Fun with the Gallup survey on “standard of living”

In economics, the term “standard of living” generally corresponds to something like real income.  A recent Gallup survey asked people about their standard of living, and Matt Yglesias and Karl Smith drew some inferences that seem to go way beyond the data.  Here’s Matt Yglesias:

What you’re seeing here is that being unemployed or being seriously poor is terrible. We ought to be working like crazy to reduce the number of people in that position.

Karl Smith makes this observation:

Losing your job is on par with losing your marriage in terms of life satisfaction. Being poor doesn’t trail far behind. These are tragedies of human suffering and they deserve our attention.

Just so I don’t get accused of insensitivity, I don’t doubt that being poor and/or unemployed is very unpleasant.  So I’m not really questioning their conclusions, or even their policy proposals (I also favor progressive taxes, monetary stimulus, etc.)   I just don’t see how they can reach any conclusions based on this survey.  It’s not clear whether the survey is asking “are you poor?” or “does is suck to be poor?”

But let’s say I’m wrong and they’re right, that these results are meaningful.  I’m willing to play along.  So let’s look at some of the results they reported, and some they didn’t report:

Category      Standard of Living:

Everyone                  33

Young (18-29)          64

Hispanic                    44

Democrat                  36

Black                         36

Republican               33

White                        31

> 65 years old         23

50-64 year old        17

< $24k income        14

unemployed              8

What can we make of this?  There is extensive research on happiness, and this doesn’t really seem consistent with the results.  Old people are actually pretty happy.  And look at the gap between the below $24,000 and age 18-29!?!?  There is massive overlap between those two categories.  I’m not saying the gap is impossible, but there is certainly something strange going on.  There’s also a big overlap between poverty and being non-white.  Yet minorities report relatively high living standards.

Are we to take seriously the gaps between the races?  I can’t imagine many progressives looking at this and arguing that we need to close the standard of living gap between blacks and Republicans, or hispanics and whites.  So how can we take any of it seriously?

BTW, Mexico scores relatively high on international happiness rankings, and that might explain part of the anomalous result for hispanics.  But I am also pretty sure that whites usually score higher than blacks in America, so I’m very suspicious of that reported gap.

To conclude, what did I know about inequality before reading the posts by Yglesias and Smith?  That poverty and unemployment suck, and policymakers should try to do something about it.  And what have I learned from reading the survey they link to?  Not very much.

Maybe that’s unfair, if I try to do partial derivatives in my head perhaps I’ve learned that it really, really, really sucks to be a 58-year old poor white Republican.

PS.  Both Yglesias and Smith discuss the standard of living question.  Interestingly, Gallup also reports results from a “satisfaction” question, which gives very different results for some groups, but not others.  Both bloggers talk about the survey results as if they are “life satisfaction” results, even as they focus solely on the standard of living question.  In fairness, the worst off heavily overlap, so their conclusions wouldn’t be strongly affected.  It’s just odd that they focused on the question with the really weird results.

Living standards: The CPI vs BU dorms

In this post I am going to argue that college dormitories provide a better way of estimating real income than the CPI.

Each year I get more like my dad, who was a reactionary liberal.  He voted liberal but always complained about how easy things were for the younger generation.  Every time I drive into Boston I think about him as I pass by a 3o story tower with large floor to ceiling plate glass windows.  There must be fantastic views of the Charles River, Cambridge, and downtown Boston.  The newest Trump Tower?  No, it’s the newest Boston University dorm.  And it’s not unique, nearby are two more towers that are slightly older, slightly lower, and slightly less elegant.  I can only imagine what it would be like to live in one of those high rise towers.  Imagine the parties; students strolling around with martinis in hand, discussing all sorts of fascinating topics.  What a life!  Here is a picture if you don’t believe me.  (Here and here are some views.)

And it isn’t just BU, which is an above average university.  The new dorms at Bentley are also much nicer than the old ones, and I’m told this trend is going on all across America.  When I ask my colleagues why students need such fancy digs, they tell me that things are different now.  (I first entered the UW in 1973.)  Our generation often grew up in modest ranch houses with one bathroom.  We doubled up with bunk beds.  Now students grow up in 4 or 5 bedroom houses, each kid has their own bedroom.  There might be three or four bathrooms.  Granite counter-tops, big screen TVs.  Two car garages.  Many students now drive their own car to high school.

I’m told colleges have to do this or they will lose students to other schools.  My colleagues say “Times change, just deal with it and stop being such a reactionary.”  (Well the last sentence I made up; my younger colleagues are too polite to say it, but that’s what they are thinking.)

On the other hand David Johnston claims that if we deflate incomes by the CPI, it seems like were are living in a poorer country than we inhabited in 1973:

America grew and grew during this era. GDP, adjusted for inflation and increased population, was up 227 percent. But wages and fringe benefits did not grow with the economy. For most workers, they fell. Wages peaked way back in 1972-1973, were on a mostly flat trajectory for more than two decades, rose briefly in the late 1990s, and then fell sharply in the new century. … Millions are out of work, and the jobs they once held are … not coming back. And even if the Great Recession is coming to an end, we face years of jobs growing more slowly than the working-age population, which could radically transform America’s culture, work ethic, and sense of progress.

I don’t know what to make of these arguments.  I find it hard to think of a single area where American living standards aren’t obviously much higher than 1973:

1.   Houses are bigger and have more baths.

2.  Electronics are so much better it is ridiculous.  100 times as many TV channels.

3.  We take jet vacations to Disney World or Europe, not car trips to a state park.

4.  Granite counter-tops vs. Formica.

5.  Thai or sushi restaurants vs. meat and potatoes “supper clubs.”

6.  Better medical care and longer life expectancy.

7.  Cars with paint that doesn’t rust out in three years.

8.  For the lower middle class: Wal-Mart vs. K-Mart.

9.  No more purple shag carpets.

10.  U2/Radiohead vs. Dylan, the Beatles and the Stones.

OK, pop music is an exception, but nine out of ten ain’t bad.  And there is lots more I could point to.  We have much cleaner air and water.  Less racism, sexism and homophobia.  Much less violent crime.  Is the composition of college students different?  Yes, but that actually strengthens my argument.

So what do you guys think?  Do you agree with me that dorm quality is the best proxy for living standards?  Or are you going to take what has been the intellectually fashionable position since ancient times—that things were better in the old days?

PS.  Don’t try to tell me I am ignoring the poor.  There are also far fewer Americans that live in shacks that lack indoor plumbing.