UPS has a message for the Federal Reserve, says Bloomberg Opinion's Conor Sen, and he tell us the Fed should listen. What is wind "turbinegeddon," and why is it a troubling climate omen? Bloomberg's Chris Bryant joins us to explain. We also explore why even wealthy Americans are anxious about money with Bloomberg's Allison Schrager. And can an electric vehicle be a muscle car? Bloomberg's Bobby Ghosh says it just may be able to. Amy Morris hosts.
You're listening to the Bloomberg Opinion podcast. Catch us Saturdays at one in seven pm Eastern on Bloomberg dot Com, the iHeartRadio app and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
Welcome to Bloomberg Opinion. I Maymy Morris. This week we look at the cost of decades of climate in action and why a German industrial giant is paying the multi billion dollar price. Is the era of the musclecar over? Is it possible to have an electric muscle car? And we'll consider the very wealthy who are also financially stressed and what that might mean for the economy. But we begin with ups drivers. Labor action for the United Parcel Service Workers helped drivers land new contracts, more benefits, even air conditioning in those familiar brown trucks. Teamster's Union president Sean O'Brien says the company was making a lot of money while the drivers kept those packages coming.
They can set the tone on how it is to reward their employees who have made them the success that they are. I mean, they made one hundred billion with a bee and our members deserve to reap those benefits as well.
And in late July they were able to strike a deal.
Well, I think it's a great victory for the labor movement in general.
We actually took on Corporate America one.
The end result a deal for UPS drivers and a message for a FED chair J Powell as policymakers way whether they've raised interest rates enough to bring inflation down to their two percent target? Want to bring in Bloomberg opinion columnist Connor Sen, the founder of Peachtree Creek Investments, Connor, always a pleasure, thanks for joining us. What is the message that this labor deal has for a FED chair pal?
So there's a lot of optimism that the slowdown we've seen in growth and inflation will lead to a return to two percent inflation, which is what the FED wants. And if you look at some of the things that have normalized and have in worker pay and indus trees like truck driving and manufacturing and construction are still running well ahead of where they were in the twenty tens and so, and then you're seeing things like the UPS deal. The UAW is looking for pretty aggressive deal as well. And while it's great news for those workers, they can get big hay increases I am skeptical that that's consistent with two percent inflation.
Well, in fact, I wanted to get into that with you because you also mentioned that this is sort of pulling against a stoft landing for the economy, this labor action, and it's not just ups. There are a lot of labor actions ongoing. At first, I thought a rising tide would lift all boats, but your argument is that this is going to make it harder for.
The fed, right, And so right now, the reason we're seeing a lot of progress on inflation is over the past year, we've seen a lot of things like freight prices and energy prices, used car prices are coming down, rents are coming down, and so that's all really helpful, but that's all more like normalization last year and sort of supply chain improvements that we've seen, and that doesn't really address the underlying Demain story, which is that we're still seeing ro bus pay increases for blue collar workers, which is arguably policy and that's a good thing. But as those wage increases get absorbed, ultimately it's going to start to compress margins again for companies, and they're going to be looking to pass that on in the form of higher prices.
So the way you describe it, it sounds like this is sort of a cycle and that it's not going to just be resolved in the next few months. This sounds years long.
Yeah, And I think we kind of all knew this was coming because we all know that truck drivers and construction workers and autoworkers have been underpaid for a while, and we were wondering what would be the impetus to change that. And I think just the structural labor storage for workers in those industries, combined with policy to do things like you know, the inflation direction acts and building out sort of green enjury transition, all of that is very labor intensive for the kinds of workers we don't have a lot of, and that's going to drive inflation over the next few years.
Anyway.
Now, in your column, you tell the story about how in two thousand and eight, the union accepted a pay package that they weren't one hundred percent and in love with because they didn't want the company to fold. They wanted to protect the overall company and therefore the workers as well. But that's not necessarily the case these days. Help us square that circle, tell us about.
