Are you better off now than you were 30 years ago?
This is an exercise I undertook to try and quantitatively measure quality of life for folks living on the bottom of the income scale. I have never understood the objection to raising the minimum wage (Well, yes I do. It's called GREED), and all the dire predictions about the what happens when you do. Many numbers are thrown around to justify that things are better today for the poor than in the past. Problem was, I just didn't see it. Things seemed worse. In fact, I am quite middle class, and I can tel you things are not what they were in my past when I was struggling. So, I set out to measure the quality of life or those living on the minimum wage. And since the MW is the floor on which all wages for the lower and middle class are based, it really is a measure of the middle class as well.
Let us look at the MW in 1978 and 2008, and the cost of various goods as a percentage or multiple of the minimum wage, and what such goods would cost today adjusted for inflation, and what so goods do cost today.
I chose 1978 as it was in the "dark days" (according to Republicans, of the Carter administration, a man vilified by the right for "destroying" the economy. Since then, we have had Republicans in charge for 20 of the last 30 years, 12 years of Reagan-Bush I, and 8 years of Bush the Lesser. In retrospect, Carter's statements about the environment and the need for new energy sources have proven uncannily accurate.
Conservatives may accuse me of picking 1978 in order to make the minimum wage numbers look good. If that were my plan, I would have chosen 1967, since it's $1.60 wage would adjust to over $10 today.
So let us ask that question Reagan used to eviscerate Carter: "Are you better off now than in 1978?"
Numbers in red mean a loss of purchasing power, or an increase in real price.
MW - Minimum Wage
Adj - $ Cost of item inflation adjusted to 2007 dollars
Chg - % Increase or decrease in 2007 dollars
Minimum Wage
1978 - $2.65
2008 - $5.85
1978 minimum wage adjusted to 2007 dollars - $8.60
Change in real minimum wage - 31.97% DECLINE
If the minimum wage paid in 1978 had been adjusted for inflation (meaning no real growth in wages), then the MW would be $8.60 today. Since it is only $5.85, we have lost 34% in real terms.
Inflation calculation source: U.S. Bureau of Labor Statistics.
Personal Savings
1978 personal savings (2006 dollars) - $908.75 billion
2006* personal savings (2006 dollars) - ($91.7 billion)
Percentage of Americans Below Poverty Line
1978 - 11.6%
2005* - 13.3%
Source: US Census Bureau
*Latest numbers available.
Gasoline
1978 - $0.65
2008 - $3.25
Adj - $2.11
Chg - 54.02% INCREASE
% of MW 1978 - 24.52%
% of MW 2008 - 55.55%
Sources: U.S. Dept of Energy.
Let me recap these numbers to make sure you follow my logic.
In 1978 gasoline was 65¢ a gallon. Adjusted for inflation to 2008 dollars, that would be the equivalent of $2.11. Since the average gas price is currently $3.25, the real cost of a gallon of gas has increased $1.05, or 54% above the 1978 cost. In 1978, that gallon of gas equaled 24% of the MW ($2.65). Today, a gallon of gasoline equals 55% of the MW.
So, not only does gasoline cost more than it did in real terms, it also consumes of twice the amount of the MW that it did in 1978.
This is a nasty double whammy for the consumer.
Electricity
1978 - $0.043/KwHr
2008 - $0.106/KwHr
Adj - $0.15/KwHr
Chg - 29.33% CHEAPER
% of MW 1978 - 1.62%
% of MW 2008 - 1.77%
Although real electricity costs declined, the proportion of the MW increased.
Source U.S. Dept. of Energy
Natural Gas
1978 - $2.56/1000 cu. ft.
2008 - $13.01/1000 cu. ft.
Adj - $8.67
Chg - 50.05% INCREASE
% of MW 1978 - 96.60%
% of MW 2008 - 150.06%
Natural gas is not the bargain it once was.
