America's Fortunate Consumers
It seems like every week Vermonters hear, from everyone from Pat Buchanan to Bernie Sanders, that the suffering middle class is taking a beating, while the captains of finance and industry are wallowing in uncountable wealth. But rarely do we hear the same kind of woeful tale when it comes to the value a modern-day consumer gets for her shopping dollar.
Thoreau wrote, in Walden, that "the cost of a thing is the amount of life which is required to be exchanged for it, immediately or in the long run." That is, the real cost of living is not measured in dollars and cents, but in the hours and minutes we must work to be able to buy what modern Americans believe to be the essentials of a decent life.
Two economists with the Federal Reserve Bank of Dallas, W. Michael Cox and Richard Alm, recently did a comprehensive survey of consumer prices in 1897 and 1997. Instead of measuring the prices in dollars, which have shrunken drastically in value over the past century, Cox and Alm measured consumer prices in terms of the time it would have taken a manufacturing employee, working at the average manufacturing wage of his day, to earn enough to buy the product.
For example, in 1897 a pair of women's stockings cost 25 cents. But manufacturing employees earned only 14.8 cents per hour of work. So a worker had to work 84 minutes to buy the pair of stockings.
Today, if a modern manufacturing worker had the same ratio of price to wage, he would have to pay $22.26 for a pair of stockings. Today's price, however, is only around $4, and to earn that the worker would have to work 17 minutes, not 84 minutes. Needless to say, the quality of the stockings has also immeasurably improved.
Here are some more products which were offered in the 1897 Sears catalog, which are not substantially different from those used today. A 1 lb. box of baking soda would cost $5.34 in wage-equivalent compared to 1897. An old style telephone would cost $1202. A pair of nine inch steel scissors would cost $66. A Webster's dictionary would cost $62. A bicycle would cost $2221, and a 13" hammer $37. It took the average manufacturing worker 30 minutes on the job to buy a pound of ground beef in 1919, 23 minutes in 1950, 11 minutes in 1975, and 6 minutes in 1997. A sample market basket of a dozen staples (milk, bacon, oranges, eggs, bread, and so on) required almost 10 hours of work in 1919, and less than two hours today. In 1919 it took 157 minutes of work to buy a 3 pound chicken; today we can buy that same chicken with 14 minutes work.
The price per square foot of modern single family housing, adjusting for large square footage and higher wages, is lower today than in 1920 or 1956. In 1956, it took 6.5 hours of work to buy a square foot of new home, while in 1996 it took only 5.6 hours. But today's homes have far more amenities. In 1956 28% of new homes had two or more bathrooms; today 91% do. Surprisingly, in 1956 only 1 of 100 new homes had a built in kitchen range; today, 94 percent have one. Only 11% then had a dishwasher; today the figure is 93%.
In 1902 100 kilowatt hours of electricity cost $16.02, the equivalent of two weeks wages for factory workers. As a result only one in 200 American houses could afford to be wired. Today, power is delivered for less than $7, and 99.9 percent of all American homes have electricity.
A gallon of gasoline required just 5.4 minutes of work in 1997. Since fuel efficiency has improved by 60% since 1970, the work time needed to drive an typical care 100 miles has been nearly halved over the past 25 years. A nylon tire of 1950 lasted 16,000 miles. Today's steel belted radials last 42,000, but in work-time terms the modern tires are cheaper as well as far safer and more durable.
The McDonald brothers offered a 1/8 pound (!) hamburger in 1940 for 30 cents, requiring 27 minutes of work time.. Today Big Mac fans get 1/5 of a pound of burger for $1.89, or nine minutes worth of work. A 6.5 ounce Coke cost a nickel in 1940, and 33 cents in 1997. But today's Coke drinker works only one third as many minutes to buy it. The pioneering color television of 1954 required 562 hours of work, but today only 23 hours are required.
How did this miraculous reduction in work-time cost of our modern day goods and amenities come about?
Because of a farsighted government program for "consumer empowerment" launched in the Wilson years? Not likely.
Let Cox and Alm explain it: "The true test of an economic system is how productive it is with people's time. Time is the currency of life, and the value of our time is our most important asset. Like a good steward, America's free enterprise system has consistently raised the value of our hours and minutes, making most goods and services affordable to the average worker. The result is a democracy of consumption." Think of that the next time you go shopping, and think of the innumerable taxes and unreasonable regulatory burdens that politicians have saddled upon that free enterprise system. Despite those costly burdens, our free enterprise system has succeeded splendidly in bringing more and better goods within the reach of every consumer. It's worth keeping.