Cost of living is our harshest tax | Opinion
Pills cost a lot of Benjamins these days. Photo illustration by Getty Images.
Sometimes I think about the one bedroom apartment in Hibbing, Minnesota, where my wife and I first lived. We weren’t married yet, just two kids playing house. The rent was about $325 a month. Our utilities cost even less.
It was the dawn of the 21st Century. She was a newspaper reporter earning about $22,000 a year. I was a college student and part-time radio reporter, earning half that much. It seemed like enough at the time. In fact, I even managed to pay off some of my student loans early.
The apartment overlooked a city park. Birds sang in the trees. It wasn’t a big place. The walls were thin, a fact that probably dismayed our neighbors more than us. We were doing fine.
In a dizzying few years, we bought a two bedroom house down the street. Our income more than doubled when she got a better paying job and I took her old job at the newspaper. Kids, successful career changes, savings, and a stable future all lay ahead.
Yes, we worked hard. And yes, we were lucky. But mostly, we could afford to live when we were just starting out. We could finish college, save money, and keep a roof above our heads.
Today, just over 20 years later, the rent and utilities on that same place almost doubled. The city sold the park to a developer who cut down the trees and built an assisted living facility within a few feet of our old bedroom window. If you work as a nursing assistant at that facility, you would struggle to pay rent on the place where my wife and I started our lives together. You’d probably have to look for subsidized housing, where demand outstrips supply.
And it’s not like the economy of Hibbing improved, which might have offered the promise of higher wages for new workers. It’s still an iron mining town adjusting to deindustrialization and rural economic decline. Hibbing’s population declined by less than 1% from 2010 to 2020.
And yet, the experiences of young people trying to start out in Hibbing aren’t terribly different from those in larger towns like Duluth or even big cities like Minneapolis. In fact, rental reform organizations are cropping up on the Iron Range with similar arguments to those you find in metro communities.
The upshot: Whether you live in an expanding area or not, your cost of living is rising faster than your wages.
The cost of life
We’ve all experienced economic inflation this past year. Consumer costs rise along with commodity prices, wages and corporate profits. Real estate is bonkers, and for a while last summer you had to fight people to buy a used car.
But the real shock is what’s happened over the past two decades. Income disparities rose at shocking levels and then accelerated the moment COVID-19 hit. The disruption benefited those with capital while setting back everyone else.
The result leads me to a chilling realization. Most of the avenues that allowed me to ascend from the lower class to the middle class 20 years ago are now closed to people in the same position I was. The rural media jobs I took, for instance, no longer exist.
To an even larger degree, birthplace and class determine access to opportunities. This reality requires more people to work retail and service jobs, mostly for big companies. College and rent cost much more. It’s a recipe for losing your 20s and 30s to a soulless grind.
We’re beginning to emerge from COVID-19 protocols again with knowledge that U.S. job growth is crushing all expectations. But none of the traditional measures of an economy correlate with the sense of anxiety and dread that seem to suffuse our politics right now. Part of that is probably because we don’t have a work problem. We have a cost problem.
As a percentage, cost takes much more from an average person’s budget than, say, taxes.
One of the most obvious robberies comes in health care. Americans pay more out of their wages for health care than any other country on earth. We just don’t have guaranteed access to that health care. We trust a private system run by extremely profitable companies to deliver our care as we or our employers can afford.
Since we’ve been mired in a pandemic, the result of this system has been all too clear.
Cancer, COVID-19, strokes and car accidents send people into the arms of crowd-funding sites. There, in one-finger keystrokes, they peck out a staccato prayer that their proletarian friends and family might close the impossible gap between what survival costs and what they actually earn.
I know some people who survived cancer or COVID while spending no more than a few hundred dollars out of pocket. Others were economically devastated. It’s all about the insurance plan. This is objectively evil, and solvable.
This aspect of cost will move front and center quite soon as temporary Medicaid assistance available as a COVID emergency measure expires this year. This will require action or additional suffering will ensue.
In fact, like some sort of high-powered expectorant, COVID expelled many political truths, not all of them negative. One remarkable observation is that paying to keep people out of poverty helps families and hastens economic recovery.
Money for everybody
Most of us experienced the effects of the federal COVID relief checks distributed under both Presidents Trump and Biden. Because most people got them, it was remarkable how few people complained about them. These payments kept workers afloat as the private and public sectors determined how to handle COVID. They also proved that people both spend and save money when given the chance.
These past few years provided fertile ground for research on universal basic income plans.