That, right, So, two thousand and eight, the auto industry was on the verbs of collapse. The government kind of stepped in to make sure that didn't happen, and unions, which understand you can't have your employer go out of business, said we're going to take this not so great deal now to survive and we'll we'll get it back later. And that's the kind of thing that doesn't necessarily show up in the data where you now have union leaders and union members with long memories and they say, we took care of you guys in your time of crisis. Now it's our turn. You've got high profits, you need us. We know it's a great label market, and we're not willing to accept that kind of subpar deal the way we work fifteen years ago.
Okay, So this isn't necessarily an entire shift in how they think or their ideology or philosophy. This is simply, hey, we scratched your back ten years ago or fifteen years ago. Now you can scratch.
Ours exactly, and they have the leverage to do it when the unemploymentge three and a half percent. And if you're not working for a car company, you can go build out a factory, go be a driver or go work in construction, and.
We are talking with Bloomberg opinion columnist Connor sent about what the FED can learn from the UPS labor talks and what it may mean as the FEDA tries to reach that two percent inflation rate goal. Connor, how do you see these types of labor actions continuing, because, as we said, it's not just UPS.
Right, And actually the UPS one was interesting because on the after that headline came out that full time UPS drivers will make in paying benefits over the course of the deal, on average one hundred and seventy thousand dollars, there was a fifty percent increase in the number of people applying to work for EPs. And so if you're applying to work for YOUPS, you're not applying to work for another company or another industry that's looking for those types of workers. And so sort of a win in one industry or one company can have ripple effects to other employers who are all competing for the same labor pool.
There's also the flip side of that agreement. Though they also got the promise that they could have air conditioning in those iconic BROWND trucks, those delivery vehicles. It seems like there's a flip side to that coin that perhaps it's not really the sexiest job ever.
Yeah, this is a very physically grueling job. I personally wouldn't want to have to haul packages ten twelve hours a day. And so, by no means am I saying this is an unearned or unmerited hey, increase it. Just that if you're looking for two percent inflation, this is making it difficult in the short term. And I think the goal is, or the hope is that over coming years, things like productivity improvements and ups talked about sort of productivity and investments in their warehouses to automate things there and just sort of paying benefits and job conditions getting to a place where they should have been all along will be enough where we can kind of reach an equilibrium that everyone's happy with.
It.
Just that we're currently in the midst of an adjustment.
That's exactly what I wanted to ask about. You talk about bringing those wage wages and wage growth back to acceptable levels. And my question for you is acceptable to whom? To everyone? Like, they have to find this happy medium where everywhere it fits everybody where the bed's not too soft and it's not too hard, it's just right.
And that's sort of the dance of capitalism right where you have. This is a job that needs to be done. We all want our package deliveries, but there's not a lot of people who want to do these jobs at the conditions and pay that they've been offered at. And so pay and benefits have to go up. That means shipping prices have to go up. And as Amazon consumers or anybody else, we have to be willing to accept that, and the company as well has to find a profit margin that works for them. And so this is just an adjustment period to figuring out what works for everybody.
I'm still fascinated with the idea that there are more labor actions ongoing this year than we've seen in quite some time. Do you anticipate there being more because of those bringing the wage growth back to acceptable levels or whatever the X factor may be for that particular industry. Do you see these types of labor actions continuing beyond just the team stairs and ups and UAW I.
Tend to think so. And again, the uneployment rate is a big part of this because it shows that the labor market is tight, and there's also kind of a nebulous expectations game where if you're the UAW and you see that the UPS teamsters just want a great deal, you think we can too. And if you're looking to unionize or or push for a bold deal at another company the other in industry, you see these wins and you see that it's detainable, and so that does just kind of shift the playing field in terms of who thinks they have the bargaining power in these negotiations.
And now the really important part is whether the FED is listening, are they getting the message.
