The Cost and Quality of Living - Quality of Life Reports
The Cost and Quality of Living - Quality of Life Reports
The Great Economic Squeeze: Why Everything Costs More But Lasts Less - A deep dive into how the modern economy has shifted the financial burden onto consumers while quietly undermining product quality
By Alexander Mills
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The Great Economic Squeeze: Why Everything Costs More But Lasts Less
A deep dive into how the modern economy has shifted the financial burden onto consumers while quietly undermining product quality
Reading Time: 9 minutes
Your grandparents could buy a house on a single income, send their kids to college without drowning in debt, and expect their appliances to last decades. Today, despite unprecedented technological advancement and global prosperity, these basic milestones of middle-class life feel increasingly out of reach for many Americans. This isn't just nostalgia talking—the numbers reveal a fundamental shift in how our economy distributes costs and value.
The Numbers Don't Lie: A Tale of Three Eras
To understand how dramatically things have changed, let's examine three snapshots of American economic life: 1910, 1960, and 2020.
Housing: From Affordable Necessity to Financial Burden
Housing Price-to-Income Ratio Over Time
1910: ~2.5x annual income
1960: 3.2x annual income
2020: 6.0x annual income
In 1967, the median home price was roughly 3.2 times the median annual income. Today, that ratio has ballooned to 6 times the median income, with home prices in many areas being five, ten, or even more times the median income. This represents a fundamental shift in housing affordability that goes far beyond simple inflation.
The median house of 1960 would cost just 240,500, meaning housing costs have increased by 129%. Median household income has only grown by 39% in that same time period.
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The Human Impact: Using historical as well as current data on income from the U.S. Census Bureau, while 68 out of 100 Americans could afford to buy a home in 1960, only 43 out of 100 Americans can afford to do so now.
Education: The Great Inflation
College Tuition Costs (Inflation-Adjusted)
1963: $243 annually (public 4-year)
1980: $9,421 total cost
2020: $14,688 tuition alone
The explosion in education costs represents one of the most dramatic shifts in American economic life. The average annual cost of tuition at a public 4-year college is 40 times higher than tuition in 1963. This isn't just about inflation—after adjusting for currency inflation, college tuition has increased 197.4% since 1963.
Between 1960 and 2020, the CPI underwent an eight-fold increase. Over the same timeframe, measures of college tuition inflation saw a 14-fold increase that sent the costs of a college degree spiraling out of control.
Real-World Example: At the University of Pennsylvania, undergraduate students in 1960 paid unadjusted costs of 1,250intuitionand150 in general fees for a year of study. Today, that same education costs over $50,000 annually.
Healthcare: The Silent Wealth Drain
Healthcare as Percentage of GDP
1960: 5.0%
1980: 8.2%
2020: 19.5%
2023: 17.6%
Back in 1960, health spending represented just 5% of GDP, meaning 1 in every 20 dollars in the U.S. Currently, health care represents about 17% of the U.S. economy (measured as a share of gross domestic product, or GDP). In other words, almost 1 out of every 5 dollars spent in the U.S. goes toward health care.
On a per capita basis, health spending has increased in the last five decades from 353peryearin1970to14,570 per year in 2023. In constant 2023 dollars, the increase was from 2,151in1970to14,570 in 2023.
The Wage Stagnation Paradox
While costs have skyrocketed in essential areas, wages have largely stagnated when adjusted for inflation:
Real Wage Growth (Inflation-Adjusted)
Peak purchasing power: 1973 ($23.68 in today's dollars)
Current average: $22.65 (2018 data)
Net change since 1973: -4.3%
Despite some ups and downs over the past several decades, today's real average wage in the U.S. has about the same purchasing power it did 40 years ago. In fact, in real terms average hourly earnings peaked more than 45 years ago: The 4.03−an−hourraterecordedinJanuary1973hadthesamepurchasingpowerthat23.68 would today.
This wage stagnation creates a vicious cycle: as essential costs rise faster than incomes, families have less disposable income for other goods and services, forcing them to seek out cheaper alternatives—which often means lower quality products.
The Quality Decline: How "Planned Obsolescence" Became Business Strategy
The concept of deliberately designing products to fail isn't new, but it became systematized in the 20th century:
Historical Timeline of Planned Obsolescence
1924: The world's largest producers of light bulbs (Philips, General Electric, Osram, and Compagnie des Lampes) colluded to artificially limit the lifespan of their products. The 1924 market standard of 2,500 burning hours was reduced to 1,000 by 1940.
