Rents outpace wages in big cities across the U.S.

This episode explores the increasing disparity between rent and wage growth in major U.S. cities, highlighting the economic challenges faced by renters.

1. Rent growth significantly outstrips wage increases in major U.S. cities.
2. Some cities like Austin and Houston have managed to reverse this trend thanks to a surge in new rental constructions.
3. The rising costs disproportionately affect low-income workers who are increasingly finding housing unaffordable.
4. Economic experts suggest that increasing housing supply is a potential solution to curb rising rent costs.
5. The disparity is part of a broader economic issue linked to inventory management challenges faced by small businesses.

1: The Growing Gap

Discusses the alarming rate at which rents are outpacing wages in the U.S., exacerbated by limited housing supply and rising demand. Kristin Schwab: "In New York, rent has risen seven times faster than wages."

2: Economic Implications

Explores how small businesses handle inventory and the broader economic indicators affecting market trends. Justin Ho: "With high interest rates, the cost of inventory is two to three times what it was a few years ago."

3: Voices from the Ground

Shares stories from individuals and business owners directly impacted by the economic trends discussed. Pat Whalen: "We're trying to be a little smarter about our inventory levels."

1. Consider Budgeting Tools: Use apps and financial planning resources to better manage personal finances amidst rising living costs.
2. Explore Additional Income Sources: Look into side gigs or freelance opportunities to supplement income.
3. Advocate for Policy Change: Engage in local advocacy for policies that increase housing supply and affordability.
4. Educational Resources: Educate oneself about tenants' rights and available housing assistance programs.
5. Community Support: Participate in or form community groups to support those affected by housing affordability issues.

Over the past five years, rents in nearly every major U.S. city have risen faster than wages. In New York City, rent surged seven times faster than wages last year. But this spike isn’t confined to the Big Apple. Later in this episode: GE’s three-way split is the end of an era. Also: the WNBA pay gap, and the rebranding of an iconic Midwestern frozen-food delivery service.

People

Kristin Schwab, Justin Ho, Pat Whalen, Samantha Fields

Companies

Zillow, StreetEasy

Books

None

Guest Name(s):

None

Content Warnings:

None

Kristin Schwab
On the show today, we'll talk about the health of small business, the health of household finances, and end with a healthy balance of ice cream. From american public Media, this is Marketplace in New York. I'm Kristin Schwab, in for Kairsdahl. It's Wednesday, May 8. Thanks for joining.

Have you ever walked into your local supermarket or wine shop or hardware store and taken a look at what's on the shelves? Like really taking a look what's up for sale and how well stocked those shelves are can tell you a lot about how a business owner feels about the economy. I say all this because we learned this morning that in March, wholesalers inventories fell from the month before down four tenths percent, according to the Commerce Department. Meanwhile, in April, a different survey of business owners called the logistics Managers Index shows inventories barely ticked up. So marketplaces Justin Ho called up a few small businesses to get the scoop on how they're thinking about what and how much they're stocking.

Justin Ho
Earlier in the year, Pat Whalen decided to bring in a lot of inventory for his grocery store and wholesaling business in Brooklyn called Sahadi Fine Foods. He imports a lot of products from parts of the Middle east that are really unstable right now. The political climate there meant I had to bulk up inventory, put a buffer here and another couple of months to the inventory cycle. But Whelan says bulking up on inventory is a whole different challenge because it requires borrowed money and with interest rates as high as they are, the cost. Of your inventory is two to three times what it was a few years ago.

As a result, Whelan says he's trying to be a little smarter about his inventory levels. We're still going to continue to replenish, but we need to take that buffer down a little bit. A lot of other businesses had been loading up on inventory this year because they thought if the Federal Reserve cut. Interest rates soon, consumers would be ready to spend more. That's Dale Rogers, a professor at Arizona state university who helps put together the logistics manager's index.

He says businesses have realized that it's not clear whether the Fed will cut rates at all this year. As a result, they're making decisions, in some cases to postpone purchases until they absolutely need it. That kind of just in time. Inventory management has a lot of advantages. Katherine Reynolds handles imports at Palmetto tile distributors in South Carolina.

She's also ordering less inventory right now, and she says that lets her stay nimble. And if I do see something that's not selling, then I can easily, you know, sell off the last part of it and not have to worry, not be stuck with inventory that's kind of gone stale, so to speak. Reynolds says keeping inventories low also lets her experiment a little more. For instance, she can bring in a small amount of new boulder tiles where its no big deal if they dont sell, but if they do, then great. We work with a lot of architects and designers, and its always good to kind of pique their interest and have the latest, greatest thing to offer them.

