No Wonder I Can’t Afford To Buy A House

I recently came across a 2007 report from the California Budget Project called “Making Ends Meet: How Much Does It Cost To Raise A Family in California?”  We didn’t even have kids in 2007, but I guess I was concerned abou this topic already.

The report is very detailed and informative, breaking down expenses for 1) Single Adults, 2) Single Parent Family, 3) Two Parent Family (One Working), and 4) Two Working Parent Family.

In 2007, the income required to have a modest standard of living for a two-parent family (one working) was $51,035. In 2013, it costs the same family $62,382 to survive in Los Angeles — a $11,347 increase. 

For two working parents, the cost of survival is $83,561.  This seems do-able until you see the cost breakdown.

CA-family-83561-2

For example, housing and utilities is shown as only $1,421.  In reality, rent is a huge burden for most Californian families.

According to the US Census Bureau, in 2012, 48.3 percent of households spent at least 35% of their income on rent.  Nearly 1/3 of households spent at least half of their income on rent.

Our rent is on the high-side — $2,000 for a 3-bedroom house in a modest working-class neighborhood.  This does not include utilities, water or trash services.  We also own two cars, which is more of a need than a want in suburban Los Angeles. We do save on childcare thanks to family help.  No wonder we tend to spend more than we make each month, and cannot save for a down payment!

The problem for my family and many, many others is that salary has not kept up with cost of living. According to the California Budget project (my emphasis in bold):

“The steady economic recovery has failed to generate robust gains in earnings for many of those who are working…Earnings have not kept up with the overall rate of inflation, with low- and mid-wage workers in particular still coping with the substantial erosion of their wages. In 2013, the hourly wage for low-wage workers – those earning at the 20th percentile of the wage distribution – was still 5.4 percent below its 2006 level, after adjusting for inflation…those earning California’s median wage – earned 5.1 percent less in 2013 than similar workers did in 2006, after adjusting for inflation.”

I am not at all surprised by these findings. During the recession, companies froze salaries, laid off scores of employees, and outsource work as much as possible.  The workers left behind had little power to negotiate and were just glad to be employed.  Now that the recession is officially over, employers are not instituting wage increases to “make up” for the last few years even while they’re enjoying greater productivity.

I know the solution, as always, is to jump ship. However, I wonder why companies don’t value and hold on to good, loyal employees?  It will be interesting when my company does its annual review.  I would hope for a bigger raise but chances are, I’ll be lucky to get a small raise that doesn’t even cover increased healthcare costs.

How did you fare in terms of salary over the past few years?

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An Article You Need To Read If You’re Middle Class

PBS has published excellent articles about the middle class decline. My personal favorite is “This is why the middle class can’t get ahead” by Nike Hanauer, a billionaire who made his fortune as one of the original investors in Amazon and continues to make millions as a venture capitalist.  I’m not even going to summarize it. Go ahead. Read it and watch the video, too.