Finance, Frugality, and Globalization

This is about saving money.

The Boomers had it uniquely good. If you worked in the United States from 1950 to 1980, you made especially good money. If you invested, you got especially good returns. This convinced people that working and saving at a modest rate was all it takes to have a comfortably affluent life.

The baby boomers enjoyed the advantages of a relatively insulated manufacturing economy in the United States. Boomers had a relatively smooth expansion that went straight from the gains of the postwar boom into the gains of global finance capitalism during the end of the 20th century. These advantages for early careers vanished with globalization. It’s still possible to gain a measure of security, but comfortable affluence is harder to attain. And Millenials/Generation Y needs to take that into consideration.

Thought experiment: you are an aesthetician. You give manicures and pedicures and wax peoples’ genitals. You are pretty good at your job. Also, you live in Belarus, and make about $660 per month (roughly comparable to the average per capita GDP). It’s enough to live, pay rent on your shared apartment, and even save a little each month. Costs of living are low.

Now you move to the United States. An aesthetician in the U.S. makes about $3,000 per month (from data at That’s a raise of 354%. Of course, costs of living are higher in the United States. But if you keep a similar shared apartment and lifestyle, you can probably still save a great deal more money than in Belarus.

Clearly, living in the United States is nice. But why is there such a huge income benefit to living here? For the aesthetician, the increase in salary is mostly due to the fact that Americans who buy manicures and genital waxing can afford to pay more than Belarusians (not due to intrinsically greater value of that service to people in the U.S.A.). It is a proximity effect.

What if new technology allowed for remote genital waxing? The globalized waxing economy would allow Americans to pay an aesthetician in Belarus (at a much lower rate) rather than paying an American aesthetician. That is nice for American consumers. It’s also nice for Belarusian aestheticians – no need to emigrate. It is also good for the American company that invented that whole “remote waxing” technology. That CEO gets to join the “one percent.” It is not so nice for American aestheticians.

Globalization has been a big deal over the last 35 years. The kind of globalization shown in the graph above killed high-paying, medium- and low-skill jobs. The balance of trade has been negative and growing more negative since about 1978. The Baby Boomers had 30 sheltered years to position themselves in the upper levels of the economy before it went full global. Generation Y started at the bottom and had to compete with the whole world. If you learn a new skill in the global economy, you get to compete with the Belarusians and Chinese. The Boomers never had that. There are winners and losers in this scenario: The top 10% is doing especially well everywhere. Globally, the bottom 90% is doing much better. Locally, not so much.

In light of all of that, this piece in Huffington Post is offensively stupid. This piece simplifies 40 years of economic reality into a single stereotype. Generation Y inherited high expectations from their parents. Some may also feel overly entitled. But that is only a small part of the story. Yes, generation Y yuppies are unhappy. They are unhappy because they don’t have their parents’ standard of living (to which they are accustomed). But the real reason that Generation Y yuppies are unhappy is because they are yuppies.

The rest of generation Y, the non-yuppies, are the precariat. They are unhappy because they don’t have health insurance. They are one sick baby away from being broke and unable to pay back large student loans. They are unhappy because the healthcare system is still broken. They are unhappy because the Tea Party Congress is broken (“Let’s pretend to repeal Obama again! Clean cup! Move down!”). They are unhappy because the media is not suggesting better options (even Alternet’s best suggestion is that complaining en masse is better than complaining alone)

Unhappiness in 20-somethings of Generation Y is not because their expectations are based in optimistic fantasy. They are unhappy because their reality-based expectations are grim. They do not need more realistic expectations, what they need are better options. How do they edge out of the precariat? How do they fund a creative, meaningful life when medical bills might bankrupt them or their family?

Some real answers are published at Mr. Money Mustache and Early Retirement Extreme. I’m trying to put some up here at Student Pro Tips. The big deal is this: how to cut expenses and save more without living less.