Upvoted you for being the only response with numbers so far, even though I disagree with your conclusion.
The average price of a new car in 1980 was $7,200 [1]. In 2010, it's $28,400 [2]. That's an almost 300% increase.
Federal minimum wage in 1980 was $3.10 [3]. In 2010, it's $7.25, a 130% increase. That's lagging pretty far behind new car prices.
You point out that fewer people are earning minimum wage now than in 1980, but I would counterpoint that more people are unemployed now than in 1980 -- by almost double in terms of the real numbers of unemployed people (but "only" a rate increase from 7.1% to 8.4%) [4].
Although car ownership did increase from 1980 to 2010 [5], total new passenger car sales actually fell from 1980 to 2010 [6], which is closer to what the original article was actually discussing, and would support the conjecture that there are simply more cars on the road now than in 1980.
Further, the inflation-adjusted income of people aged 25 to 34 has stayed roughly level from 1980 to 2010 [7], which pretty well jives with so much of what I've read everywhere else that shows a tremendously overall weakened buying power amongst the youth demographics -- which, again, was what the article was trying to be about.
So, in summary: the price of a new car has gone up a lot but wages have not, especially if you're young. I'm pretty confident that this might be a factor in why young people aren't buying new cars.
Note that your “average price of a new car in 2010" is skewed wildly high for a number of reasons.
(1) The variety of mid-high end luxury cars (i.e. $50k+), and the number of such cars sold, far exceeds the choices available in 1980. For example, you now have a variety of choices if you want to drop >$50k on a pickup truck.
(2) We simply have more disposable income to spend on cars. That we’re so rich we can afford to spend a higher minimum wage multiple on a frivolous expense isn’t really a bad thing.
This of course also overlooks the fact that today, right now, you can buy a brand new car for about $7,200. (I just bought a Ford Ranger for about that, but there are numerous other choices in that range as well.) Even these very cheap cars are so much better in every tangible and intangible metric than even “decent” 1980's cars that it’s laughable. Step up to cars in the $15k range, and you’re able to buy cars that are better in just about every way, except for upholstery, than even luxury cars in from 1980.
I don't think it's useful to compare minimum wage, which is a fixed floor, with the average cost of a new car, which will float upward if rich people buy more expensive cars. I also don't know why you would limit yourself to new cars, since the least expensive cars are typically used--and cars have undoubtedly gotten more reliable since 1980. They last a lot longer.
Unfortunately I don't have the time to do the research and math myself to tease out these relationships.
If car ownership increased, but sales of new cars fell, it implies people are keeping the same car for more time.
The employment to population ratio is the same as it was during the 80's, and was considerably higher until the recent recession. In contrast, the fraction of people earning min wage has fallen.
Further, adjusting wages (rather than total comp) for inflation is a gratuitous statistical fallacy. One of the biggest drivers in "inflation" is an average of the price of the expanding basket of goods called "health care" [1]. For most people, this is paid for out of non-wage compensation.
[1] I.e., an MRI + laparoscopic spine surgery today costs more than back pain in 1980.
Quibbling about the exact source of inflation is irrelevant unless you want to claim that people are not buying cars or houses because they are buying health care instead.
And that is clearly not the case. According to government statistics [1], nearly one-third of those lacking health care coverage in the United States are young adults. The unemployment rate among this cohort is over 15 percent, and much higher if one looks at U6. And those who are employed are collecting lower wages which are not offset by higher benefits: less than 25 percent of young workers are provided health insurance through their jobs as compared with over 57 percent for the rest of the labor force.
Put simply, breaking down aggregate statistics into demographic chunks gives a much better picture of what is really happening. Younger works have it really hard these days. Older (employed) people are still doing OK and they are the ones pulling up the aggregate income figures. But for young people -- the focus of this article -- the data supports Thaumaturgy's argument that younger people these days are simply poorer.
People are buying cars and houses, as you'd know if you read my link. We currently have more cars/houses than ever before.
If inflation-adjusted compensation were down, this fact would pose a paradox and suggest we are incorrectly measuring inflation - however, the paradox is easily resolved by looking at total comp.