Source U.S. Dept. of Energy
Medical Care
1978 - $960/year
2008 - $6,174/year
Adj - $3,120/year
Chg - 97.88% INCREASE
% of annual MW salary 1978 - 17.41%
% of annual MW salary 2008 - 50.73%
Source: U.S. Census Buereau
Home Prices
Median Home Price 1978 - $52,100
Median Home Price 2008 - $233,000
Adj - $169,325
Chg - 37.6% INCREASE
# of year's salary 1978 - 9.45 years
# of year's salary 2008 - 19.14 years
Source: U.S. Census Buereau
Milk
1978 - $1.70/gal
2008 - $3.80/gal
Adj - $5.52
Chg - 31.16% CHEAPER
% of MW 1978 - 64.15%
% of MW 2008 - 64.95%
Source: U.S. Census Buereau, USDA.
Butter
1978 - $1.39/lb
2008 - $3.16/lb
Adj - $4.51
Chg - 29.93% CHEAPER
% of MW 1978 - 52.45%
% of MW 2008 - 54.01%
Source: U.S. Census Buereau, Wisconsin Farm Bureau Federation.
Bread
1978 - $0.36/lb
2008 - $1.62/lb
Adj - $1.17
Chg - 38.46% INCREASE
% of MW 1978 - 13.58%
% of MW 2008 - 27.69%
Source: U.S. Census Buereau, American Farm Bureau.
Hamburger
1978 - $0.95/lb
2008 - $2.38/lb
Adj - $3.08
Chg - 22.75% CHEAPER
% of MW 1978 - 35.85%
% of MW 2008 - 40.68%
Source: U.S. Census Buereau, Bureau of Labor Statistics.
Chicken
1978 - $0.62/lb
2008 - $1.16/lb
Adj - $2.01
Chg - 42.28% CHEAPER
% of MW 1978 - 23.39%
% of MW 2008 - 19.85%
Source: U.S. Census Buereau, Bureau of Labor Statistics.
Sugar
1978 - $0.24/lb
2008 - $0.51/lb
Adj - $0.78
Chg - 34.61% CHEAPER
% of MW 1978 - 9.05%
% of MW 2008 - 8.71%
Source: U.S. Census Buereau, Bureau of Labor Statistics.
Coffee (instant)
1978 - $9.12/lb
2008 - $10.38/lb
Adj - $29.64
Chg - 64.97% CHEAPER
% of MW 1978 - 344%
% of MW 2008 - 177%
Source: U.S. Census Bureau, Bureau of Labor Statistics.
Eggs
1978 - $0.81/lb
2008 - $2.17/lb
Adj - $2.63
Chg - 17.49% CHEAPER
% of MW 1978 - 30.56%
% of MW 2008 - 37.09%
Source: U.S. Census Buereau, Bureau of Labor Statistics.
Hershey Bar
1978 - $0.21/oz
2008 - $0.45/oz
Adj - $0.71
Chg - 36.61% CHEAPER
% of MW 1978 - 7.92%
% of MW 2008 - 7.69%
Chocolate bars are a bargain, but not so much for the working poor.
Source: Consumer Reports
Pepsi/Coke
1978 - $0.15/12 oz. can
2008 - $0.56/12 oz. can
Adj - $0.49
Chg - 14.28% INCREASE
% of MW 1978 - 5.66%
% of MW 2008 - 9.57%
Source: Greensboro Record back issues, 1978, 2007
McDonalds Hamburger
1978 - $0.35
2008 - $0.89
Adj - $1.14
Chg - 28.08% CHEAPER
% of MW 1978 - 13.21%
% of MW 2008 - 15.51%
Source: McDonalds office of Consumer Relations
What can we learn looking at these numbers? Well, food is cheaper today than in 1978. I think this is attributable to modern "factory" farming practices. While they is good news for consumers on one hand, it is also bad for consumers and family farmers on the other. Hormones and antibiotics taint our food, and after excretion, our water. The practices in the beef, poultry, and pork business result in cruel and inhumane treatment of the animals. Poor safety enforcement leads to occupational injuries and deaths, and the rise of bovine spongifom encephalopathy (Mad Cow Disease) which is immune to all drugs, survives even burning, and kills 100% of those infected.