It's interesting because in the short term we do have softer inflation data because used car prices are coming down as auto production picks up and supply chains normalize and shelter and rents are coming down as sort of the pandemic normal is that craziness goes away and things are normalized, and so we have probably six to nine months where the inflation data iso going to look pretty good. But the question is, again on the other side of this, if UPS rates have to go up, if auto prices have to go up to account for these labor deals, will that push inflation in the back half of twenty four and it's going to be a while until we know. So it's this interesting time where you have arguably signs of hotter inflation in the future, while the actual inflation data that we get is soft.
It sounds like the way you're describing it is. Again, as we mentioned before, this is going to take months, years, but that bringing wage growth back to acceptable levels where it's acceptable for all parties. It's also going to have to take the FED into consideration. Once that wage growth is balanced, then the FED can find some balance too Or am I oversimplifying it, reading too much into it.
I think that's right.
And you just can't get sort of seven percent consistent wage growth in these types of industries and think that you're going to get to two percent inflation for the economy as a whole.
And again I.
Think eventually, maybe you know, the UAW gets their contract that they feel they've earned for the past fifteen years, and then in a couple of years things kind of normalize. But right now we still have that pretty tense upward wage pressure that's going to drive inflation.
I don't want to ask about the pendulum swinging back the other way, because the whole point of this is not to swing the pendulum, but define the balance. But the balance won't last forever, Like that's a temporary balance. But what are we talking in terms of years? How long will this last?
Well, these union contracts typically are I think the UPS won us for four years, and so I would imagine this is going to be the big catch up union contract. And it's pretty hard to see what things can look like four years from now, because things like spending in the Investment Reduction Inflation Reduction Act peak I think in twenty twenty six, and so it's possible that when we get to the next negotiation in twenty twenty seven or whatever, that things have normalized and we're not talking about this anymore. Just right now, I think there just shouldn't be any confidence that we've totally liftd inflation, because we still see these pretty intense wage pressures.
Connerson is a Bloomberg Opinion columnist and founder of Peachtree Creek Investments and coming up a troubling climate omen problems with wind turbines that pretend to slower and more expensive energy transition. We're going to check it out. Just ahead. You're listening to Bloomberg Opinion.
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You're listening to Bloomberg Opinion I Namy Morris. Just last month, President Biden toured a wind turbine factory in New Mexico to tout his economic agenda and new kinds of jobs under the Inflation Reduction Act and the Chips Act.
Now they're tired to hear me say this, but where's it written that America can't lead the world again to manufacture, because we're going to do just that the leading manufacturer in the world.
Well, it may take longer and cost more to transition to wind energy. It's been stymied by red tape, structural issues, and material and logistics costs. But wind energy seems to have a lot to offer. The question now, is is it all worth it? We are talking with Bloomberg Opinion columnist Chris Bryant. He covers industrial companies in Europe. Chris, always a pleasure. Thank you for taking the time with us and in your column on the Bloomberg terminal. You frame all of this with Siemens Energies wind turbine project and struggling with those abnormal vibrations that they found, but they only found it in about four percent of their fleet. Why is that a problem? This four percent?
Very simply, if you do have a problem with a wind turbine, then repairing it can be extremely expensive. You've got to imagine this is hugely heavy equipment installed high above the ground, so the last thing you want is anything going wrong, and unfortunately that's been the case here with Semens Energies wind unit. It forecasts recently a four and a half billion europe and you're lost.
Now.
To be clear, that's not all down to the fact that due to these problems with the onshore wind turbines, it's having other issues too, some of which you mentioned at the start. But it all adds up. And as I said, you know, a four and a half billion euro loss at the time when the world needs more wind power and demand is actually very high, is extraordinary and it takes some explaining, I think, because I think many people outside not familiar with the companies in this sector would assume that they're all doing very well. But the opposite is the case.
Well, let's talk about that, because in your column you also talk about how this can be laid at the doorstep of climate and action, and now there's this rush to catch up, bring us up to speed. What did you mean by.
