Yeah, the numbers in the parent comments of this thread make me wonder how useful those “in today’s dollars” conversions are in general. Especially considering entire markets that existed in the 30s don’t today (or do but are vastly smaller, like horses would have played a bigger role and shoe shining was a job) and new markets exist today (like the entire tech sector). Is it even meaningful to compare money between those two timeframes without putting it in some specific market context?
Depends on what you want to buy. An inflation index uses select goods and services that are thought to represent the general economy but it’ll be different for any one individual.
This is the right question. Many goods and services have far eclipsed the average rate of inflation. Housing being one of them. But hey, we can buy cheap TVs now, so it all balances out, right?
If the official inflation figures (which are used to calculate that equivalent amount) understate the real inflation, that has the side effect of mathematically makinh the official GDP figure larger (because inflation is used to deflate the nominal - in dollars - GDP to create the official one).
There absolutelly is a political interest in the official Inflation understating reality (because it lets politicians claim as GDP Growth something is just the mathematical result of that understating error in the inflation figures).
It neatly explains why inflation is so consistently understated that dollar amounts at spearated by over half a century points in time which those official inflation indices tell us are worth the same do not in fact buy the same (i.e. are not worth the same) by a massive distance.
Random errors in measuring inflation would be just as likely understate it as overstate it and would not result in this difference in worth of a dollar amount thats several hundreds % off from the worth of present day dollars as measure by what it can actually buy.
I live in a house built before the year in question and paid not too much more than that price for it (~$95,000) in 2018. For reference the house is in a working class suburb of a small city in the Midwest, so it’s not a housing hotspot but not out in the middle of nowhere.
There’s no insulation in the exterior walls, I had to rebuild the dangerously steep basement stairs, and I’ve spent about five grand on asbestos abatement so far with more in the near future. Those are just problems with the original construction, I’m excluding issues caused by age or mistakes made by previous owners.
Cheap housing from that era doesn’t meet even the most basic safety related modern building codes (to say nothing of energy or environmental codes). Modern housing is more expensive because cheaper housing is a goddamned death trap.
I lived in a 3 decker built in the 1940s outside of Boston and the thing had barely functioning steam heat that had constant water hammer and it was so drafty that in the winter I could actually feel a breeze coming through cracks in the walls.
I know the feeling. In the mornings and evenings when light comes in through the basement windows I can see it through the gaps in the floorboards. I just tell people that I really committed to getting natural light.
Even when you take age related issues out of the picture the older, cheaper homes wouldn’t pass muster if they were built today. They’re bad for the environment and they’re bad for people.
Food production is “artificially” cheap. There’s a middle man taking a big cut, and there’s somewhere where the cut is taken. Be it poverty wages for poor immigrant workers or animal welfare, there is no price small enough considered by the powers that be for constant production of cheap food.
I’d take that as a smaller dairy farmer was able to make a living at that time, understanding that maybe people valued milk over the non-existent necessities that we now rely on today. Milk got cheap because it became an industry.
I wonder what median wage is like. Average, which I assume is mean, would be greatly skewed by high wage earners since the lowest you can go is zero (if that even counts as a wage), but the highest you can go is much higher and far more people are closer to the lowest wage than the top.
Unwittingly you have just pointed that the officail Inflation Rate indices that are used to calculate the equivalent amount in todays’ money are not only complete total bollocks but consitently understate the real inflation, which is why those maths produce an amount today for that past salary which is according to those indices worth twice as much and yet buys way, way less that the supposedly equivalent amount bavk then.
If the Inflation figures are telling us two amounts at different points in time are worth the same yet the present day amount buys a lot less (i.e. is worth less when you try and buy goods and services with it) that means those inflation metrics have been understating inflation.
I’ll even give you the reason why: the lower the official inflation figures, the higher the official GDP, because in its calculation those inflation figures are used to deflate the nominal GDP (i.e. the dollar amount) to create a supposedly inflation-free GDP that can be compared with other years. If the official inflation understates real inflation politicians get to claim as GDP growth something that’s just the Matematical outcome of that inflation figure being lower than reality.
Sure vast conspiracy across decades of civil servants is one option, or inflation as an overall number is an average and some things increase in price faster while some go slower.