While industrial farming is very efficient, thus allowing for cheaper food, it drives commodity costs down to levels that family farms, not able to afford the expensive tracts of land and massive investments in equipment and people, cannot sustain. Thus, each year, more family farms go out of business. Those that survive can only do so by specializing in one of two crops, rather than the range of crops grown by farmers 100 years ago. As a result, unlike their great grandfathers, todays family farmer cannot feed his family, and must buy food from the grocery store.
The damage to the environment inflicted on the air, land and water is an expense not factored into actual food costs, which will one day have to be paid. The cost to other economies in other countries where we have exported our practices in order to drive down costs further also increases the pressure on family farmers, and creates legions of poorly-paid workers living as virtual serfs to American agribusiness.
Another point to ponder is that while staples like coffee, chocolate and sugar got much cheaper, the lives of the people growing them (many of them children) is pretty abysmal. Wages in many countries are barely subsistence level, and in some cases, "slavery" would be an applicable term.
The other key point to note from these numbers is that the minimum wage is obviously too low, something many states have figured out for already. In just about every aspect of daily living, the proportional cost of of goods and services has increased markedly from 1978, especially gasoline, housing and medical care.
Gasoline's portion of the MW more than doubled, as did housing, while medical care expenses almost tripled.
And how are the big boys doing while the serfs toil away for $5.85 an hour?
Total Compensation Ratio of CEO to Average Worker
1978 - 40
2005 - 367
Source: Historical Trends in Executive Compensation 1936-2003
As the saying goes, you do the math.
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Unemployment Soars Under Hayes-Bush Economic Policies
Interesting.
A very interesting analysis - good attempt at being objective. It's hard for me to be objective or not. 30 years ago I was 18, a college freshman, unmarried, inexperienced in oh so many things. Now I've learned A LOT about myself, have been married, had a son, had partners of both genders, and am now married. I think I'm a lot better off, even financially, than I was then.
But if you ask me if I am better of than I was 8 years ago financially? No. No, not at all.
Be the change you wish to see in the world. --Gandhi
Pointing at Naked Emperors
That makes you about my age
The question is pretty moot in the context of you at age 18, versus now. But if our money had the buying power of 1978, food would be slightly more expensive, but housing, energy, and medical care would be much lower.
Another way to make make an apples to apples comparison, imagine yourself at 18, getting started today. Were you better off then, than you would be now?
For example, I currently pay $1,000 for insurance, and they just doubled all my co-pays. I know have drugs that are $100 out of pocket. Even adjusted for inflation, if I were buying 1978 insurance, I would pay half that, with almost no co-pays. My mortgage payment would be about a third of what it currently is, and of course, gasoline would be a dollar less a gallon.
I am trying for expand this analysis to other goods and services (cars, clothes, books, appliances, etc.
Liberalism as a badge of honor!
No apologies, no excuses.
I wonder about the poverty line
Now, it's been years since I had a class on the subject, but the poverty line has always seemed pretty nebulous to me. Wkipedia defines it as more of a blur.
I often wonder what the health effects of poverty are - it is extremely stressful to be poor, both physically and emotionally. It's extremely hard to eat well, even if you technically have enough money to keep yourself from starving, and it is very hard to enjoy any sort of full life below the poverty line (meals out, toys for the kids/grandkids, going to see a movie once in a while).
For myself, 30 years ago I was 6, and I had it made - two professional parents, a house, private school...
Now, we're not doing as well financially as my parents did at this point in their lives as far as appearances go, but I think in the long term we're going to do better. They had no savings except for my dad's pension, and I'm a saving maniac. So it's a debatable point.
- BJ
the poverty line
As I understand it, the poverty line is arbitrary at this point, and it's important to keep it arbitrary because if you modernize the numbers you'll be comparing today's apples to yesterday's oranges.