1930s-1940s: In 1939, the first nylon stockings were invented to replace silk stockings and they were nearly indestructible. But after the inventor DuPont realized that sales would be limited following the first round of sales as the stockings would last a very long time, they were remanufactured to be of cheaper quality to not last as long.
1950s-1960s: This strategy was applied, for example, in the 1950s and 1960s for portable radios, for which a premature lifespan of three years was set.
Modern Manifestations
Today's planned obsolescence takes more sophisticated forms:
Software Obsolescence: Products become unusable when software support ends
Compatibility Obsolescence: New accessories won't work with older devices
Repair Obsolescence: Products are designed to be difficult or expensive to repair
People lament the fact that things aren't repairable, and that things don't seem to last as long as they used to, and they're right.
Consumer Spending Patterns: A Shifting Landscape
Percentage of Income Spent on Major Categories
1960 2020
Housing: 25% 33%
Food: 24% 13%
Healthcare: 5% 8%
Education: 1% 3%
The data reveals a fundamental shift in how Americans allocate their income. Overall, housing accounted for the largest share of total expenditures (32.9 percent), followed by transportation (17.0 percent), food (12.9 percent), personal insurance and pensions (12.4 percent), healthcare (8.0 percent), and entertainment (4.7 percent).
While we spend less of our income on food and goods (thanks to globalization and efficiency gains), we spend dramatically more on housing, healthcare, and education—the very things that determine our quality of life and economic mobility.
The Global Factor: How Globalization Changed Quality
The shift of manufacturing to lower-cost countries has created a complex trade-off:
Benefits:
Lower prices for consumer goods
Greater variety and availability
Technological advancement
Costs:
Reduced emphasis on durability
Harder-to-repair products
"Fast fashion" mentality across categories
It's said that 99% of our products are planned to be obsolete before their time. This represents an estimated lifetime cost that most consumers never calculate.
Three Economic Snapshots: The Evolution of American Standards
1910: The Foundation Era
Housing: 2.5x income ratio
Most goods: Locally made, built to last
Healthcare: Minimal but affordable
Education: Elite luxury item
1960: The Golden Era
Housing: 3.2x income ratio
Consumer goods: Balance of quality and affordability
Healthcare: 5% of GDP
Education: Accessible pathway to middle class
2020: The Squeeze Era
Housing: 6x income ratio
Consumer goods: Cheap but disposable
Healthcare: 17.6% of GDP
Education: Debt-fueled investment
Why This Happened: The Structural Shifts
Several interconnected factors created this situation:
Financialization: Housing became an investment vehicle rather than just shelter
Federal Policy: Easy credit inflated costs in housing and education
Market Concentration: Fewer competitors in key industries
Regulatory Capture: Industries influenced their own oversight
Global Labor Arbitrage: Manufacturing moved to lowest-cost locations
The Innovation Paradox
Despite technological marvels that would seem like magic to previous generations, many Americans feel economically worse off than their grandparents. This paradox exists because:
Innovation concentrated in luxury: We have smartphones but can't afford homes
Efficiency gains captured by capital: Productivity increases didn't translate to wages
Quality sacrificed for quantity: More stuff, but it breaks faster
Looking Forward: The Path to Sustainable Prosperity
The current trajectory isn't sustainable. Some potential solutions emerging:
Right to Repair movements gaining political traction
Housing policy reforms addressing zoning and construction costs
Alternative education models reducing college cost burden
Healthcare system overhauls addressing cost structure
The modern economy has created an illusion of affordability while quietly transferring costs to consumers in less visible ways. We pay less upfront but more over time—in replacement costs, in healthcare bills, in mortgage payments that stretch for decades.
Our grandparents' washing machines lasted 25 years because they were built when companies competed on durability. Their homes cost 3x annual income because housing was shelter, not investment. Their healthcare was 5% of GDP because the system was simpler and less financialized.
The bottom line: We've traded quality for quantity, durability for disposability, and long-term value for short-term savings. Understanding this trade-off is the first step toward demanding better—both from our markets and our policymakers.
The question isn't whether we can return to 1960s economics (we can't), but whether we can build a 21st-century economy that delivers both innovation and affordability, both choice and quality, both efficiency and equity.
The data suggests we're paying more and getting less where it matters most. It's time to ask why—and demand better.
Sources: Data compiled from U.S. Census Bureau, Bureau of Labor Statistics, Centers for Medicare and Medicaid Services, National Center for Education Statistics, Federal Reserve Economic Data, and academic research on planned obsolescence and consumer economics.
