[Caelon]

andyt andyt:

I think you're mixing up your stats too. You say a good wage is 80k, I doubt that's

$1:

the wage for a university grad working an entry level position in Alberta

which you said was $14,000 in the 70's. 80k is almost double the national median wage for an individual. In Alberta, the median family income is 83,560. You'd have to dig up family median income in Alberta for the 70's to make a direct comparison. In BC median family income is only 66,700. Housing we've been told has gone up drastically compared to income.

Everytime I found a median wage for the 70's it was expressed in 2009 dollars for comparison purposes. Doesn't help when you are talking in say 1977 dollars. Alberta's economy is more skewed by the oil patch today than it was in the 70's. Recent Engineer grads are able to claim a salary of $80,000. Similar numbers happen in the IT field. A new 4 year degree teacher makes a little over $58,000, but after 10 years experience that number climbs to $92,000. Teachers with 5 years of university start in the low 60's. Teachers are not usually representative of the better salaries for university grads.

We are playing with semantics. Remember the definition was a 'good' salary not average, low or high. $14,000 in 76 or 77 would be a grad working for the provincial government. Wage increases at the time were about 10% per year, so numbers can change significantly over a couple of years.

[andyt]

Brenda Brenda:

FWIW...
http://blogs.ubc.ca/newdealforfamilies/ ... elease.pdf

$1:

The researchers found that the average household income
for young Albertan couples has increased by only 12 per cent since the
mid-1970s (after adjusting for inflation) even though the share of young
women contributing to household incomes today is up 42 per cent

So how much has the average house price increased there - I bet it's more than 12% after inflation. But we don't have that stat.

Unfortunately the last line is a red herring. It's referring to the number of women contributing to household incomes, not that their monetary contribution is up 42%. At least that's the way I read it.

Also, using average incomes isn't as accurate as median incomes. You could have Warren Buffet move to Alberta, and a few other high income earners, and average income would increase without anybody else being better off. There's no doubt that the 1% is doing better now than the ever have since the depression, their share of national income has doubled. But that's not what this discussion is about, but the average, sorry median, person.

[andyt]

Caelon Caelon:

$14,000 in 76 or 77 would be a grad working for the provincial government. Wage increases at the time were about 10% per year, so numbers can change significantly over a couple of years.

That was my point - we'd have to compare apples to apples. So what was the average salary for a '77 grad, what is it for a '12 grad and take inflation into account. By all accounts, housing prices have drastically outstripped this increase, while prices for food and electronic shit have become relatively lower. OTOH, you need more of that electronic shit to make it in today's world. In '77 you had a land line, that's it.

[Brenda]

andyt andyt:

Brenda Brenda:

FWIW...
http://blogs.ubc.ca/newdealforfamilies/ ... elease.pdf

$1:

The researchers found that the average household income
for young Albertan couples has increased by only 12 per cent since the
mid-1970s (after adjusting for inflation) even though the share of young
women contributing to household incomes today is up 42 per cent

So how much has the average house price increased there - I bet it's more than 12% after inflation. But we don't have that stat.

Unfortunately the last line is a red herring. It's referring to the number of women contributing to household incomes, not that their monetary contribution is up 42%. At least that's the way I read it.

Also, using average incomes isn't as accurate as median incomes. You could have Warren Buffet move to Alberta, and a few other high income earners, and average income would increase without anybody else being better off. There's no doubt that the 1% is doing better now than the ever have since the depression, their share of national income has doubled. But that's not what this discussion is about, but the average, sorry median, person.

$1:

While household incomes increase slightly, young
families simultaneously struggle with the costs of living because housing
prices increased 58 per cent. Alberta is now second only to BC in terms of
the high average cost of housing.

If you'd read the link, you'd have known.

[bootlegga]

Caelon Caelon:

Several people have made good points. I put off responding to the thread as I did not have time to read through the posts and when I came back there were even more, so I postponed again.

The thred can be split inot two camps. The first is the boomers had lots of advantages and had it easy compared to today. The second is the current generation are whiners and need to get off their duff.