Pat Whalen
Reynolds says. That can help her boost sales even when the economy is uncertain. Im Justin Ho for Marketplace Wall street today. A little up, a little down. We'll have the details when we do the numbers.

Kristin Schwab
Yesterday on the show, we talked about the tough spot aspiring homebuyers and even some homeowners are in right now. Well, things are not exactly rosy out there for renters either. In almost every single big city in the US over the last five years, rents have grown faster than wages. On average, about one and a half times faster. That's according to new data from Zillow and Streeteasy.

There are some exceptions. In Austin, San Francisco, and Portland, wage growth has actually outpaced rent growth. But here in New York, rent has risen seven times faster than wages, Marketplace's Samantha Fields reports. I'm going to say it again because I think it bears repeating. Rent in New York City rose seven times faster than wages did last year.

Samantha Fields
And yes, new York is notoriously expensive. But it's not just New York. It's also Boston, Cincinnati, Buffalo, Chicago. As long as there are people who are willing to pay those rents and prices, the market will keep going up. Jenny Schutz at the Brookings Institution says, that's what we've been seeing in the last couple of years.

Kristin Schwab
People who own real estate, people who own stock portfolios, people in really high paid jobs are doing extremely well in this economy. That means they have a lot of money to spend on housing. And increasingly, a lot of them are renting, partly because there are so few houses to buy. And that is driving up rents for everyone. David Dworkin at the nonprofit National Housing Conference says this is putting a particular strain on lower income people.

Pat Whalen
You're talking about the person who makes your coffee, the person who serves you lunch, the people in your doctor's office, the people who come to rescue you if you get into a car accident, the nurse at the hospital. Over half of renters were cost burdened as of 2022, meaning they're spending more than 30% of their income on rent. Igor Popoff, chief economist at apartment list, says, as rents have spiked, we've also started seeing fewer people forming new households. That means that folks aren't going out and getting that new apartment, aren't moving out from living with parents, with family at the same clip that they were, because they're kind of looking at a market and saying, well, maybe it doesn't make sense right now. Things are starting to improve for renters in some markets, says Kenny Lee, senior economist at Street Easy and Zillow.

Austin and Houston, Texas, are great examples. In both of those cities, wages grew faster than rents. What's different about them is the substantial increase in the supply of new rental buildings. Really? Simply put, building more can make such a big difference for renters only.

Samantha Fields
Most cities aren't doing enough of it. In New York, I'm Samantha Fields for marketplace.

Kristin Schwab
Let's go from wages and rent to wages and basketball. The WNBA preseason has been selling out games. More than 6000 people bought tickets to see Indiana fever rookie Caitlin Clark's debut against the Dallas Wings. Clark and other high profile members of her draft class, Angel Reese, Cameron Brink, Camila Cardozo, they're expected to draw record crowds and viewership when the regular season tips off next week. But for all the fans and media focus and money these rookies are bringing in, WNBA players have relatively low salaries.

They fall in the mid $70,000 range. But as marketplaces Savannah Marr reports, new fans and interest from investors could help turn that around. The WNBA draft isn't typically appointment viewing, but this year, 2.4 million people tuned in more than four times the previous record. The Indiana fever select Caitlin Clark, University of Iowa. Clark, who's dressed head to toe in Prada, by the way, has already made over $3 million in endorsements after as.

Pat Whalen
Decorated a collegiate career as we have ever seen. She's reportedly working out a $28 million deal with Nike. So it's not like she'll live off her WNBA earnings. But many of her teammates will. And news of Clark's five figure salary was astonishing for some fans.

Savannah Marr
Not everyone. Welcome to the party. Weve been trying to figure this out for some time. Thayer Laviel is with the collective, which advocates for women in sports and recently did an audit of the athlete pay gap. What we found was that women athletes make 21 times less than men athletes on the field of play.

Thats on average in professional basketball. Its worse. Women make 108 times less than their counterparts in the NBA. And of course, the NBA is 50 years older than the WNBA. It brings in billions more in revenue.

But Laviel says the forces behind those disparities are entrenched. It's a challenge from needing enough eyeballs in order to get the dollars, but in order to get the eyeballs, you need to get the dollars. Let's start with the eyeballs problem. For decades, sports media was controlled by a handful of old guard gatekeepers, says Alicia Jessop, who studies the business of sports at Pepperdine. If you look at who the decision makers are, they tend to be middle.