That, Well, of course, you know, we've had an enormous step forward in the wind industry over the last decade, and the machinery has been getting larger and larger and more powerful, and that's a very good thing from the perspective of climate. It means we can generate more clean electricity and so forth. The problem has been as intense competition to get this deployed in the field, intense competition to develop ever more powerful turbines. The danger of the courses in producing that technology that you know, you cut corners, you rush too much, you brush problems under the carpet. That's what seems to happen at Semen's Energies GMESSA wind unit, where these problems have only sort of dripped out gradually and they'll finally hopefully acknowledged the full extent of them recently, and of course once that happens, then you know fixing them. As we discussed is very expensive. But you know, this all resulted from the fact that the company was determined to produce the you know, these very large, very powerful turbines. Of course they bid offer a little more than they could chew.
In this case, some of the issues that you talk about in the column, the red tape, the material costs, inflation impacting those costs, are those at all or entirely impacted by the pandemic. Is this sort of a leftover residual effect of what we went through in twenty twenty and twenty one, or is there more to it than just that.
Well, there's certainly the case that besides these these warranty repair issues that the wind turb i makers have been having, they've been hit by a really sort of perfect storm. If they excuse the pun of problems in their supply chain, as you say, if you think about logistics, you know, if you produce a wind turn and as I say, enormous blades of machinery, they have to be transported, you could have imagined that suddenly the cost of delivering those that equipment got extremely expensive. And of course, yes, the components and that make up a wind turber and all of those went up in costs as well, and that created a bit of problem because it's often the case that these companies have sort of fixed time contracts that did not adjust for inflation, and so they ended up having to delivered this equipment what they promised, and of course it wasn't profitable. Then is it hoped and so forth. I think there's a lot of big learning curve that's happened. There now, lots of contracts being now rewritten to allow for sort of inflation adjustment and so forth. But the sad reality is, of course, therefore we had this, you know, for years, a declining trend in the cost of wind turbines. The price is now having to go up again to accommodate some of these inflated costs.
We are talking with Bloomberg opinion columnist Chris Bryant about an energy transition to wind power and some of the hiccups that we're finding along the way. More than just hiccups, and Chris, the wind energy or the wind energy industry seems to have a lot to offer. There seems to be a lot of promise there and as you said, there is a tremendous demand for these turbines. What's the hang up are these growing pains. We've never been here before, and we're just learning as we go.
There is certainly an element of growing pains, and of course so this is always the case with large projects of any client. If you look at the new power industry for example, you know, we've seen in in Europe, you know, companies trying to build new nuclear power stations across of those ends up going through the roof. This simply is is very hard to do this kind of stuff, and we can be proud, I think in Europe and also in the United States for general electric perhap some very very you know, accomplished wind companies, but unfortunately, as I say, they really have had a torrid time with you know, conditions going against them and pricing not helping them are so and some home made mistakes as well, and particularly offshore. Now we're seeing that the costs of offshore wind have gone up a lot projects there are being canceled, which is of course again the last thing you want to see at a time like this. I still think that you know, wind power has still got you know, very rosy years ahead of it. Nevertheless, to get from a stage where these come some of these companies have not been making money to one where they're making healthy profits. It's going to be difficult, it's going to take time.
Are there any best practices or any other lessons to be learned from semens for other men of factorers who are launching into this or getting into this or I already eyeball deep into it, and they want to make sure that they do the best that they can and not make some of the same mistakes we've seen.
Well, I think there's a couple of things to get to keep an eye on. One, as we've seen in so many industries, is that the rising threat of Chinese competition. Chinese wind market is sort of an island to itself in some instances. Chinese companies are dominating there, but they are starting to push overseas and the fear I think on the part of European wind manufacturers in particular, is that they'll see more competition, which of course wouldn't be helpful as they try to get their finances in the right order. The other thing I flag is is permitting, and that's something that governments can help with wind projects. Unfortunately here are constantly delayed in sty meat by there's an element of nimbiaism, an element of just huge amounts of paperwork required to get these projects up and launch, so you know it can take years, and of course it's time that we don't have this efforts underway to simplify permitting. But I think a lot more improvements could be made there, because even if the wind turbine manufacturers finally get their technical and cost problems under control, they still face this headwind from permitting at the time when we need to speed up, not slow down.