As a boomer I would like to dispute the first. House prices are related to wages. So while you could buy a house in the late 70's for under $80,000 (Alberta market) a 'good' wage for someone in their 20's was about $14,000 or 5.7 times annual salary. Today the 'good' wage is closer to $80,000 and the house $400,000 (lots for less) or 5 times annual salary. Interest rates were about 11% on either side of the 22% peak compared to interest rates on locked in mortgages of 2.79% to 3.29% today. A high leveraged mortgage was a minimum of 10% down not 5%. New grads were complaining about the lack of opportunity as the older generation had the job market locked up. No experience yielded no job. Education with 2 to 3 years of experience yielded a job. I took my lumps at low paying positions to get to the point of getting the 'decent' wage entry level position.

Don't the last 4 sentences sound like a summary of today's new grad complaints? It is the same now as it was then. In fact when I was complaining about the problems of getting the entry level job in my field an older person was telling me he thought it was even worse when he started. Nothing has really changed in 60 years.

So that means there is an element of truth to the second position regarding the current generation. There are no handouts and no free lunches. You need to sacrifice and put in the time to earn the credentials for an employer to take the risk of hiring you.

As for the article Regina posted, regarding the St Albert couple, the writer jumped around trying to make a point, but lacked a logical arguement to support his position. Despite the lack of real detail the writer showed the couple was making one major mistake that hinders them in establishing RSP, RESP or an emergency fund. He interpreted the mistake as the couple doing the right thing to get ahead. Lay people should not write articles on finance as they usually do not have sufficient knowledge to interpret the facts and come to the wrong conclusion.

The biggest problem with your argument is your description of a 'good wage'. It's subjective, not objective. While you may think a good wage is $80k, I certainly don't. I'd say a good wage is $150K or thereabouts. Others might say it's 60k. It all depends on what a person is earning and where they are in life.

As a student, I thought 60k was huge, but once you buy a house or condo in Alberta (Edmonton in my case), it doesn't leave a lot leftover for everything else - and I dont own a samrtphone, a fancy car, lots of expensive toys or fancy vacations, have tons of credit card debt or anything else extravagant. Likewise, my buddy who is an engineer, feels he needs a minimum six figure income because his wife doesn't work and they have three children. He earns close to 150k annually.

If you're going to talk numbers like that, you need real hard figures like median wages, not one's opinion of what a good wage is.

The fact is that, in many ways, most Boomers had it easier than the Xers and the Yers do. The government paid far more of their post-secondary than they do now, the job market was better, and real estate prices were much lower.

If you want to get a good grip on the difference inflation makes, uses this site;

http://www.bankofcanada.ca/rates/relate ... alculator/

As I said previously, my parents bought a house in 1976 for about 60k, inflation adjusted, that is 239k today, yet the market value for that same house is close to 350k. To me, that says that this generation has it a little tougher than the previous ones did when it comes to buying real estate.

Today, students pay close to 30% of the cost of a post-secondary education, as recently as 1992, it was less than 10%. That might not sound like much, but over the course of a four year degree, it can add up to tens of thousands of dollars. For example, I paid about $1300 in tuition in 1991 at the UofA - by 1997, the same tuition was over $3000. And if you've read the paper at all, tuition here in Alberta increases by 3-6% every year, so it's not like fees are staying the same either.

Tack on things like TFSAs, which are a savings tool almost specifically geared towards the Boomers - so that they can squirrel away even more of their gains tax-free. Not too many Yers (or even many Xers I know for that matter) can set aside a full 5k a year for a TFSA, especially given their huge debt servicing costs (mortgage and student loan).

Did Boomers have difficult times? Sure, the early 80s were brutal, but by then, most Boomers had been in the workforce for at least a few years (early Boomers had been working for more than a decade by then), which mitigated the effects somewhat.

But by and large, the Boomers had it easier when compared to the generations following them - what's worse, instead of sharing that largesse, they are pulling back, hoarding them. They are demanding low taxes to protect their nest eggs (creating massive deficits), staying in jobs longer - denying 'good jobs' to those following them, etc. Hell, even big pharma is getting in on it and creating a whole new generation of pills so Boomers can keep their hard-ons for a few more years.