The AEI is a laughingstock in economic circles, and the paper you cite is a good example of the reason why. The authors do not say that more people are buying cars and houses, but argue that there is greater "housing consumption", a catchall term they use to cover rentals along with the accumulated value of detritus like hand-me-down appliances. The authors also redefine the idea of conventional housing to start including things like mobile homes and trailer parks in the mid-1980s.
Their "income" figures are equally shoddy since they include government transfers through programs like food stamps as part of the "market income" of poorer people by calculating the value of these products and services as if they were bought using salary. Leaving aside the morass of problems with the way this approach leads to grossly inflated aggregate income and is clearly intended to deflect from more accurate claims that most market wages are stagnant, their approach is totally off-topic in any discussion about the state of the labor market: what kind of jobs are available to young people; what those jobs pay in salaries and benefits; and what people can afford to purchase given those incomes.
You should also ask yourself why the authors go through such contortions to count things like rentals as purchases and IMPLY that housing is clearly affordable when there is a perfectly straightforward and universally-applicable measure of real estate affordability in the rent/buy ratio? The only reason the AEI does not use this statistic is that it is inconvenient, showing that housing costs have risen significantly across the United States in response to the housing bubble which started in the 1990s, Prices have still not collapsed even close the levels enjoyed by previous generations. So housing is NOT more affordable for people today than in the past. It is in fact significantly more expensive pretty much everywhere except Las Vegas:
Finally, since you explicitly make the claim that health care coverage has improved in your MRI/backpain comment and suggest that this is what people are spending their money on instead of cars and houses, it is interesting that the AEI paper explicitly excludes health care costs in its panegyric on how well-off American workers are, noting that "we exclude from consumption out-of-pocket health expenses because they are not closely tied to well-being." In other words, they realized that including basic health care expenses as income makes people relatively worse off now as compared to the past.
On a final point -- it is worth commenting that your other link to the labor participation rate shows the exact opposite of what you claim: the average labor participation rate is visibly much higher throughout most the 1980s than at present, except for a brief crash during the 1982 recession. If 2008 was anything like 1982, the participation rate now would be well into the 60s again and growing.
The authors do not say that more people are buying cars and houses, but argue that there is greater "housing consumption"...
See table 1 & 2. Housing consumption is measured in terms of square footage, number of rooms, fraction of homes owning a car, and other similar objective properties.
I didn't claim housing was "more affordable" (whatever that means), I claimed people have more of it.
Thaumaturgy's point was simple: rental costs have increased relative to wages and housing prices have increased relative to wages. It is no mystery why fewer young people are able to purchase real estate now than in the past. Or cars.
At worst your argument and sources conflate wages and income and standard of living in order to make insinuations that are statistically wrong. At best they can be interpreted as making the fairly non-controversial claim that the AGGREGATE standard of living in America has improved over the last 30 years, despite the fact that there has been a clear reduction in the relative purchasing power and affluence of younger Americans over the last 10 years.
If you have stats to back up your assertions, present them. So far all you've done is made ad-hominem attacks against the authors of my study and incorrect claims about it's contents.
Sources for health care and housing statistics are already listed above and I do not make a single ad-hominem attack on the authors. If you can point out where exactly you think I am misrepresenting their argument I will be happy to provide page references so they can disagree with you themselves.
To cite just one example as evidence that you need to read AEI "research" more carefully, you can find the authors mention the mid-1980s inclusion of mobile homes and trailer parks as new forms of "housing consumption" in the first paragraph on page 15. I give them some credit for mentioning this, since it should be obvious even to the uninformed that aggregate measures of "housing consumption" are going to go up when you find new forms of housing to count half-way through your survey.
As far as the reputation of the AEI goes, it stopped having any when it fired David Frum for being too far left [1]. Mainstream economists find the institute laughable [2], and even conservative economists like Bruce Bartlett mock its employees as "scholars" (his quotes) [3]. Poor quality ideological broadsides like the one cited above are the norm rather than the exception. Charles Murray's "The Bell Curve" is broadly derided for racism, while Kevin Hassett and James Glassman are ridiculed in the mainstream media for backing pump-and-dump schemes like "Dow 36,000" and for seeming to be unaware of such basic economic concepts as discounted cash flow.
