Posted by: Michael Mandel on October 09
As I’ve written quite a few times before, the post-2000 period has been a terrible time for young workers. Their wages were falling, and the price of assets such as homes—which young workers did not own— were rising.
The fall in home prices is making housing more affordable for the young. And Dean Baker makes the same point about equity prices. He writes:
The Low Stock Market: A Gift to Young Workers
I’m waiting to see a reporter write this story, but I’m not holding my breath. The basic point is simple, given a path of future profits, if the stock market is high, it will cost our children and grandchildren much more money to buy a certain share of these future profits than if the market is low. In other words, if the S&P is at 1000, then our children will get much higher returns on their savings than if the S&P is 2000. (There is very little feedback the other way — stock prices have little impact on profit growth— so the assumption that the growth path of profits is independent of stock prices is probably a reasonable one.)
So, the young people out there should be celebrating the plunge in the stock market, except for the relatively small group who were anticipating inheritances from their parents. You can’t please everyone.
Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.