However, as I've said several times, today's youth don't do anything to help themselves when just over one-third of them vote (compared to almost three-quarters of Boomers). If they want a better deal, they need to speak up at election time too.

[Caelon]

bootlegga bootlegga:

If you want to get a good grip on the difference inflation makes, uses this site;

http://www.bankofcanada.ca/rates/relate ... alculator/

As I said previously, my parents bought a house in 1976 for about 60k, inflation adjusted, that is 239k today, yet the market value for that same house is close to 350k. To me, that says that this generation has it a little tougher than the previous ones did when it comes to buying real estate.


Tack on things like TFSAs, which are a savings tool almost specifically geared towards the Boomers - so that they can squirrel away even more of their gains tax-free. Not too many Yers (or even many Xers I know for that matter) can set aside a full 5k a year for a TFSA, especially given their huge debt servicing costs (mortgage and student loan).

Did Boomers have difficult times? Sure, the early 80s were brutal, but by then, most Boomers had been in the workforce for at least a few years (early Boomers had been working for more than a decade by then), which mitigated the effects somewhat.

But by and large, the Boomers had it easier when compared to the generations following them - what's worse, instead of sharing that largesse, they are pulling back, hoarding them. They are demanding low taxes to protect their nest eggs (creating massive deficits), staying in jobs longer - denying 'good jobs' to those following them, etc. Hell, even big pharma is getting in on it and creating a whole new generation of pills so Boomers can keep their hard-ons for a few more years.

Okay let's look at your hard numbers. The 1976 home is worth $239,000 in today's numbers and was bought with an 11% 25 year mortgage. To keep it simple we will amortize the entire amount. So monthly payments are $2300 and the 25 year interest cost is $451,127 or a total cost of $690,127. Today you tell me the equivalent house is $350,000 and interest rate are 3% (some are less and some are more, but 3% is pretty common) so payments are $1656, and the 25 year interest cost is $146,908 or a total cost of $496,908.

Gee looks like it is quite a bit easier today for buying a house.

TFSA's are actually geared to the younger person. On a net after tax return the TFSA is a better saving instrument when you are under 45. The RSP may be better when you are over 45. This is because your peak income years tend to be after 45 and your tax rate at withdrawal will be less.

The real problem for the younger generations is being able to afford all the social safety net programs for baby boomers who become seniors. Not only will the ratios of seniors to workers be different than it was in the 70's, seniors are living much longer. By living longer they will use more resources plus with medical advances the cost of their last 5 years of medication management is considerably larger.

The liability is significant. Now we also have a gowing voting block of seniors and as you pointed out they exercise their franchise. Any government that wants to stay in power or gain power will need to have policies that appeal to seniors. Grey Power!!

[Alta_redneck]

dino_bobba_renno dino_bobba_renno:

After reading the first paragraph or so I couldn't even be bothered to finish reading the whole thing. Talk about a load of horse sh*&.

I remember back when I was in my early 20's, the labor market was saturated with Babyboomers who were still in their late 40's and early 50's. No one was hiring and what little jobs there were in the city were low paying labor positions and there was a ton competition for even those. And on those jobs you worked your ass off because there was all ways someone who would be more than happy to take your place if you didn't like it. Not to mention it took years before you got to advance.

Christ now a days I see wet behind the ears 26 year olds making 80k + a year. They have nothing to complain about. Talk about the generation of entitlement.

Yeah, I didn't read much more than that either Dino, every whiner here thinks it's all our fault for the high taxes because we set up our own sweet deal in life, but most of them think spending $Millions on free crack pipes and safe injection sites is a good thing.

dino_bobba_renno dino_bobba_renno:

Christ now a days I see wet behind the ears 26 year olds making 80k + a year.

And a lot of those people quit high school 8 or 10 years ago to get their life's started.

[Scape]

Alta_redneck Alta_redneck:

Scape Scape:

Baby Boomers got a sweet deal, no one else will get the ride they got.

Maybe my brain isn't working up to snuff cause I worked my ass off to have what I have today, so could you remind me what this sweet deal consisted of?

I can remember getting a bit of a subsidy on my power bill for awhile when Ralph deregulated the electricity industry in AB.