Periodically some reporter or politician will attempt to live on minimum wage to demonstrate how hard it is to do. The experiments always show that poverty is miserable, especially when you lack support from a family or social network. You could ask anyone who makes less than $20,000 a year how things are going, though, and you’d know far quicker.
The premise of universal basic income, or UBI, is that social and economic problems can be alleviated if all citizens — or at least all but the most wealthy — receive an income boost. The government sends UBI payments to all eligible recipients to be used however people wish.
The hypothesis runs that this reduces the burden on other social safety net programs and prevents the kind of poverty that spirals into more complex problems.
Last year, a Twin Cities experimental UBI program attempted to test that theory. A Dec. 23, 2021 story by Max Nesterak in the Reformer detailed the results. Recipients described receiving $1,000 per month as “transformational,” and that even though the money was used differently in most cases, it aided not just the finances, but the well-being of those who participated.
Another project in St. Paul randomly selected 150 people economically affected by COVID-19 for $500 monthly payments. Minneapolis is following up with its own program. Early findings show that the benefits people report go beyond just paying bills; the money allowed some recipients to invest in training for better career prospects.
Quality of life produces happier, better adjusted people. For instance, a Jan. 24, 2022 story by Jason DeParle for the New York Times explains stunning new data surrounding financial payments like these.
A study published in the Proceedings of the National Academy of Sciences followed children of poor mothers who received cash stipends during the first year of their children’s lives. The results showed improved brain activity in the children associated with stronger cognitive development.
In other words, the stress of poverty is bad for everyone, even babies who don’t know why their mothers are struggling but can feel it nonetheless. Addressing this problem directly will improve the outlook for the next generation.
Generally, UBI experiments show something hard to pin down in statistical terms: the psychological effect of having a dollar more, rather than a dollar less than what you need.
These experiments are only expanding. For instance, the BBC reported in February 2022 that the Welsh government will implement a widespread program for 18-year-olds leaving the care of their parents. Starting this summer, young adults in Wales will receive a living wage of about $2,100 per month for two years. It will be taxed as income and would affect eligibility for other income-based programs. Young people would also receive financial education to help them prepare for their future.
A flexible safety net
For the past several years I’ve been researching the early 20th Century in Hibbing, the same town where my wife and I first lived together. In fact, I read about the construction of our old building and the school that would later be torn down to make the park I remember.
One-hundred years ago, few of the social safety nets available today existed. Abject poverty was just that: complete, all-consuming and often deadly. But what helped people survive (and continue to reject textbook socialism, for those concerned about such things) was the fact that housing was affordable even for the poor.
Smaller homes and boarding houses were available, including many rental properties that today’s zoning laws prohibit. Multi-generational living wasn’t just common, it was the norm. Three generations living under the same roof eased both demand and cost for housing.
There’s no going back to the past; indeed, it wasn’t all that good in many ways. But analysis of the past, present, and future trends all at once might give us some good clues to solve current problems.
The past tells us that more varied low-cost options for housing is a way to help. This means moving away from high priced development schemes into creative, even (dare I say) conservative models using space already available.
The present tells us that universal basic income, especially for those most in need, shows considerable promise as a way to ease the worst aspects of poverty. In fact, it shows promise for the working poor and middle class alike. It increases savings, private investments and consumer spending.
And future projections tell us that automation, the gig economy and remote working will all become more common. This only further supports notions of housing reform and UBI. Human civilization is going through a mighty change and we need to plan for it. This will require all of us to suspend appeals to nostalgia and seek an acceptable quality of life for all our citizens.
In fact, the Brookings Institution published a Jan. 26, 2022 essay about new data showing that quality of life is the best determinant of whether Midwestern towns will experience rejuvenation or decline. That includes aesthetic factors like natural amenities, parks and entertainment, but also cost-based ones like transportation, child care and quality public schools.
If you read all this and are worried about the tax burden on everyday working people, I’d gently suggest that everyday working people are already paying all they have and more to maintain the broken system we’ve got. They may not pay it all to the government. But how is paying real estate developers, insurance companies and other big corporations all that much better?
The kids these days are getting married later and later. Not because love is dead, but because the costs are too damn high. Neglecting that fact just to coddle the richest and most secure members of our society will lead to disaster for all classes.
Unnecessarily high cost of living stands as our nation’s most unreasonable tax. Reducing these costs represents a goal of mutual benefit. Here we find the key to free us from our real shackles, the ones that most trouble the minds of working people.
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