"The AEI is a laughingstock in economic circles..." <- Ad hominem. See also the third paragraph of your most recent post.
"You should also ask yourself why the authors go through such contortions to count things like rentals as purchases..." <- Misrepresentation. The authors attempt to measure consumption of housing, as does thaumaturgy. You are the only person discussing real estate investments.
"Their "income" figures are equally shoddy since they include government transfers through programs like food stamps as part of the "market income" of poorer people..." <- Misrepresentation. The authors explicitly distinguish between earned and unearned income.
To cite just one example as evidence that you need to read AEI "research" more carefully, you can find the authors mention the mid-1980s inclusion of mobile homes and trailer parks as new forms of "housing consumption" in the first paragraph on page 15. <- Misrepresentation. The "re-definition" was done by the government, not the AEI. It's also irrelevant, since I compared square footage in 2009 to 1989 (i.e., both stats are after the redefinition).
So, in summary: the price of a new car has gone up a lot but wages have not, especially if you're young. I'm pretty confident that this might be a factor in why young people aren't buying new cars.
You're probably right, but that doesn't lead to a conclusion that the effect is caused by the economy.
In absolute dollars, cars are more expensive than they used to be, but for your dollar, you get much more car. That is, there are more features (stereo, A/C, power everything), more safety (both structurally as well as ABS, better restraints, etc.), more reliability, and much greater life expectancy [1] from a modern car. In short, it's a better investment.
If you've got enough money to meet the minimum threshold for buying a new car, you're going to get more for your money than you did in 1980. But that minimum threshold has definitely been raised. Part of this is from consumer demand; part of it (particularly in areas related to safety or emissions) is government mandated.
So it looks to me like the car market just evolved itself out of the reach of many young people.
[1] We just got a new car for the wife, trading in her old car at 200,000 miles. My car has 128,000 and is still running strong. In this age those numbers are expected; back then, a 200K mile car would be a minor miracle.
Incarceration rates: it's a hockey stick! Incarcerated people are all unemployed, and most of them, if in the job pool, are likely to be in the minimum wage or similar bracket.
The equivalent of a $3.80 minimum wage in 1980 is also nearly $9 today with inflation, so the group of true "minimum wage" workers is much larger for yet another reason.
The average price of a new car in 1980 was $7,200 [1]. In 2010, it's $28,400 [2]. That's an almost 300% increase.
Federal minimum wage in 1980 was $3.10 [3]. In 2010, it's $7.25, a 130% increase. That's lagging pretty far behind new car prices.
You point out that fewer people are earning minimum wage now than in 1980, but I would counterpoint that more people are unemployed now than in 1980 -- by almost double in terms of the real numbers of unemployed people (but "only" a rate increase from 7.1% to 8.4%) [4].
Although car ownership did increase from 1980 to 2010 [5], total new passenger car sales actually fell from 1980 to 2010 [6], which is closer to what the original article was actually discussing, and would support the conjecture that there are simply more cars on the road now than in 1980.
Further, the inflation-adjusted income of people aged 25 to 34 has stayed roughly level from 1980 to 2010 [7], which pretty well jives with so much of what I've read everywhere else that shows a tremendously overall weakened buying power amongst the youth demographics -- which, again, was what the article was trying to be about.
So, in summary: the price of a new car has gone up a lot but wages have not, especially if you're young. I'm pretty confident that this might be a factor in why young people aren't buying new cars.
[1]: http://www.thepeoplehistory.com/1980.html -- might not be a good source, I'm open to suggestions for something better.
[2]: http://www.ehow.com/facts_5977729_average-cost-new-car.html; this number seemed high to me, but http://www.usatoday.com/money/autos/2010-07-12-carprices12_S... corroborates it.
[3]: http://www.infoplease.com/ipa/A0774473.html
[4]: http://www.nidataplus.com/lfeus1.htm
[5]: http://en.wikipedia.org/wiki/Motor_vehicle#United_States -- because I questioned the partisanship of your source.
[6]: http://www.bts.gov/publications/national_transportation_stat...
[7]: http://nces.ed.gov/fastfacts/display.asp?id=77