Trends in spending
26/06/24 02:06
The Washington Post recently ran an article comparing how American households spent money in the 1970s and how households spend money today. Much of the analysis and the charts used to illustrate the article compared percentage of household spending in various categories. The report does not address how spending within a particular category has shifted. For example, spending on telephones and service has remained relatively steady around 3% of family spending. Fifty years ago, however, private ownership of telephones was very uncommon and the Internet was not yet a factor for private citizens. Today spending in that category has shifted to cell phones and internet access.
There were a few surprises for me in the article despite the fact that I have lived through all of the changes outlined. The span from the 1970’s to today is roughly the span of my adult life. I had forgotten that the typical US household used to spend more on clothing than health care. The increases in health care spending are interesting for several reasons.
Of course, one would expect my personal health care costs to increase as I age and the general aging of the population of the United States is likely a factor in the total spending, it is interesting to note that health care spending as a percentage of total household spending was generally static, even decreasing some years, prior to 2000. While spending on clothing has steadily decreased since the 1970s, health care costs declined slightly before beginning to trend upward in the 1980s, and then began to rise dramatically, peaking at the height of the pandemic before decreasing slightly since.
Another area that has shown consistent declines in percentage of household spending is food. The trend was basically downward until a slight uptick since the pandemic. I wonder if that uptick is primarily related to the cost of food delivery rather than actual grocery store prices, but that information was not available in the article I read.
I suspect that the primary driver in the decreased spending on food is technology. During the farm criss of the 1980’s it was clear to me that the number of people required to produce food was declining. Fewer farmers were producing more food at lower costs. This meant the death of many rural small towns as small farms became incorporated into larger farms. Larger farm equipment and other technological changes allowed fewer people to be more productive and literally cover more ground.
Technology has also been a major factor in health care. However, the increase in technology in health care has not resulted in lower overall costs. Automated billing and record keeping systems has not resulted in lower labor costs in health care. While many surgical procedures are less invasive and involve shorter hospital stays the costs of those procedures has continued to rise.
One surprise for me in the report was the decline in the cost of transportation as a percentage of household spending. There are definitely more cars per household these days. While families owning only one car were common in the 1970s, most households have at least two and many have three or more. In order for the numbers to come out the way they did in the report the cost per vehicle must have decreased despite the increases in fuel costs. This must have to do in part with the fact that people keep cars for longer periods of time. The cars of the 1970s rarely lasted a decade and major maintenance costs such as engine overhauls often cropped up around 50,000 miles. We now drive our cars to above 200,000 miles. There are a lot of cars that are more than 20 years old still going strong. The technology in cars has changed dramatically with computers.
Of course technology isn’t the only factor in the shifting numbers. There has been a shift in the makeup of households in the last 50 years. A major driver in the makeup of households is the dramatic rise in spending on housing. Young people are slower to create their own households. The number of retirees has increased steadily over the last 50 years. The study doesn’t have all of the information on family makeup, but I suspect that the average household is roughly the same size now as was the case in the 1970s but that the makeup is quite different. Families have fewer children but the children they have remain in the home for more years. More households have multiple generations as working families take on the care of elders in their homes. The cost of housing means it is harder for young adults to become independent and even middle aged adults remain dependent on the wealth of elders to cover housing costs.
On the topic of housing, I was surprised by a chart comparing renting to home ownership. As expected the cost of renting has remained higher than owning with a brief time prior to the collapse of the housing market in 2008 when renting and owning were almost the same. Since the great recession, however, rents have continued to rise dramatically while the total cost of home ownership has generally declined. Despite recent raises in interest levels, interest has generally been low in the 21st century so far.
A single article cannot begin to answer all of the nuances in questions about spending, but reading the article did spur some specific memories for me. Since we were married 51 years ago, I have personal experience with the time covered by the article. There are other trends over that time which may have affected costs, but without more data it is hard to say their impact. For example, we used to be careful to purchase clothing made in the United States, but that is nearly impossible in today’s markets. There is simply less clothing manufacturing in our country. And clothing is only one thing that we import at high levels. The number of recent immigrants we encounter in obtaining health care make it seem as if we import a lot of doctors, nurses and technicians from other countries. The number of imported automobiles continues to rise.