Oh, and I can remember getting a 2 or 3% lower interest rate on my mortgage when they were up around 24% back in the 80's.

Is there something else I'm missing?

Yes.

Simple put the problems are getting much larger then any of us can hope to grapple with, myself included. I will attempt to break it down but I would recommend when you get a chance is to look at the frontline documentary Money, power and wallstreet. Even that 4 hour doc just touches the surface but the reality of the gods we worship have changed and they are vengeful fickle gods.

Right now the banks need to be reformed before they eat the economy. 2009 we almost all bought the big one and we are still very close to collapse. Our economy has adjusted to the reality but only as fast as the system will allow which is at a glacial pace and no where near fast enough to keep up with the pace of change required to keep the economy from imploding. We see it in the penny being removed or the retirement age adjusted to 67 or droves of youth spending billions in student loans on a nonexistent job market. All of these are symptoms of a much larger problem of bank reform.

It why I ran on for office in 2004. NAFTA and the evils of chapter 11 was only the tip of the iceberg. The simple fact is what happened in 2009 can happen again and we may not be able to bail out of it and it is that eventuality that is turning the economy to shit. Greece is failing, Spain is next and a major collapse in the EU will cascade to the US and take out their banks as well which hold over 57% of the US economy. That will mean the US goes down and the entire global economy will follow.

The great crash in the 1930 lead to reform and we should be doing the same today now but without political will we won't do it until it is too late. Simply put when banks are in the game of finance for themselves and not in the industry of lending they will eat us to make profits. The banking system of today runs on bonuses and to hell with the rest. Even if they make trades they know will dam the client down the road they have made their cut. You exacerbate that to an entire industry and you end up taking down nations.

The whole baby-boomer vs the generation of today angst is eclipsed against that backdrop. The kids are canaries in a coal mine here, they know the system isn't working anymore but don't know why and are acting out the only way they know how. Theses student protests are only going to grow like the occupy moment because people can't carry on with the statuesque. Meanwhile the banks are stealing everyone future (including their own) in pursuit of money now at the expense of the entire fiscal ecology. The cracks in the system are showing in the form of protest and they are only going to become more pronounced as governments are forced to austerity measures to maintain their debt payments.

At some point this has got to stop or it will be stopped for us.

[Thanos]

Removing the banks and the profit motive from the equation seems reasonable. Turn all student loans into government grants that are payable back through the regular income tax filing process. Start at a less difficult payment level of $500 to $1000 per year, with no interest applied at all. Taxpayer gets the money back, loaner isn't broken with payment levels they're not capable of meeting. Win-win all around for everyone.

I'd support this, even if I still think that the basket-weaving grads would still have problems paying back even a lousy $500 per year. Yes, some degrees are that damn useless.

[Scape]

Problem is to do that the bankers have the upper hand with endless lobbyists and no political will to stop them. It's why Glass–Steagall Act was allowed to expire and the Volker rule has so many exemption to it to make it practically useless.

[ShepherdsDog]

Thanos Thanos:

Removing the banks and the profit motive from the equation seems reasonable. Turn all student loans into government grants that are payable back through the regular income tax filing process. Start at a less difficult payment level of $500 to $1000 per year, with no interest applied at all. Taxpayer gets the money back, loaner isn't broken with payment levels they're not capable of meeting. Win-win all around for everyone.

I'd support this, even if I still think that the basket-weaving grads would still have problems paying back even a lousy $500 per year. Yes, some degrees are that damn useless.

And the NDP have only so many positions open in their offices.

[bootlegga]

Caelon Caelon:

bootlegga bootlegga:

If you want to get a good grip on the difference inflation makes, uses this site;

http://www.bankofcanada.ca/rates/relate ... alculator/

As I said previously, my parents bought a house in 1976 for about 60k, inflation adjusted, that is 239k today, yet the market value for that same house is close to 350k. To me, that says that this generation has it a little tougher than the previous ones did when it comes to buying real estate.


Tack on things like TFSAs, which are a savings tool almost specifically geared towards the Boomers - so that they can squirrel away even more of their gains tax-free. Not too many Yers (or even many Xers I know for that matter) can set aside a full 5k a year for a TFSA, especially given their huge debt servicing costs (mortgage and student loan).