Well, this type of setback that we saw at Semens and other issues that are plaguing the industry, is that going to have a chilling effect on the future of this industry.
I think it's certainly made investors cautious and it would not be helpful if the cost of capital of some of these companies starts to rise again. You've seen a massive sell off in the Semens energy stock. You lost billions of euros at market value. A isn't helpful if one day it needs to grace capital. Now for now it does not need to. But nevertheless, I think for now these wind cup companies is definitely under pressure to show investors, prove to investors that their technology is reliable, and there aren't any more skeletons in the closet because I think, you know, there is a nervousness out there that more problems could emerge as these these these turbines are installed and you know to feet the new equipment. If that proves not to be the case, I think there'll be a lot of relief out there. But yes, a lot to prove on the part of these companies.
Thank you so much, Chris. Chris Bryant is a Bloomberg opinion columnist covering industrial companies in Europe. And don't forget We're available as a podcast on Apple, Spotify or your favorite podcast platform. Get your motoron, head out on the highways. Yes, I know Steppenwolf is singing here about motorcycles. This is from the movie Easy Writer. I know that, but it also seemed to be a good fit for talking about our next segment, muscle cars. Muscle cars, the Charger, the Mustang, the Camaro, the Pontiac Gto They're retired, retiring, facing retirement, and it's not hard to see why, starting with new emission standards back in the nineteen seventies, plus the spike in the price of gasoline. But now there's the electric vehicle. Is it possible to have a muscle car that is also electric? No one better to talk about this than Bobby Gogi is a Bloomberg opinion columnists covering foreign affairs and joins me, Now, Bobby, is the era of the muscle car over?
Well, certainly one era is over. People who follow this closely are calling it the second Golden era of muscle cars. You alluded to the first, which was in the sixties and seventies, when you had these massive engines that made a great amount of noise and drank gas as if it was going out of fashion, and then emission standards imposed in the seventies and the increase in prices of gas because of the oil shock, the Arab embargo.
Remember, muscle cars went away.
They came back in about fifteen years ago when technology allowed for a new generation of muscle cars that were not as that met the emission standards off the time, and we're actually giving pretty decent mileage and at the same time preserving the things about muscle cars that we like, which is the noise, the roar of the engine, the sort of brute force of.
The big v eight, the speed, the torque.
But again, emission standards have now risen again and car companies are recognizing that no matter how hard they try, they simply are not going to be able to keep those cars on the road anymore, and so they're pulling away this year. By the end of this year, three great names in muscle car history, the Camorow, the Charger, and the Challenger, will all go out of production. The gasoline versions. The companies are saying that they will introduce EV versions in time, but those are not expected to hit the market for at least another year, maybe longer.
Okay, let's talk about those EV versions. I want you to go over again. What makes a muscle car? You ticked off a few boxes, and let's compare and contrast. If there is the possibility that an EV version could meet those standards, is there something that the EV could offer that maybe a traditional combustion engine cannot do? Now, I know, I just asked you a lot of questions in one quick little segment, But let's just start with the boxes that have to be ticked so that it is an actual muscle car.
Yeah, so what makes a muscle car? If you ask five people, you will get.
Six opinions, but generally people will agree on a few things. One is that they've got to be big. You know, they're not sleek sports cars like the like the Italians make them the Ferraris or even like Corvette and not Muscle cars have to be big, boxy, bulky.
They have to go fast.
A version, Wait, a Corvette's not a muscle car.
