"How much does it pay?" has long been an irresistible question for Americans, whether or not they are seeking a job themselves. "How much does it cost?" is an equally compelling inquiry. Answers are easy enough when asking about today, but many of us are less clear about the nation's history of wages and prices.
In 1935 the average auto worker was paid 74 cents an hour. Is that a lot? Postal employees received an average of $2051 in 1925. Was that more than they'd earned before? How much more or less did factory workers make? Were public school teachers improving their financial lot over the years, or losing ground to prices? That's the critical question: could workers in a given year purchase more, fewer, or the same number of goods as they had a few years – or many years – previously?
During the depths of the Great Depression, a man's suit could be purchased for $10, a pack of cigarettes cost 15 cents, a dental filling one dollar. How much is that, really? How do those prices compare with expenditures in less severe times? Just how far down did they go in those hard years?
In order to judge the changes in earnings and, even more important, in purchasing power over the past century, this essay focuses on three questions. First. it asks how much the average worker, and employees in certain occupations, made in particular years through the century. Second, it considers how expensive consumer goods were at those times. Finally, it attempts to determine whether the average person was doing better or worse than he (or his ancestors) had in prior years.
That Americans as a whole have increased their buying power over the past century comes as no great surprise. Nevertheless, specific numerical facts present a valuable picture of economic fluctuations and trends. As Lord Kelvin insisted, "When you can measure what you are speaking about and express it in numbers, you know something about it; but when you cannot..., your knowledge is of a meager and unsatisfactory kind."
This essay begins in 1886 and stops every decade or two to look at the changes that have occurred, in an attempt to offer just such a numerical picture of the developing economy and its impact upon American families.
Note: Accompanying some wage figures for each year are equivalents in 1986 dollars. The average annual wage of $1137 in 1935, for instance, is said to be comparable to around $9000 in 1986. "Adjusted" values of this sort allow comparison between years, compensating for the inflation (or deflation) in that interval. Those equivalent dollar values have been obtained by comparing the Consumer Price Index figure of today with that of the year in question. Since the 1986 CPI amount is approximately 8 times that of 1935, that earlier year's wage has been multiplied by 8.
Don't trust these figures too far. They are rough approximations, meant only to illustrate trends. The example given does not mean that all prices, and certainly not all wages, in 1986 were even close to 8 times their 1935 level. They cannot be relied upon with any hope of precision, especially when attempting to compare early years with modern times.
As the accompanying explanation, "Then and Now," reveals, innumerable obstacles stand in the way of valid comparison and analysis. Still, the broad shifts and trends are unmistakable, and offer intriguing insights into the many ways that economic life has changed in a hundred years.
Notice, too, the difference between "money" and "real" earnings. The former is the amount actually received by a worker for his hour's or year's labor. "Real" earnings are calculated by adjusting for changes in consumer prices from one year to the next. They show actual buying power.
First stop on this tour through the changing pattern of wages and prices finds the economy on prosperous, yet slightly shaky ground. The long depression (and deflation) that followed the Civil War had eased. Manufacturing was spreading to the south and west. Factory methods were improving. Business activity was especially strong later in the decade, with high stock prices and records set for factory production.
The decade of the eighties gave labor both hope and disappointment: its first significant gains, but also a series of setbacks. The Knights of Labor had won several railway strikes earlier. By 1886 they claimed at least 700,000 members in a short, but intense, rise to glory. They fizzled just as fast. Also in 1886, however, the American Federation of Labor (AFL) evolved from its predecessor group.
Considerably more union development took place in the Eighties than in the preceding two decades. Carpenters, for one, had been organized in 1881. Still, no more than 2 percent of the work force was unionized, and less than 10 percent of the industrial labor force – a smaller percentage than in the early 1870s. Moreover, the movement was far stronger in the skilled trades than among ordinary laborers.
Serious turmoil offset many of labor's gains. Progress came to a screeching halt with the 1886 riot in Chicago's Haymarket Square. A protest against the killing of four strikers ended with the death of a policeman. Public opinion turned against unionism, setting back the 8-hour-day movement for years. Average annual earnings of employed persons (apart from farm workers) had been rising steadily since 1879, after a decade of decline in the aftermath of the Civil War. The average worker in 1886 earned around $453 for his year's toil. The increase holds true not only for actual dollars received, but when adjusted for the rise in prices.
Manufacturing workers earned somewhat less: a bit over 14 cents per hour in 1886. But they were gaining faster than workers in general.
Carpenters were paid around 30 cents an hour in mid-decade, or $2.68 per day. That was considerably above the $1.61 that factory workers received per day. Wide disparity in wages persisted between occupations and between industries. Since the 8-hour-day movement was in its infancy, there was little shortening of work time. This was still the era of the 10-hour day and the 6-day week.
Consumer prices had fallen considerably since Civil War inflation. In 1886 a family could buy a dozen eggs for 29 cents, roasting beef at 12 cents a pound, coffee for 27 cents a pound. A quart of milk cost 6 cents; potatoes 74 cents a bushel. A man's suit cost an average $13, a pair of overalls 70 cents, his shoes $1.65. Rent for a four-room house averaged a bit over $10 a month, but an eight-room city flat might cost $35 or more, an apartment facing New York's Central Park up to $4000 a year. Railway fares amounted to 3 cents per mile and the bill for an office visit to the doctor averaged 62 cents.