Did Boomers have difficult times? Sure, the early 80s were brutal, but by then, most Boomers had been in the workforce for at least a few years (early Boomers had been working for more than a decade by then), which mitigated the effects somewhat.

But by and large, the Boomers had it easier when compared to the generations following them - what's worse, instead of sharing that largesse, they are pulling back, hoarding them. They are demanding low taxes to protect their nest eggs (creating massive deficits), staying in jobs longer - denying 'good jobs' to those following them, etc. Hell, even big pharma is getting in on it and creating a whole new generation of pills so Boomers can keep their hard-ons for a few more years.

Okay let's look at your hard numbers. The 1976 home is worth $239,000 in today's numbers and was bought with an 11% 25 year mortgage. To keep it simple we will amortize the entire amount. So monthly payments are $2300 and the 25 year interest cost is $451,127 or a total cost of $690,127. Today you tell me the equivalent house is $350,000 and interest rate are 3% (some are less and some are more, but 3% is pretty common) so payments are $1656, and the 25 year interest cost is $146,908 or a total cost of $496,908.

Gee looks like it is quite a bit easier today for buying a house.

TFSA's are actually geared to the younger person. On a net after tax return the TFSA is a better saving instrument when you are under 45. The RSP may be better when you are over 45. This is because your peak income years tend to be after 45 and your tax rate at withdrawal will be less.

The real problem for the younger generations is being able to afford all the social safety net programs for baby boomers who become seniors. Not only will the ratios of seniors to workers be different than it was in the 70's, seniors are living much longer. By living longer they will use more resources plus with medical advances the cost of their last 5 years of medication management is considerably larger.

The liability is significant. Now we also have a gowing voting block of seniors and as you pointed out they exercise their franchise. Any government that wants to stay in power or gain power will need to have policies that appeal to seniors. Grey Power!!

Well, the data I've found is that the interest rate in 1976 was 9%, not 11%, so payments would drop somewhat, although still be higher than those of today. Current interest rates also fluctuate and mortgages bought mid-2000s are much higher than the 3% of 2012. My own condo mortgage for example, is just over 5% actually. Finally, interest rates fluctuate and for a good decade of your proposed 25 year amortization, rates were much lower than 9%. So the numbers might actually be closer than your math suggests.

However, even if your numbers are accurate, there are other factors that calculation doesn't take into account. Wages have stagnated over the past 35 years, and after inflation, wages have actually shrunk in many industries. That means, while it might be cheaper to finance a home now than it was 1976, people also have less money to pay for it.

Then you need to tack on higher student loan debt, because of funding cuts to post-secondary education starting the mid-90s. For example, I had friends who graduated in the early 90s with a few thousand dollars of student debt - I finished in 1999 with over $20,000 (and I worked while pursuing my degree). Another thing to note is that student loans are no longer wiped out by a bankruptcy (it did until the mid-90s) - which means even a bankruptcy provides no relief from high debt loads. I don't have a problem with that per se, but I do find it yet another symptom of how society is tilted in favour of the Boomers (who could escape student debt via bankruptcy).

TFSAs might be better suited to young people, but with poor-paying jobs (compared to what Boomers had in the 70s) and high levels of student debt, how can they afford them? Again, it is an investment tool for Boomers to hide their assets from taxation - which further compounds the government's revenue situation when it comes to paying for the Boomer's rapidly increasing health care costs.

[andyt]

bootlegga bootlegga:

However, even if your numbers are accurate, there are other factors that calculation doesn't take into account. Wages have stagnated over the past 35 years, and after inflation, wages have actually shrunk in many industries. That means, while it might be cheaper to finance a home now than it was 1976, people also have less money to pay for it.

They're not accurate. Caelon claims that a good job in '76 earned 14k while it now earns 80k. He's way off on his numbers. As you say, earnings for the middle class have stagnated, actually dropped for the bottom 20%. For the top 20%, Caelon is right - things are better than ever. So it depends on what stratum of society you want to look at. Since the subject here is young adults - ie the average, his analysis doesn't hold. It conflicts with what people who have access to the hard data have bee telling us.