No, Corvette's technically a sports cars. There is a distinction there. Covettes are not designed in the same way as muscle cars are. Puscle cars are a lot cheaper. Covetes are very expensive. Buscle cars are meant to be affordable to the average American. We can debate about whether that's true or not. So puzzle cars have to be big, they have to be fast. They have to have a lot of talk, which means when you hit the gas you should be pushed back in your in your seat. As a driver, they have to make noise that That is the key to a muscle car, the rumble of that engine, the roar as you accelerate, and then beyond that, other definitions are are more technical. Can you replicate all of that in an EV Well, you can replicate somethings. I mean, you can make a big boxy EV. Many of the evs are big in boxing. You can certainly delivered pork. In fact, electric vehicles have an advantage over gasoline engines in that respect. You know when that that feeling what we ordinary sort of non technical people call a fast pickup for a car. Evs have a much faster pickup. They get off the blocks much faster than gasoline engines. But they do not make any noise. That's the whole point of an EV. And can you have a muscle car that doesn't make noise. Some companies are trying to figure out ways to introduce noise artificially. There are two ways to do that. Either you introduce a noise inside the car so the driver can hear it. You do that by piping artificial noise through the car stereo system, or you create a Dodge particularly is working on this. They're going to install an exhaust. Now, normal evs don't need exhaust, they don't produce any gas, but they're going to introduce an exhaust with the car, which will make the noise, which means people outside the car can hear the noise.
But these artificial noise, so it won't be air pollution as much as it'll be no I don't want to say noise pollution because to many the sound of muscle car is a beautiful sound. But it'll be noise instead of what see a carbon monoxide correct.
I mean, I have no problems calling it noise pollution, But as you say it, in the right circumstances, in the right context, that can be a beautiful thing. But you will always know in an ivy, even in an iv that makes noise, you will know that it's not real that it's piped music really after a fashion, So will will drivers get over that is the question. And of course then there's a bigger problem with all of these muscle or not, which is range. Muscle cars are gasoline engine. Muscle cars can go as far as the tank full tank will take them, which is hundreds of miles, whereas an EV especially if you are sort of really sort of pushing your pedal to the metal, will not get you very far. I mean, the best case is a couple of hundred miles, But if you're really accelerating and really sort of hitting the tarmac, you're lucky if you'll get one hundred miles at that speed.
I love how you call it a tarmac, like it's launching like an airplane, because it's kind of a proper analogy. It strikes me that there is so much appeal of a muscle car that there are those who would seriously consider piping in the sound to make it feel more authentic, or even creating an exhaust for just the sound. Again, for the authenticity. What is the appeal? Bring me up to speed. Talk to me like I'm five, Why is this such a special thing?
Well, if you were five, you would be much closer to the appeal.
You're absolutely right.
But what it is is it's you know, it's the bad boy thing, right, It's a bad boy or bad girl thing with there's always there will always be a part of us that wants to rebel. It wants to push against the ordinary. And with the passing of time or regular sedan cars have become so boring.
They all look.
The same, they have the same performance stats, they have the same give or take more or less, the same interior.
They're all the same shape in their dull and.
Walk into any grocery store parking lot, any workplace parking lot, go downstairs here at Bloomberg and look at the parking lot. It's all SUVs and they're all the same shape, code and color.
Yeah, so there will always be a proportion of people who want to rebel against that, and the muscle car is nothing If it's.
Not an act of rebellion.
It signals that you are different, that you don't follow the rules. There will always be an appeal. Now, if you can afford it, you will buy an old one, you will restore the engine, you'll pay the high insurance that comes with that. Because your passion basically pushes you to do those things. You know, until the end of this year, you'll still be able to buy a few muscle cars that are coming off the regular production line with the security of knowing it's a new car.
It'll last you certain.
Number of years. It comes with some warranties that will go away in January of twenty twenty four until the new evs turn up. And then you have a question, is that new EV a muscle car? Now we already know a little bit of what that might feel like. Mustang launched its first EV model, but it's not even a car. It's an suv, And you know purists I count myself among them, will argue that an EV is not a muscle car. It may be a muscle ev someday, if you can imagine such a thing, but it's not a muscle car. And it feels very strange to me to see that iconic Mustang badge on a suburban vehicle.
It just feels very very strange.
Bloomberg Opinion columnist Body Goes also covers foreign affairs. Bloomberg Opinion continues with the bit a puzzle. Economic trends are improving, but our economic anxiety is getting worse. This is Bloomberg.