Aged white men, men who long assumed there wasn't a market for women's sports so they didn't get tv spots or coverage by sports journalists. But now technology streaming and social media. What it has done is it's democratized media. Athletes and teams can market directly to fans who can watch and engage with women's sports more easily than ever. But Jessop says there's a lingering investment problem.

Alicia Jessop
For so long, women's sport has been treated like a charity case or a side project. Investors might put a small amount of money behind an athlete or a league, but then back off when they don't immediately see a return, Jessop says. Leaders in this space don't need to play scared. What that means is you place your financial bet, but then you double down on it by spending appropriately on marketing and promotion so that your investment can make significant gains. Like how investors have always treated men's sports, Jessup guesses we're years out from the Caitlin Clarks of the world making multimillion dollar salaries.

Savannah Marr
But the true fandom and star power around Clark and others in this highly anticipated rookie class could help move things along. I tell you what, what a great time to be a fan of women's basketball. Ketra Armstrong is a professor of sport management at the University of Michigan. She's also lived and breathed women's sports for decades and watched critics put the blame on women athletes for revenue shortfalls and their low salaries. There was a time that people thought, yeah, yes, women's sports is an inferior version.

Justin Ho
The media records tell us that's not the case. Armstrong hopes this wave of fan interest can put that conversation to bed and put a spotlight on the investments needed to get women athletes paid. I'm Savannah Marr for marketplace.

Kristin Schwab
Coming up. 20 years ago, there was no Amazon. We are trying to compete with all of those service providers. Oh, how times have changed. But first, let's do the numbers.

The Dow Jones industrial average rose 172 points, four tenths percent, to close at 39,050. The Nasdaq fell 29 points, about two tenths percent, to finish at 16,302. And the S and P 500 barely budged, ending at 51.87. Samantha Fields told us about the gap between wage growth and rising home rental costs. Let's check in on some publicly traded rental companies.

Invitation homes shaved off 810 percent. American homes for rent subtracted eight tenths percent as well. Blackstone retreated 1.4%. Ride sharing firms drove in opposite directions today. Uber shares fell 5.7% after the company reported first quarter results that were kind of mixed.

Lyft rose 7.1% after the company reported faster than expected revenue growth. Bond prices fell. The yield on the ten year t note rose to 4.49%. You're listening to marketplace.

H
Hey, everyone, it's Rima Grace, host of this is uncomfortable. If you're looking for some good recommendations on books to read, well, you should join this is uncomfortable's summer book club. Every other week in our newsletter, we'll share a new book that'll make you rethink your relationship to money, class and work, while also featuring an interview with the author or an expert on the topic. Plus, when you join, you'll be entered in a giveaway where you could win some this is uncomfortable merchandise. Be sure to check it out.

Sign up today@marketplace.org. Bookclub.

Kristin Schwab
This is Marketplace. I'm Kristin Schwab. Americans, generally speaking, built up a pretty good cash cushion during the pandemic. Economists at the San Francisco Fed found that by August of 2021, we collectively saved up to $2 trillion more than we would have had there been no pandemic. But now those very economists say all the extra savings are gone.

So where did all of it go? Marketplace's Kaylee Wells talked to some economists about how they spent their savings and where everyone else's might have went. Preston Moy earned his PhD during the pandemic. He was dipping into savings, and the stimulus checks he got kept him from dipping too far. It really helped me out.

Pat Whalen
I probably spent it on takeaway food when I was writing my dissertation. Now he's a senior economist at Employ America, and he says smaller savings accounts aren't as worrisome for consumer spending as they sound, because there's an even more important factor here, wages. And the fact that labor income growth is still strong, employment is still strong, and wage growth is still strong leads me to believe that consumption, at least for the foreseeable future, is going to be healthy. Lots of higher income households saved and invested their money. That's what Scott Baker did.

I
He is a finance professor at Northwestern University, who says, now that the savings are gone and interest rates are up, loan and credit card payments are more challenging, especially for lower income households with less financial wiggle room, where the savings probably ran out months ago, those debt. Payments are going to start to bite a bit more and kind of continue to take a chunk out of the disposable income that households have. As for one of the economists behind the San Francisco fed research, Hamza Abdulrahman. Hi, you bought a car, he says. That's a good reminder of the fact that savings aren't the only indicator of wealth here.

A lot of households, like his use their money to buy more non financial assets, think cars and houses. And that was thanks to a low. Interest rate environment and some influx of cash and financial support at the beginning of the pandemic. Those assets help people to feel wealthier, even as their savings dwindle. And Abdulrahman and his co author say the wealthier people feel, the more likely they are to keep spending.