[bootlegga]

Thanos Thanos:

Removing the banks and the profit motive from the equation seems reasonable. Turn all student loans into government grants that are payable back through the regular income tax filing process. Start at a less difficult payment level of $500 to $1000 per year, with no interest applied at all. Taxpayer gets the money back, loaner isn't broken with payment levels they're not capable of meeting. Win-win all around for everyone.

I'd support this, even if I still think that the basket-weaving grads would still have problems paying back even a lousy $500 per year. Yes, some degrees are that damn useless.

Your idea certainly has merit - they already do something similar for paying back RRSPs used to finance homes and education expenses. I'm sure it would be an easy thing to implement.

When I had student loans, I never objected to paying interest, I just hated that the bank just created a loan at the highest rate possible and started demanding money from you - I got nailed with 10% in 1999 - which worked out to almost $400 monthly for ten years!

The other problem is if you do get a crappy job and don't make much, you can apply for 'interest relief', a three month period in which the government pays the bank your interest, but doesn't pay the principal.

On paper, it sounds okay, but if you have an RRSP, you have to cash it in to qualify, if your car is more expensive than X, they expect you to sell it and buy a cheaper one, etc. There are so many damned hoops to jump through it's hardly worth it, and what the hell good is a three month window anyways? It should be longer term than that, in my opinion, six months at least or even a year.

About the only good thing nowadays IMHO is that student loan interest is tax-deductible - although on most entry-level salaries, tax isn't that much to begin with.

The student loans system in the UK sounds pretty good - if you earn less than a benchmark wage, you are not expected to make payments, during which time interest does not accrue. Once you hit a certain salary, interest starts to accrue and you make payments, but if you get laid off or something, it goes back into no payment mode. To top it off, the term can be as long as 20 years, so payments aren't crippling.

As for those "basket-weaving" degrees, most of those guys make a livable wage and would be able to make those sorts of payments - they just don't hit six figures like tradespeople do. The only ones who might struggle are the artists types who are living hand-to-mouth while pursuing a career in stage acting or painting or something like that. But I think society needs those types of people just as much as we need welders and pipefitters and everyone else - the only difference is their perceived contribution.

I, for one, don't feel like living in a drab industrial society that resembles communist Russia because we focus only on the physical and nothing on the psychological. Art most definitely has a place in our society.

[OnTheIce]

bootlegga bootlegga:

Well, the data I've found is that the interest rate in 1976 was 9%, not 11%, so payments would drop somewhat, although still be higher than those of today. Current interest rates also fluctuate and mortgages bought mid-2000s are much higher than the 3% of 2012. My own condo mortgage for example, is just over 5% actually. Finally, interest rates fluctuate and for a good decade of your proposed 25 year amortization, rates were much lower than 9%. So the numbers might actually be closer than your math suggests.

However, even if your numbers are accurate, there are other factors that calculation doesn't take into account. Wages have stagnated over the past 35 years, and after inflation, wages have actually shrunk in many industries. That means, while it might be cheaper to finance a home now than it was 1976, people also have less money to pay for it.

Given what you've said, interest rates at between 9-11% in 1976 and the fact that they went up to 22% in the early 80's; also the fact that wages have stagnated over the last 35 years....

A boomer who purchased their home in 1976 would have it paid off in 2001 making the lowest rate they paid at 7% interest (2001) and some as high as 22% (1981) during the 80's.

The average interest rate (12 months) from 1976 was 11.75% for a 5 year mortgage. A high of 12% and a low of 10.75%.

Buying your house in 1976 on a 5 year term meant you came up for renewal in 1981 at a rate of 21.75% at it's peak or an average rate from '81 at 18.3%.

1976

That $60,000 house in 1976 would be $238,000 in 2012 dollars.

Using an average of all the rates from Jan 1976 to today, the interest rate would be 11.1%.

Monthly Payment=$2307
Total Interst Cost= $454,000

2012

$300,000 house in today's market.

3.19%

Monthly Payment=$1449
Total Interst Cost= $134,000

That makes monthly costs ~37% lower today and the interest costs are down 70%.