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You're listening to Bloomberg Opinion. I'm Amy Morris. As America's economic trends are improving, our economic anxieties are actually getting worse. But this is more than just your typical middle to lower income family struggling to make ends meet. Higher income earners are also feeling financially stretched. Let's now break in Bloomberg opinion columnist Alison Schreeger, she covers economics. She joins me, now, Alison, you actually address this in your column. It's kind of hard to stir up simple for the very very wealthy who are feeling a financial pinch. But you say there's a reason we need to pay attention to this particular demographic in what's going on.
Yeah, I mean, they as much as you know, it's hard to have sympathy for them, although you know, I think we can all recognize ourselves in some of the bad financial choices they're making. We all do you know, they are legitimately stretched. I looked at some data from the Survey Consumer Finances, this SPED survey, and you do see sort of upper middle class people. You do see that their savings, particularly their liquid non retirement savings, have been falling over the years, even when the stock market was way up. So they do have less money than they used to. And I think it's largely because of service thing like service costs, things like cost of education, housing. You know, we should all worry about this, maybe not as much as said, as you know, people were really really struggling, but still because this could have impacts for the wider macroeconomy because we are very consumption based and this is a growing demographic and they consume a lot, and they also cut back the most when there's a recession, which could make them worse.
Do you anticipate than cutting back to make up for these higher costs of services.
Well, what we're.
Seeing is is ay it.
They have a much betner financial cushion than they used to be. So if there's economic stress going on, if they're job loss or they just are worried about their jobs, and we're going to see them, they have a big part of their spending is discretionary spending, like the things we make fun of. It feels like a couple times a year we get these articles about someone who makes five hundred thousand dollars a year and they lived in New York and we see this like list of their spending and we're supposed to feel bad for them, and no one does. But a lot of those things on that list, you know, they'll drop once the economy turns. And if everyone does this at the same time, then we actually end up with a more volatile economy for everyone.
Is it just our human nature? We're so much more eager to spend and then save. I mean, I remember having it beaten into my head when I was a kid, you have to save so much for a month so that you'll have something in case of already day fund or in case of an emergency. But it doesn't seem like that's really the message that's getting out anymore, or is it just not being heard.
I think it's largely cultural. I mean, you were raised with those values, but you know, maybe they were raised by people who didn't make savings to priority. Isaiy, Like the twenty fifth percentile of wealth for people who make I think it was between one hundred and fifteen three hundred thousand dollars a year is thirty grands, which is, you know, not bad. But like if you're making three hundred thousand dollars a year in your entire like non retirement assets are thirty thousand dollars and you lose a job, or you have a divorce, or you have a health event, that's actually not that much money. So I mean, I think people aren't making saving as much as a priority, And you know, I think that's largely a cultural shift or just values.
Yeah, the childcare costs are going up, Fueling costs are going up, mortgage rates, rent, and the student loans are have to be paid back soon. And some of those folks who are making a half million dollars a year, they did have student loans in their back pocket, a lot of them.
Actually.
There's a high correlation with student loan balances and income, so they're likely to as well have the bigger payments which they're about to start up again.
So how do we address this? What do we do well?
I mean, you know, we'd like to have a cultural shift back to savings, but I think we could, in the short term think more about tax policy. We could think about taxes and high end consumption. And maybe you know, one of the things that has lowered liquid saving is people are saving more for retirement, which is great. I mean, I think people were diverting more of their savings into retirement, which means they're in good shape for that, but also means it's coming across the liquid savings. Maybe we should have more tax preferences for more liquid emergency savings too.
Thank you so much, Bloomberg Opinion columnist Alison Schreeger. That does it. For this week's Bloomberg opinion. We are produced by Eric Molow, and you can find all of these columns on the Bloomberg terminal. We're also available a podcast on Apple, Spotify, or your favorite podcast platform. And stay with us. Today's top stories and global business headlines are coming up. I'm Amy Morris. This is Bloomberg