Your opinions on a bit of research I did.

[Kelvin Mace]

Let me preface this by saying that I am looking to see if I am explaining this clearly enough as to what I was trying to measure and how I measured it. I am not an economist (though I had an excellent Econ teacher), nor a mathematician, but the math is pretty basic.

My purpose in this exercise was to create a clear picture of life for the bottom 60% of wage earners.

I had to strip out source links because of the screwy way DU handles links and I didn't want to type them over. You can find the full post with source links here:

http://www.thoughtcrimes.org/s9/index.php?/archives/2377-Are-you-better-off-now-than-you-were-30-years-ago.html

Oops, forgot the text!



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%

*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%

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.

---

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.

---

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%

---

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

---

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%

---

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%

---

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%

---

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%

---

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%

---

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%

---

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%

---

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%

---

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

---

Analysis

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 are 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 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 eare expenses almost tripled.

And how are the big boys doing while the serfs toil away for $5.85 an hour?

Total Compensation Ration 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.

[Warpy]

1. If you want to get really sick, go back 40 years

40 years ago I was making maybe $.50 above minimum wage. I was able to afford a one bedroom apartment, a good used car, and I had healthcare and other benefits. I was able to take vacations at the beach, although the accommodations were far from plush. I was working full time and going to college part time. I did do my own cooking.

By 1978, that was all over. We'd seen double digit inflation for years, caused by oil shocks and blamed on unions. The minimum wage had been allowed to drop far below the poverty level. Early 1978 was the watershed year for older boomers to buy that first house since interest rates were jacked up very quickly later that year.

We've had nothing but conservatives from both parties since 1969, when Nixon was sworn in. Are we any better than we were 40 years, 30 years ago?

Not unless we inherited many hundreds of millions.

[Kelvin Mace]

3. I mention that very fact

and that I avoided 1968 because it might be seen as Cherry picking.

If you made .50 above MW, that would be $11.50+ in 2008 dollars. Certainly far better than the $5.85 currently being paid.

BTW, I just went back and pasted in the text I forgot. Ack!

[magellan]

2. Very good, and some surprises in there

It feels like almost everything's more expensive than 30 years ago, but that's probably just my personal perspective rather than objective.

It was fairly easy to follow, even for this math dunce. Good job!

[Kelvin Mace]

4. Well, other than food

it IS more expensive now. That was what I was comparing to, a percentage of the minimum wage in '78 and '08 for goods and services. While food prices are lower, they are still more expensive relative to the prevailing MW. Health care, housing and gasoline are killing us.

Food prices will be going up. It will be interesting to run these same numbers at the end of the year. At that point I think all numbers bad news.

[magellan]

6. That's what I was comparing it to, grocery shopping

I think I'm just reacting to the more recent price jumps in food since I do the shopping. I absolutely understood what you're getting at and it's criminal.

Seeing it laid out like you've done is something the corporate media should be doing instead of feel-good talk about how the markets are "only down a bit today". People know different.

[troubleinwinter]

5. Fascinating!

The numbers are interesting, particularly the decline in minimum real wage, and the personal savings numbers are very telling! The analysis is quite interesting as well.

[Kelvin Mace]

13. Yeah, in fact

I am working on a graph which shows that, no surprise, the MW goes up under Democrats, and stagnates under Republicans.

[Laelth]

7. Nicely done and very informative. Thanks.

n/t

:dem:

-Laelth

[progressoid]

8. How did you arrive at the medical expense number?

Does this include insurance costs or just what the procedures cost?


I'm also intrigued by the personal savings decline. While increased costs and decreasing wages affected this, I think over-spending by Americans during the 80's and 90's was also a huge factor. Of course we've know savings have been in decline for years but we just seem to spend and consume. Maybe the latest economic pressures will make Americans a little more frugal again.

[Kelvin Mace]

10. If you go to the link

you can see my sources. The numbers are from the Census Bureau and include insurance, out of pocket and folks with no insurance paying it all. This is, of course, an average. For example, my insurance bill alone is $12,000 a year, with another 2-3,000 OoP.

[prairierose]

9. Kelvin, I found it easy to understand...

the numbers and I am math challenged. This was something that I knew having lived through it but the numbers really are very telling. Thanks for posting this.

[Hissyspit]

11. Good to see you, Kelvin Mace.

I just realized after all these years how close you live to me. Do you have a DU sticker on your car? Saw one about a year and half ago at a movie theatre in High Point.

[Kelvin Mace]

12. Yes, as a matter of fact.

Where do you live? I am in High Point, near Jamestown.

[Hissyspit]

14. My best friend and his wife live in High Point (Eastchester Road?)

I live down near Raeford, So. Pines, Ft. Bragg.

[Kelvin Mace]

15. Ah, well

there's close, and close. You'd be a couple hours out.

Still, we have to get together next time your in the area, or I in yours.

[Hissyspit]

16. Yeah, I go up there all the time.

When I said close, I meant I always thought you lived in New Zealand or LA or something! :)

[Kelvin Mace]

17. Drop me a line

next time your up this way, we'll grab a pizza.

[Hissyspit]

24. O.K. Dana and Marty like pizza, too. Or we could just get together on our own. n/t

[Kelvin Mace]

28. Not at all. I'll PM you my number

and you can give me a buzz next time your up this way.

[Indenturedebtor]

18. Thanks for sharing

Good info here.

[HCE SuiGeneris]

19. Thank you K M

K n R

[NM Independent]

20. That made my top 10 bookmark/save worthy threads ever

Outstanding work.

Thank you, I am so going to use this with anyone who dares defend *onomics

:yourock:

[Kelvin Mace]

23. I hope to get the numbers vetted

by some real economist types. I have seen prices adjusted for inflation, but I don't think that I have seen the prices expressed as a proportion of the MW.

[Redstone]

21. Damn, that was a lot of work on your part, but damn, does it tell us more than one thing.

Excellent research and post.

Redstone

[Kelvin Mace]

22. It was informative

to research. I was trying to find some car prices, but that has proven difficult. I wanted to compare the price of a VW Beetle to the current model, but I was unable to find any sources on line or in the back issues of the paper I had access to.

I would like to expand the number of items a bit to clothes, electronics, etc.

[unkachuck]

25. great job!!

....we're all feeling the pain but sometimes it's hard to understand why....

....for those of us old enough to remember, there was a time, not that long ago, when an average blue-collar family could afford a home, car, necessities AND send their kids to college all on a single blue-collar income....

....your excellent post demonstrates the screwing we've all received....thanks DLC....

[Kelvin Mace]

27. One of the things I learned writing this up was that

one damn thing is connected to another.

Even raising the MW to $10 wouldn't make a dent in the three major budget busters at the moment: housing, gasoline, and health care. Right now, oil prices are driving up food costs, so very soon, cehap food will disappear.

On the subject of food, there is a very steep, unpaid cost to be paid for cheap food in terms of health and environmental damage. This bill will come due in the next decade or so when the role of high fructose corn syrup is better revealed as a major contributor to obesity.

[CT08]

26. Great Job!

Just goes to show why the middle-class household segment begins at the $75,000 mark. To balance things out, they should have made a maximum wage.

[Kelvin Mace]

29. Given that CEOs now make

367 times the average worker's salary, I think there should some kind of leveling device in play.

What I favor is a change in the tax law which states that any compensation paid to CEO's great than 75 times the pay of the lowest paid worker in the company is no longer tax deductible for the company. Compensation would include insurance, stock options, company transport, discounts, etc.

Company's can pay their CEOs anything they want. They just can't expect the US taxpayer to subsidize their largess.