I'm Kayleigh Wells for marketplace.

Kristin Schwab
General Electric has been a big piece of american business for 132 years, so big that it's almost hard to remember all of the industries the company has touched. It's made televisions and light bulbs, and has even provided home mortgages. But that is the past, because GE is entering a new phase. Last month it split into three separate companies, a wind power business, an aerospace firm, and a healthcare company. Marketplace's sabree Benashore looks back at GE's long history.

Pat Whalen
The first spoken words in human history to be recorded and replayed were from a nursery rhyme recited by Thomas Edison. In 1877. The original recording was destroyed, but Edison re recorded it decades later. Mary had a little lamb. Its fleet was quite as snow, and everywhere that Mary went, the lamb was sure to go.

Five years after inventing the phonograph, in 1892, one of Thomas Edison's companies merged with another electric company to form General Electric. It wasn't actually Edison's idea. It was JP Morgan's. The original JP Morgan. Like the guy, GE ushered in the age of electricity.

And it was big from the get go. You have to think of it as sort of the Microsoft, Google, apple of its time. William D. Cohen is author of power the rise and fall of an American Icon. Edison was a better inventor than a businessman and was quickly sidelined from leading the new company.

But it continued to create in the 1910s and 1920s. It quickly became a powerhouse of invention, innovation. GE inventors developed radio broadcasts and an electric car. In the twenties, GE got into home appliances. By the sixties, it was making plastics and silicones for the boots and helmets and the moon landing.

It also got into the credit business. It started during the depression to help people buy GE products that they couldn't otherwise afford. By the middle of the 20th century, GE became seen as ubiquitous because it was at general electric, progress is our most important product. GE had a long and tense history with unions from the beginning, and its desire to escape unions helped drive the company in 1956 to move its computing department out of what would become Silicon Valley and into Phoenix, Arizona. Elizabeth Tandy Shermer is a professor of history at Loyola University, Phoenix, Arizona.

Alicia Jessop
Has anti union laws with a more favorable labor and tax policy. That decision proved fateful. The company that made everything from a to z ended up losing out on c computers. Because the GE computing was so removed from that hotbed of computer innovation, they really got left behind. But by 1999, GE employed 340,000 people worldwide, nearly 200,000 of them in the US.

Pat Whalen
It was still the quintessential conglomerate, and there was a rationale for that. And this was this notion that some degree of the research would be shared across these industries. Ted Mann is co author of lights, Pride, Delusion, and the fall of General Electric. He's also a reporter at Bloomberg. He says while one tentacle of GE could theoretically help out the others, it could also bring them all down.

GE's financial arm almost did both. Under Ge's most famous CEO, Jack Welch, GE Capital had exploded. That grew into what was essentially the 7th biggest bank in the country, at one point generating 50% of GE's earnings. When the great financial crisis hit, it began to implode and nearly took all of GE with it before being bailed out, along with the too big to fail banks. William D.

Cohen right then is when things really began to change. Under CEO Jeff Immelt, GE sold off NBCUniversal to help pay for the fallout of the great Recession and return to its industrial roots. GE Capital was spun off. GE's different industrial tentacles were chafing at being tied to one another again. TED Mann there was a realization that the only way for these companies to thrive and survive was to separate it all.

It took two more CEO's to accomplish that. By 2021, General Electric's headcount in the US had fallen by almost 75% from its peak. And finally, in April of this year, GE split apart into a wind power company, a healthcare company, and an aerospace company. It is no longer the great, ubiquitous conglomerate whose products touched both earth and moon. It was this incredible industrial company and built truly incredible things.

And so it does feel like we're never going to see a company that looks like that again. It's a reminder that even the greatest of companies don't have fate on their side forever. In New York, I'm Sabri Ben ashore for marketplace.

Kristin Schwab
I grew up in rural Minnesota, and one of my core childhood memories is Schwann's. Schwann's has been around since the fifties, and it's an iconic brand in the midwest. Its yellow trucks are like freezers on wheels, going door to door delivering ice cream and chicken strips. I always begged my parents for the orange Flintstones push ups. If you know, you know.

Well, a lot has happened in the grocery industry since Schwans heyday, like Instacart and Amazon. So in 2018, the Schwans family sold most of its business to a south korean food company, which renamed the brand Yellow Harvest. Public Media's Elizabeth Rembert has more on the company's transition. Since 1965, Mary Bartles has been looking forward to her Schwann's deliveries. She remembers her nine kids excited to see the delivery man drive his yellow truck down the driveway.