Certainly reading the article has not made me an expert, but it has inspired me to write a thousand words on the trends in household spending. I wouldn’t have done that 50 years ago.
There were a few surprises for me in the article despite the fact that I have lived through all of the changes outlined. The span from the 1970’s to today is roughly the span of my adult life. I had forgotten that the typical US household used to spend more on clothing than health care. The increases in health care spending are interesting for several reasons.
Of course, one would expect my personal health care costs to increase as I age and the general aging of the population of the United States is likely a factor in the total spending, it is interesting to note that health care spending as a percentage of total household spending was generally static, even decreasing some years, prior to 2000. While spending on clothing has steadily decreased since the 1970s, health care costs declined slightly before beginning to trend upward in the 1980s, and then began to rise dramatically, peaking at the height of the pandemic before decreasing slightly since.
Another area that has shown consistent declines in percentage of household spending is food. The trend was basically downward until a slight uptick since the pandemic. I wonder if that uptick is primarily related to the cost of food delivery rather than actual grocery store prices, but that information was not available in the article I read.
I suspect that the primary driver in the decreased spending on food is technology. During the farm criss of the 1980’s it was clear to me that the number of people required to produce food was declining. Fewer farmers were producing more food at lower costs. This meant the death of many rural small towns as small farms became incorporated into larger farms. Larger farm equipment and other technological changes allowed fewer people to be more productive and literally cover more ground.
Technology has also been a major factor in health care. However, the increase in technology in health care has not resulted in lower overall costs. Automated billing and record keeping systems has not resulted in lower labor costs in health care. While many surgical procedures are less invasive and involve shorter hospital stays the costs of those procedures has continued to rise.
One surprise for me in the report was the decline in the cost of transportation as a percentage of household spending. There are definitely more cars per household these days. While families owning only one car were common in the 1970s, most households have at least two and many have three or more. In order for the numbers to come out the way they did in the report the cost per vehicle must have decreased despite the increases in fuel costs. This must have to do in part with the fact that people keep cars for longer periods of time. The cars of the 1970s rarely lasted a decade and major maintenance costs such as engine overhauls often cropped up around 50,000 miles. We now drive our cars to above 200,000 miles. There are a lot of cars that are more than 20 years old still going strong. The technology in cars has changed dramatically with computers.
Of course technology isn’t the only factor in the shifting numbers. There has been a shift in the makeup of households in the last 50 years. A major driver in the makeup of households is the dramatic rise in spending on housing. Young people are slower to create their own households. The number of retirees has increased steadily over the last 50 years. The study doesn’t have all of the information on family makeup, but I suspect that the average household is roughly the same size now as was the case in the 1970s but that the makeup is quite different. Families have fewer children but the children they have remain in the home for more years. More households have multiple generations as working families take on the care of elders in their homes. The cost of housing means it is harder for young adults to become independent and even middle aged adults remain dependent on the wealth of elders to cover housing costs.
On the topic of housing, I was surprised by a chart comparing renting to home ownership. As expected the cost of renting has remained higher than owning with a brief time prior to the collapse of the housing market in 2008 when renting and owning were almost the same. Since the great recession, however, rents have continued to rise dramatically while the total cost of home ownership has generally declined. Despite recent raises in interest levels, interest has generally been low in the 21st century so far.
A single article cannot begin to answer all of the nuances in questions about spending, but reading the article did spur some specific memories for me. Since we were married 51 years ago, I have personal experience with the time covered by the article. There are other trends over that time which may have affected costs, but without more data it is hard to say their impact. For example, we used to be careful to purchase clothing made in the United States, but that is nearly impossible in today’s markets. There is simply less clothing manufacturing in our country. And clothing is only one thing that we import at high levels. The number of recent immigrants we encounter in obtaining health care make it seem as if we import a lot of doctors, nurses and technicians from other countries. The number of imported automobiles continues to rise.
Certainly reading the article has not made me an expert, but it has inspired me to write a thousand words on the trends in household spending. I wouldn’t have done that 50 years ago.