You can always look at a price as a percentage of average income if that’s what you’re interested in, nobody is hiding these numbers.
That’s a massive strawman and a pretty lazy falacy to use: it’s like saying that CEOs cutting jobs to boost short term bonuses is a “vast conspiracy” or that politicians lying is “a vast conspiracy”.
As if people influencing people and people doing what’s best for themselves requires them to all coordinate with each other forming a “vast cospiracy”.
As soon as the heads of the institutions that produce economic figures are nominated by politicians, both the ones nominated are the ones expected to be friendly to the interests of those politicians and the ones in there will be under political pressure. Politicians want to look good and win elections and they’ll put pressure on those who produce politically important figures to make those figures look good so that they look good - no conspiracy required - and, guess what, GDP Growth has been a politicially important figure for several decades now, as noticed by the loud celebrations from whomever is in power that GDP is growing.
As for the numbers: here’s a pretty chart. Notice that’s the median, which is the correct average to reflect the experience of most people since the numbers aren’t skewed up by a small fraction of high-earners, unlike the mean.
Observe how in the 60s a single factory worker salary was enough for a house, a car, a family of 4, whilst now it takes two degree level salaries to get the same with smaller families - feel free to explain why what we are told is equivalent to 2x the salary back in the 60s buys less that half as much.
Keep in mind that any “beautification” of those figures was not be massive: we’re talking about in average maybe 1-2% a year. It’s just that over the span of half a century or more it significantly adds up.
Average income of $1,731/yr is equivalent to $37,393 in present dollars. Current average wage is $63,795.
Yes but a house would only cost $84,240 in todays dollars. It’s all relative.
Which begs the question, is $1,731 really equivalent to $37,393? Because it sure sounds like we aren’t using the right metric for that conversion.
We should be comparing purchasing power instead of raw inflation.
Yeah, the numbers in the parent comments of this thread make me wonder how useful those “in today’s dollars” conversions are in general. Especially considering entire markets that existed in the 30s don’t today (or do but are vastly smaller, like horses would have played a bigger role and shoe shining was a job) and new markets exist today (like the entire tech sector). Is it even meaningful to compare money between those two timeframes without putting it in some specific market context?
Well, you only had to save about 2 years worth of wages to buy a new home (if you didn’t spend any)
Doubt you can do that this day and age.
6 months to buy a new car. Which is about the same as now.
3 months to pay for Harvard. Now about a full year.
Inflation is the combined change in prices, not just the change for one good.
There were no 30 year mortgages in 1938. Home prices are more related to the monthly payment than anything else.
Maybe? I do not have enough information on it to speak intelligently. What % of adults (let’s say over 25) were homeowners then compared to now?
Depends on what you want to buy. An inflation index uses select goods and services that are thought to represent the general economy but it’ll be different for any one individual.
This is the right question. Many goods and services have far eclipsed the average rate of inflation. Housing being one of them. But hey, we can buy cheap TVs now, so it all balances out, right?
If the official inflation figures (which are used to calculate that equivalent amount) understate the real inflation, that has the side effect of mathematically makinh the official GDP figure larger (because inflation is used to deflate the nominal - in dollars - GDP to create the official one).
There absolutelly is a political interest in the official Inflation understating reality (because it lets politicians claim as GDP Growth something is just the mathematical result of that understating error in the inflation figures).
It neatly explains why inflation is so consistently understated that dollar amounts at spearated by over half a century points in time which those official inflation indices tell us are worth the same do not in fact buy the same (i.e. are not worth the same) by a massive distance.
Random errors in measuring inflation would be just as likely understate it as overstate it and would not result in this difference in worth of a dollar amount thats several hundreds % off from the worth of present day dollars as measure by what it can actually buy.
I live in a house built before the year in question and paid not too much more than that price for it (~$95,000) in 2018. For reference the house is in a working class suburb of a small city in the Midwest, so it’s not a housing hotspot but not out in the middle of nowhere.
There’s no insulation in the exterior walls, I had to rebuild the dangerously steep basement stairs, and I’ve spent about five grand on asbestos abatement so far with more in the near future. Those are just problems with the original construction, I’m excluding issues caused by age or mistakes made by previous owners.
