on the Money with Katie Show. Our show is a production of Morning Brew and is produced by Henah Velez and me, Katie Gatti Tassin, with our audio engineering and sound design from Nick Torres. Devin Emery is our chief content officer, and additional fact checking comes from Scott Wilson.