Earlier quoted context omitted.
Quibbling about the exact source of inflation is irrelevant unless you want to claim that people are not buying cars or houses because they are buying health care instead. And that is clearly not the case. According to government statistics [1], nearly one-third of those lacking health care coverage in the United States are young adults. The unemployment rate among this cohort is over 15 percent, and much higher if o…
People are buying cars and houses, as you'd know if you read my link. We currently have more cars/houses than ever before. If inflation-adjusted compensation were down, this fact would pose a paradox and suggest we are incorrectly measuring inflation - however, the paradox is easily resolved by looking at total comp.
Their "income" figures are equally shoddy since they include government transfers through programs like food stamps as part of the "market income" of poorer people by calculating the value of these products and services as if they were bought using salary. Leaving aside the morass of problems with the way this approach leads to grossly inflated aggregate income and is clearly intended to deflect from more accurate claims that most market wages are stagnant, their approach is totally off-topic in any discussion about the state of the labor market: what kind of jobs are available to young people; what those jobs pay in salaries and benefits; and what people can afford to purchase given those incomes.
You should also ask yourself why the authors go through such contortions to count things like rentals as purchases and IMPLY that housing is clearly affordable when there is a perfectly straightforward and universally-applicable measure of real estate affordability in the rent/buy ratio? The only reason the AEI does not use this statistic is that it is inconvenient, showing that housing costs have risen significantly across the United States in response to the housing bubble which started in the 1990s, Prices have still not collapsed even close the levels enjoyed by previous generations. So housing is NOT more affordable for people today than in the past. It is in fact significantly more expensive pretty much everywhere except Las Vegas:
http://money.cnn.com/real_estate/storysupplement/price_to_re...
Finally, since you explicitly make the claim that health care coverage has improved in your MRI/backpain comment and suggest that this is what people are spending their money on instead of cars and houses, it is interesting that the AEI paper explicitly excludes health care costs in its panegyric on how well-off American workers are, noting that "we exclude from consumption out-of-pocket health expenses because they are not closely tied to well-being." In other words, they realized that including basic health care expenses as income makes people relatively worse off now as compared to the past.
On a final point -- it is worth commenting that your other link to the labor participation rate shows the exact opposite of what you claim: the average labor participation rate is visibly much higher throughout most the 1980s than at present, except for a brief crash during the 1982 recession. If 2008 was anything like 1982, the participation rate now would be well into the 60s again and growing.