Cheap housing from that era doesn’t meet even the most basic safety related modern building codes (to say nothing of energy or environmental codes). Modern housing is more expensive because cheaper housing is a goddamned death trap.
I lived in a 3 decker built in the 1940s outside of Boston and the thing had barely functioning steam heat that had constant water hammer and it was so drafty that in the winter I could actually feel a breeze coming through cracks in the walls.
I know the feeling. In the mornings and evenings when light comes in through the basement windows I can see it through the gaps in the floorboards. I just tell people that I really committed to getting natural light.
Even when you take age related issues out of the picture the older, cheaper homes wouldn’t pass muster if they were built today. They’re bad for the environment and they’re bad for people.
A house may have been more affordable, but food was fucking expensive. A gallon of milk was more than $10 in today’s dollars.
Food production is “artificially” cheap. There’s a middle man taking a big cut, and there’s somewhere where the cut is taken. Be it poverty wages for poor immigrant workers or animal welfare, there is no price small enough considered by the powers that be for constant production of cheap food.
I’d take that as a smaller dairy farmer was able to make a living at that time, understanding that maybe people valued milk over the non-existent necessities that we now rely on today. Milk got cheap because it became an industry.
I wonder what median wage is like. Average, which I assume is mean, would be greatly skewed by high wage earners since the lowest you can go is zero (if that even counts as a wage), but the highest you can go is much higher and far more people are closer to the lowest wage than the top.
Income inequality has risen above 1938 levels after a huge decrease after WW2.
That’s wild! Plus the chart stops at 2010 and I’m sure it’s much worse now.
Unwittingly you have just pointed that the officail Inflation Rate indices that are used to calculate the equivalent amount in todays’ money are not only complete total bollocks but consitently understate the real inflation, which is why those maths produce an amount today for that past salary which is according to those indices worth twice as much and yet buys way, way less that the supposedly equivalent amount bavk then.
If the Inflation figures are telling us two amounts at different points in time are worth the same yet the present day amount buys a lot less (i.e. is worth less when you try and buy goods and services with it) that means those inflation metrics have been understating inflation.
I’ll even give you the reason why: the lower the official inflation figures, the higher the official GDP, because in its calculation those inflation figures are used to deflate the nominal GDP (i.e. the dollar amount) to create a supposedly inflation-free GDP that can be compared with other years. If the official inflation understates real inflation politicians get to claim as GDP growth something that’s just the Matematical outcome of that inflation figure being lower than reality.
Sure vast conspiracy across decades of civil servants is one option, or inflation as an overall number is an average and some things increase in price faster while some go slower.
You can always look at a price as a percentage of average income if that’s what you’re interested in, nobody is hiding these numbers.
That’s a massive strawman and a pretty lazy falacy to use: it’s like saying that CEOs cutting jobs to boost short term bonuses is a “vast conspiracy” or that politicians lying is “a vast conspiracy”.
As if people influencing people and people doing what’s best for themselves requires them to all coordinate with each other forming a “vast cospiracy”.
As soon as the heads of the institutions that produce economic figures are nominated by politicians, both the ones nominated are the ones expected to be friendly to the interests of those politicians and the ones in there will be under political pressure. Politicians want to look good and win elections and they’ll put pressure on those who produce politically important figures to make those figures look good so that they look good - no conspiracy required - and, guess what, GDP Growth has been a politicially important figure for several decades now, as noticed by the loud celebrations from whomever is in power that GDP is growing.
As for the numbers: here’s a pretty chart. Notice that’s the median, which is the correct average to reflect the experience of most people since the numbers aren’t skewed up by a small fraction of high-earners, unlike the mean.
Observe how in the 60s a single factory worker salary was enough for a house, a car, a family of 4, whilst now it takes two degree level salaries to get the same with smaller families - feel free to explain why what we are told is equivalent to 2x the salary back in the 60s buys less that half as much.
Keep in mind that any “beautification” of those figures was not be massive: we’re talking about in average maybe 1-2% a year. It’s just that over the span of half a century or more it significantly adds up.