Wages and prices

luckat

I'm terrible at arithmetic. I'm looking at Nixon vs Khruschev's 'kitchen debate' and Nixon says:

"Let me give you an example you can appreciate. Our steelworkers, as you know, are on strike. But any steelworker could buy this house. They earn $3 an hour. This house costs about $100 a month to buy on a contract running 25 to 30 years."

(The model house in question was selling for $14,000.)

How would this compare with today?

3 an hour
* 40hours a week
120 a week.
*50 weeks and 2 weeks unpaid holidays
6000 a year

14000/6000 = 2.3 times your annual income.

Or lets assume they get an hour break unpaid each day
35hrs * 3
= 105 per week
* 50 weeks
5250 per annum

or 2.66 times your income.

Are steel workers above or below average pay at the time?
Are house like that widely available at that price?
Whats the average wage at the time and the average wage ?
What % of their income is available after other living expenses are taken away?
i.e if food if ten times what it costs today then its not a fair comparison.

The_Conductor

At $3/hour- the $14k house took 4,667 hours of gross pay to cover its cost. At a 40 hour week, this is 117 weeks, allowing for 47 productive weeks per year (reasonable) that is roughly 2.5 years gross pay.

In an Irish context property prices are still at roughly 3 times the multiples above, but falling.

luckat

Steel workers were well paid, though how well paid in the context of other jobs I don't know. In those days, the variations between wages were much less. A CEO would earn more than a steelworker, but nothing like the difference in pay there is today.

Tigger

in 1991 i lived in dublin dundrum to be exact

i know tat the house i lived in (4 bed semi ) was worth irl£77,ooo

i earned at the time £100 per week (i was sixteen and i was working in a shop)

so 100 x 52 = 5200

77,ooo/5200= 14.8 times my pay

house on the same road in 2006 for 1.2 million euros

if i was runnig tht same shop (its gone but if i was the manager) i'd expect to get
€75,000

1,200,000/75,000=16 times my pay so i was more likley to but that house and more able to afford it when i was on a 16 year olds pay then on a 30 something on €75 grand


till people notice this we're all fected

cantdecide

i hate to be vague so If anyone else also heard these stats, please enlighten us but I heard recently that the an average house around 1990 was the average gross annual industrial wage times three. Now, the average house price is something like ten times the average gross annual industrial wage...

Tigger

Standard International Pricing
Submitted by karlos_the_jackal on Wed, 09/24/2008 - 01:47 Home Buyers Guide
According to the Demographia international survey(http://www.demographia.com/dhi-ix2005q3.pdf), at affordable levels average house prices should be 3 x average wages.

When the bust has ran it's natural course Irish property prices will fall in line with international property prices.

Ireland (for the moment) has greater employment than the norm and other factors that would suggest a higher average price. Therefore a reasonable average price of four and a half times salary would be appropriate.

if your salary is 30,000 then you will be able to buy a house worth €135,000.
This is an unskilled persons salary so the house would be a 2 or 3 bed in a working class area.
If your salary is 50,000 then you will be able to buy a house worth €225,000.
This is a professional persons salary so the house would be a 3 or 4 bed in a good area.
If your salary is 70,000 then you will be able to buy a house worth €315,000.
This is a higher professional persons salary so the house would be a 4 or 5 bed in an exclusive area.
N.B In pre-bubble Ireland, average house prices were historically 4 x average wages.

takemn from here

http://www.irishhometruths.com/node/56

The_Conductor

Current average industrial wage = 38,750 (according to the CSO) * 4 = 155,000

Average house price = 245k outside Dublin, 310k in Dublin = 8 Times average industrial wage in Dublin, 6.35 Times average industrial wage outside Dublin (prices in Dublin were historically 8-10% higher than prices outside).

To reach the historic norms- house prices in Dublin would have to halve from current levels, and outside Dublin fall by 37%.......

Ouch!

Tigger

or wages could double

The_Conductor

Tigger wrote: »

or wages could double

In real terms- taking inflation into account?
I don't think so......

Heroditas

Wages have essentially doubled though haven't they through dual income houselholds?
How many dual income households are there nowadays compared to even the early 90s? The rpices started to rocket then. Back in the 80s many households were single income and the house prices reflected this.

gurramok

CSO changed their calculation for avg ind wage. It was about 33k in 2006 and all of a sudden jumped to 38k last year, a bit unrealiable!

What we do know is that 67% of the workforce earn under 35k, thats where that 4.5times multiple should apply so Tigger's calculations look ok to me.

Plus national income is declining this year and next year(negative GNP) so expect our 'average' wages to decline a bit as well.

gurramok

Heroditas wrote: »

Wages have essentially doubled though haven't they through dual income houselholds?
How many dual income households are there nowadays compared to even the early 90s? The rpices started to rocket then. Back in the 80s many households were single income and the house prices reflected this.

Yes, its a factor, blame the women

I think 4.5 times looks fair when we know not every housing unit is a dual income one, think of all those singletons!
Plus, dual incomes would be scaled back to one and half times incomes from that dual income as that dual income is going to have a kid or two as the woman(mostly) would be out of the workforce for a significant amount of time.

Heroditas

gurramok wrote: »

Yes, its a factor, blame the women

Well I didn't want to be the first to say it.

gurramok

Heroditas wrote: »

Well I didn't want to be the first to say it.

I should of put a discalimer on that to avoid getting fried

ZYX

cantdecide wrote: »

i hate to be vague so If anyone else also heard these stats, please enlighten us but I heard recently that the an average house around 1990 was the average gross annual industrial wage times three. Now, the average house price is something like ten times the average gross annual industrial wage...