Over the past 100 years food costs have gone way down and housing costs have gone way up.
By the way, what most working class families would consider poverty is actually like more like 200% of the poverty line. Again, you don't want to actually change it too much because then it becomes more of a communications tool than an economic tool, and I believe it is valuable as an economic tool.
- - - - -
The NC Justice Center has an really good report
on Living Wage, and how it compares to the Federal Poverty Level, etc. Check it out here. Warning, it's a long pdf - about 44 pages. But it puts "the poverty line" in perspective and explains why it's different in different areas and for different people. A serious must read and print out for activists, in my opinion.
Be the change you wish to see in the world. --Gandhi
Pointing at Naked Emperors
hot
thanks
- - - - -
very cool analysis! I enjoyed it
But I see a flaw in all the MW comparisons that are a trickle down effect. Todays MW is 31% lower then 78's MW. With that, everything else is going to be skewed when comparing to 78 MW.
Arguably, you would have to readjust the MW to what it should be to be most objective? I may be wrong on this. Seems like your not really comparing to the old bar. Might be comparing oranges to tangerines?
But when comparing to present day MW, it is valid. I just do not think it is objective to show a % difference change of the % to MW change between the two years with that already inaccurate error?
Actually, I did compensate for it.
At the very beginning I pointed out that today's MW should be $8.60, but isn't. I then showed 1978 prices as a % of the MW, then compared the same item (at 2008 prices) as a % of the current MW.
At one point I had put in the %increase/decrease of the proportional cost of items, but folks found it confusing, so I took it out. So, in the case of gasoline, the proportion of the minimum wage had increased 120%.
So, if you bought a gallon of gasoline in 1978, it was $0.65, about 25% of the 1978 MW of $2.65. When you buy the same gallon today, it is $3.25, or 55% of the current MW of $5.85. I also point out that adjusted for inflation, gasoline should be only $2.11 a gallon, thus 2008 gasoline prices have gone up 35% relative to the 1978 price.
Liberalism as a badge of honor!
No apologies, no excuses.
OOO OK
I was doing a different comparison. I see it now.
Thanky
One thing that is immeasurable but still very palpable
is an uneasiness in the country today. People know deep down that they are working harder; two incomes used to meet the needs of a family and still longer ago, one income did the job.
They know too that even if you have a good job now or health care that meets your needs, those things are becoming scarce and there are NO guarantees in the workplace. Even if the pension plan looks like you can retire someday, how many of those have vanished into thin air?
Sorry to be Debbie Downer, I just thought that point ought to be made.
every job has been
subject to disappearing. This is not a 2000s issue. My father lost his job in the 1970s. He never got a real job after that.
With so many people having to place their retirement in 401k and these are based on the stock market, that is scary. Retirements are no longer rock solid. What is going to happen to many retirement plans when the stock market adjusts itself down to 10,000 again or lower? If it does not constantly grow, peoples retirements will not keep up with inflation. You can find yourself in a few years of bad times with nothing even though you have done all the right things for 40 years of your adult life.
How do you fix that concern? no clue. That is why it is scary to me.
What's up with bread?
Great stuff, Ambassador Kosh.
I think I understand why, of the "food"stuffs, Pepsi/Coke went up; they're brand-name goods, and consequently for people who must have them, the firms that own the marks can extract monopoly rents.
But what's up with bread? Why has it gone up? Is it all the fault of ethanol and biodiesel getting cropland reallocated to corn and away from wheat? If so, what did bread prices look like 4-5 years ago?
--
relocating from Indianapolis, IN to RTP, NC soon; got any advice for me?
I wouldn't recommend drugs, alcohol, violence, or insanity for everyone, but they've always worked for me. -- Hunter S. Thompson
Maybe they're just trying to keep our butts from getting
any bigger than they already are.....they raise the price so we won't eat so much of it. Hehe...it isn't working for me.
Robin Hayes lied. Nobody died, but thousands of folks lost their jobs.