Justin Ho
They would get on the truck and climb all over it, and they'd all come in with an ice cream bar or something. And now I realize he was giving those to those kids out of his pocket because I wasn't paying for him. One of those kids actually happens to be my stepdad, which is how I know that nearly 60 years later, Mary is still ordering ice cream, frozen food, and meals from Schwann's. And on this Thursday morning in Vermillion, South Dakota, it's time for another delivery. Come in.

Pat Whalen
Hi, Mary. Hello. How are you? Nate O'Grady lets himself in and takes a seat at Mary's kitchen table. He's our delivery man now.

We have time to sit and talk and socialize with people. He says his favorite part of the job is getting to know the customers along his route. You get to know the customers well enough. You know exactly what they want. When you come to the door, you know exactly what, what they're going to order.

Mary's going to get her peanut butter cups. I know that. Oh, yeah, that's the best thing they had. Mary says. It's the great service that's kept her buying from Schwann's for nearly 60 years.

Alicia Jessop
She doesn't even have to get out of her recliner. As O'Grady checks her freezer for what she needs, grabs the order from his truck and packs it onto the freezer shelves. When the Schwan's family sold most of their business, they kept the delivery service but changed its name to Yellow, spelled Y e l l o h. Some customers, including Mary, didn't take much notice. When did they do that?

The new name is inspired by the unmistakable trucks, according to Bernardo Santana, the company's CEO. That's one of the reasons we kept the name as yellow, because of the famous and recognizable yellow truck, to bring back and to keep this connection with our customers. The makeover comes as yellow contends, with a much different market than when the company started in 1952. Its main competitors used to be local family owned shops. Now online giants like Walmart, Costco and Amazon are coming for its customers.

Yellow is still delivering its own yellow branded proprietary products. About a year and a half after announcing its new name, Yellow made another change. It cut 750 employees and closed 90 delivery centers. Santana says it's to keep up with new technology and a more competitive online grocery environment. 20 years ago, there was no Amazon.

Pat Whalen
We are trying to compete with all of those service providers. The new brand and cuts are part of an overall strategy to modernize Yellow's delivery service, says Akshay Rao, who teaches marketing at the University of Minnesota. The whole rebranding, cost cutting through the reduction in their workforce and so forth, is part of a strategic shift which is emphasizing costs rather than customers. Yellow CEO Santana says customers are still the priority, but the cuts do leave some in the dust. The yellow trucks used to make deliveries in all 48 lower states.

Alicia Jessop
Now it's just 18. Customers elsewhere can get orders via UPS. It's a loss for Deb Kuomoto. She's in Lincoln, Nebraska, and won't receive deliveries anymore. It's really kind of ironic because here.

Kristin Schwab
Schwann's they were kind of like the. First grocery delivery, and now everybody else has kind of caught up to them. Ordering from Schwann's and seeing the yellow trucks felt like stepping back into her childhood. I think it's the end of an era because I do miss the drivers. I really do, she says.

Alicia Jessop
She'll go to the grocery store instead of ordering via ups, even if the ice cream there isn't as good as yellows in Lincoln, Nebraska. I'm Elizabeth Rembertz for Marketplace.

Kristin Schwab
This final note on the way out today, generative AI is certainly going to be transformative, but it looks like for now, a lot of people are just using it because they're tired. Saw this in Wired, a new report by Microsoft and LinkedIn says 75% of people who have desk jobs are using AI at work. The company surveyed more than 30,000 people in more than 30 countries. Nearly 70% of respondents say they struggle with the pace and volume of work, and many of them say they use AI to dig their way out of emails, web chats and meetings. Our media production team includes Brian Allison, Jake Cherry, Jessen Dooler, Drew Jostad, Gary Okeefe, Charlton Thorpe, Juan Carlos Torado, and Becca Weinman.

Jeff Peter Peters is the manager of media production. And I'm Kristen Schwab. We'll be back tomorrow.

This is APM.

H
Hey everyone, it's Reema Grace, host of this is uncomfortable. If you're looking for some good recommendations on books to read, well, you should join this is uncomfortables summer book club every other week in our newsletter, well share a new book thatll make you rethink your relationship to money, class and work, while also featuring an interview with the author or an expert on the topic. Plus, when you join, youll be entered in a giveaway where you could win some this is uncomfortable merch. Be sure to check it out. Sign up today@marketplace.org.

Bookclub.