My brother’s wife is a CPA and something of a fiscal conservative. My husband’s sister was a business major who works for a big Internet firm. I got into two separate conversions with them recently about the same topic. They’re approximately 30 years apart in age, which may explain some of the disagreement. The younger one lacks mature perspective and trusts experts more. One was raised all over the world in a different era when Third World countries really were Third World countries and the other was raised in New England, where she resides today, but I don’t think that’s the issue, really.
Are people better off or worse off than our parents?
The CPA says we’re suffering from a failure to know history. The Internet marketer says we’re sliding toward the poor house. Which is true?
I grew up in a working class home, so I know that for myself, I’m better off financially than my parents were at my age … except they had their mortgage paid off, so maybe I’m living in a dream world. SIL #1 was raised by an engineer. She says she’s done as well or better than her folks did and my brother paid off the mortgage about 10 years ago. SIL #2 was raised by a middle-manager for a huge corporation, but her dad suffered a stroke in her early teens, and although he recovered, he never could work at the same high-pressure job again, so her teens were more working-class income. But she now makes an income twice what her father’s best year was.
There was a curious phenomenon in 2008. Up to that point, if you asked almost anyone (except people in the Rust Belt) whether they were doing better than their parents, you would have heard a loud affirmative. They lived in bigger houses filled with all sorts of gadgets their parents never even dreamed of, they owned better (and more) cars, they had more than one television, they enjoyed better health care, had closets stuffed with clothes, went on vacations to far-flung places their parents never imagined and had retirement accounts in addition to Social Security.
Then the economy collapsed and this narrative started about how the middle-class income was shrinking compared to incomes 30 years ago.
Is that true … and if it is true, why weren’t we aware of it in 2007?
I’m going to submit that it’s only partially true because even if our real money incomes never raise above what our parents made, what our incomes buy us is far more than what our parents’ incomes could buy them.
I ran across this cool chart and thought I’d share some of the findings. It looked at retail price in 1959, 1973 and 2013 and the number of hours we have to work to buy the item we desire. So instead of looking at inflation adjusted incomes, it looked at how much time we invest in purchases a consumer item.
A washing machine cost $210 in 1959. The average wage was $2.09. It took 100.5 hours to purchase a washing machine in 1959. In 1973, average wage was $3.95 and a washing machine was (on average) $285. It took 72.2 hours to purchase a washing machine in 1973. In 2013, that washing machine would cost $450, but the average wage was $19.30, so it took only 23.3 hours to purchase a washing machine in 2013.
A dishwasher cost $190 in 1959 (and few houses had one). The average wage of $2.09 meant that it took 90.9 hours to purchase a dishwasher in 1959. In 1973, a dishwasher cost $310 and the average wage was $3.95. It took 78.5 hours to buy a dishwasher in 1973. In 2013, the dishwasher cost $400 at a wage rate of $19.30). It took 20.7 hours to buy that dishwasher in 2013.
A color TV cost $267 in 1959 (and almost nobody owned one). With an average wage of $2.09, it took 127.8 hours to buy a color TV in 1959. In 1973, a color TV cost $400. With an average wage of $3.95, it took 101.3 to purchase a color TV in 1973. In 2013, a color TV cost $400 (yeah, it hasn’t gone up). With an average wage of $19.30, it took 20.7 hours to purchase a color TV in 2013.
According to the US Census Bureau’s 2005 figures on what households have, even the “poor” are increasingly able to buy common household appliances. In 1971, the number of houses that had a washing machine was 71.3%. In 2005, it was 84% of total houses. In 1984 (as far as the figures went back) 58.7% of “poor” households had a washing machine. Now it’s 68%.
In 1971, 18.8% of total households had a dishwasher. In 1984, 13.4% of “poor” households had a dishwasher. In 2005, 64% of total households had a dishwasher and 37.7% of “poor” households had a dishwasher.
In 1971, 43.3% of total households had a color TV. In 1984, 70.3% of “poor” households had a television. In 2005, 98.9% of total households had a color TV and 97.4% of “poor” households had a television.
In other words, Americans making less than the federal poverty standard today are much more likely to have these sort of things in their homes that the average 1970s American family considered to be luxuries. It cost people in 2013 far less time to purchase the same items as it cost people in 1959. It’s what makes it so we can afford smart phones and air conditioning and better medical care … not to mention insurance.
AH, wait! Is it perhaps necessary to admit that a lot of our current financial straits has to do with rapidly increasing medical costs and insurance premiums and let’s remember that 2006 was when the cost of energy went nuts, a crisis that is now relieved to the extent that some states are suffering budgetary crises?
So hit pause for a second and ask yourself — would you want to live your parents’ lifestyle if it meant your inflation-adjusted income was better than theirs?
If you answered “No” to this question, you might want to reconsider whether to believe the doomsayer propaganda that insists that you’re not as well off as your parents were. Maybe it’s not about how much we make, but more about how much what we make will allow us to buy.