Average industrial wage is pretty meaningless these days as very few are employed in industry. Average financial services wage ( €43000 per year in 2006)would cover more people or even average civil service/public sector pay (€48000 in 2007)
http://www.cso.ie/statistics/empandunempilo.htm
http://www.cso.ie/statistics/earnings_banking_ins_building_soc.htm

The other point to remember is only 75% of people own a house in Ireland> This figure has not changed a lot in last 20 years. It is reasonable to assume it is the richest 75% who buy houses. So the average income of the average house buyer is likely to be well in excess of these figures.

The_Conductor

ZYX wrote: »

Average industrial wage is pretty meaningless these days as very few are employed in industry. Average financial services wage ( €43000 per year in 2006)would cover more people or even average civil service/public sector pay (€48000 in 2007)
http://www.cso.ie/statistics/empandunempilo.htm
http://www.cso.ie/statistics/earnings_banking_ins_building_soc.htm

The other point to remember is only 75% of people own a house in Ireland> This figure has not changed a lot in last 20 years. It is reasonable to assume it is the richest 75% who buy houses. So the average income of the average house buyer is likely to be well in excess of these figures.

I wonder how they calculate the average pay- for example the 48k that they are quoting as an average for the civil service is HEO salary (or very senior EO), the 43k in the banking sector is 11k above graduate recruitment starting salary etc. Perhaps its the mad pay that senior management are on that are skewing their statistics?

Who was buying all the property - by their wage levels:

http://www.thepropertypin.com/viewtopic.php?f=4&t=1859

Investor Demand - which has skewed the market so much:
http://www.thepropertypin.com/viewtopic.php?f=4&t=2132

The Interest only loans that the above took out:

http://www.thepropertypin.com/viewtopic.php?f=4&t=2281



Shocking stuff

gurramok

ZYX wrote: »

Average industrial wage is pretty meaningless these days as very few are employed in industry. Average financial services wage ( €43000 per year in 2006)would cover more people or even average civil service/public sector pay (€48000 in 2007)
http://www.cso.ie/statistics/empandunempilo.htm
http://www.cso.ie/statistics/earnings_banking_ins_building_soc.htm

Thats misleading saying more would be covered. 300,000 in Financial(it says banks, building societies and insurance) and 255,000 in civil/public plus another 223,000 in health is not 'more' as in a majority. They are probably the most highly paid sectors. If you bring the others in, the average goes down.

Talk about a Ginormous publlic/civil/health and financial sector now going into the doldrums, we're screwed:D

ronbyrne2005

Average household income might be more instructive. It's around 60k a year(gross) in Dublin and 55k outside according to CSO. What multiple should average couple borrow to buy average home? 4 times gross income? Most couple have kids which will reduce disposable income through one or both partners working less or having to pay for childminding.

ronbyrne2005

ronbyrne2005 wrote: »

Average household income might be more instructive. It's around 60k a year(gross) in Dublin and 55k outside according to CSO. What multiple should average couple borrow to buy average home? 4 times gross income? Most couple have kids which will reduce disposable income through one or both partners working less or having to pay for childminding.

if you go on couples you double to risk of default. Peope get sick/injured

ZYX

gurramok wrote: »

Thats misleading saying more would be covered. 300,000 in Financial(it says banks, building societies and insurance) and 255,000 in civil/public plus another 223,000 in health is not 'more' as in a majority. They are probably the most highly paid sectors. If you bring the others in, the average goes down.

Talk about a Ginormous publlic/civil/health and financial sector now going into the doldrums, we're screwed:D

What I meant is more are employed in financial services or civil service than in industry.

ZYX

smccarrick wrote: »

I wonder how they calculate the average pay- for example the 48k that they are quoting as an average for the civil service is HEO salary (or very senior EO), the 43k in the banking sector is 11k above graduate recruitment starting salary etc. Perhaps its the mad pay that senior management are on that are skewing their statistics?

I suppose they include things like overtime, extra payments for higher qualifications (if they exist) and things like that.

The_Conductor

ZYX wrote: »

I suppose they include things like overtime, extra payments for higher qualifications (if they exist) and things like that.

Nope- you get time-in-lieu when you work overtime, and it doesn't matter how qualified you are (which is why so many of the better people leave the civil service- particularly in areas such as Finance, IT and Laboratory Sciences).

ZYX

smccarrick wrote: »

Nope- you get time-in-lieu when you work overtime, and it doesn't matter how qualified you are (which is why so many of the better people leave the civil service- particularly in areas such as Finance, IT and Laboratory Sciences).

Of course there is overtime. Prison Officer and Garda overtime are famous. Civil Service may not have but rest of public sector does

gurramok

And it been curtailed back now because of budget hence me saying 'screwed'

The_Conductor

ZYX wrote: »

Of course there is overtime. Prison Officer and Garda overtime are famous. Civil Service may not have but rest of public sector does

The CSO figures quoted were for the civil service though, not the Gardai and the Prison Officers (they have seperate much higher figures for both of those groups). I was curious as to how they figure the average civil servant is on 48k- when elsewhere (Department of Finance website) it gives a breakdown of grades which show that over 80% of civil servants regardless of seniority, will never reach that level of pay.

It just seems like a very small group of people must be skewing figures upwards in a unusual fashion.

S.

SimpleSam06

ronbyrne2005 wrote: »

Average household income might be more instructive.

Median household income might be more instructive yet. If there are four men in a room and one has four loaves of bread, on average they each have one loaf of bread. This doesn't reflect reality though. Averages can be very misleading.