To derive a rough comparison with today's dollar value, multiply wage and price figures by about 12 to 14. That's how much the cost of living, as measured by increases in the index of consumer prices, had risen over the past century. But before taking that multiplier as gospel, take note of the "Then and Now" warnings about comparisons to early periods.
Average annual earnings of $453, then, amounts to between $5500 and $6500 in 1986 dollars. (The difference is due to the disparity among price indexes derived for the time.) Pitfalls are immediately apparent. The average worker today earns considerably more than would be suggested by simply multiplying 1886 earnings by an appropriate figure to adjust for inflation. By the same token, the dozen eggs that cost 29 cents in 1886 would amount to $4 in 1986, which is hardly likely. Coffee at 27 cents a pound, however, would be equivalent to around $3.50 a pound – closer to the mark. That doctor's visit would come to $8 today – possible, but not typical.
Compared to 1860, before the Civil War began, average annual earnings had gone up 25 to 50 percent by 1886. Even adjusted for price changes, workers gained a similar amount. Daily wages for manufacturing and construction workers appear to have risen even more, in both current and "real" dollars.
Rising productivity, including an increase in capital investment per worker, helped to boost wages. Abolition of slavery had an obvious impact on the labor supply, as did rising immigration. But manufacturing was expanding rapidly. Even with the increased number of workers, labor was relatively
scarce. Workers also tended to be mobile, often able and willing to find employment elsewhere if conditions proved unsuitable at home. All these factors helped push wages steadily upward.
Consumer goods were proliferating. There were already 167,000 telephones in American homes in 1886. Households contained more and more gadgets.
Many studies of family income and expenditures began in the latter years of the nineteenth century. Even more would appear in subsequent years. An 1888-91 survey of city workers showed families spending $219 (41 percent) of their $534 annual outlay on food. About $80 went to housing, $32 to fuel and light, $82 on clothing, leaving $121 for miscellaneous goods and services. Food proportions of budgets diminished with higher income, whereas expenditures on miscellaneous items inevitably increased – a phenomenon equally true in later years. A similar study in 1874-75 had yielded results quite different: 58 percent toward food, and only $44 a year for sundry items.
Conclusion: The 1886 worker was clearly better off than his counterpart of the 1870s in actual purchasing power. Troubled unionism had not yet created a major impact on wages, but wage earners had some justification for remaining optimistic and hopeful about their futures.
Moving forward a decade, the economy had suffered some major setbacks in the aftermath of the severe depression that began late in 1893 and lasted into 1897. Many businesses failed. Railroads went into receivership. Commodity prices had fallen since 1886, hitting bottom in 1897: down at least 47 percent
since the Civil War.
On the labor front, setbacks were equally severe. Several strikers and Pinkertons were killed during the 1892 Homestead Strike at the Carnegie steel mills in Pennsylvania. (Pinkerton was a well-known detective agency, often hired to act against strikers and labor protesters – typically, using harsh methods.) Two years later, railway workers struck against the less-than-benevolent paternalism of George Pullman. The jailing of their leader, Eugene Debs, for violating injunctions helped result in a drastic diminution of the union's effectiveness. Less than one-half million workers (2 percent) belonged to unions.
Increasing urbanization played a role in shifting values and consumer needs. By 1900, some 40 percent of Americans would be urban, as opposed to a mere 20 percent just before the Civil War. Immigration rose through the decade, but labor remained somewhat scarce.
Prices were down some 7 percent on the whole since 1886, as a result of the recent depression. A pound of round steak now cost a bit over 12 cents, pork chops 11 cents, butter 25 cents. Eggs averaged 21 cents a dozen: milk less than 14 cents for a half gallon, delivered to the customer's door.
Participants in the bicycle craze could put themselves on wheels for as little as $15, or pay more than $60 for a deluxe bike. Tourists could sail Second Class on Cunard to Britain for as little as $35. Steerage passengers needed only $15. Ladies might pay a dollar for a shirtwaist, or five for a wool outing suit on sale. A small frame cottage could be constructed in many areas for around $2000.
Average annual earnings for employed workers in all industries (except farm labor) came to $438. That's a small drop from the $453 average of 1886; down even further from the 1892 peak of $482.
Manufacturing workers were now paid about 20 cents an hour for a 59.5-hour week, according to one source (Paul Douglas); 14 cents an hour in a later study of manufacturing wages by Albert Rees. Either way, factory wage earners still lagged slightly behind workers in general.
Unionized workers in the building trades earned about 34 cents an hour, or $17 for an average 50-hour week. Their earnings remained quite stable through the 1890s. Postal workers were among the plutocrats of labor, earning $935 a year on average: 37 cents an hour for a 48-hour week. That was up from $878 annually in 1890. Public school teachers stood near the back of the pack, earning only $289 a year.
Doctors might expect an annual income around $2000 in large cities, but only $1200 in rural areas. Their average income by 1900 amounted to $1478.
Although annual 'money" earnings for non-farm workers had dropped slightly since 1886, bottoming at a 7 percent loss in 1894, they exceeded the 1886 level by the end of the century. And even though money wages declined during the depression, prices continued to fall too. Thus, real annual earnings (adjusted for price fluctuations) dipped less and actually gained some 4 percent over 1886.
The $438 average annual earnings for 1895 is equivalent to $5800 to $6800 in 1986 dollars. A multiplier of at least 13 gives a rough comparison to the latter year's wages and prices.
Living standards and expectations no longer stood constant, however. Some of the "luxuries" envisioned by Edward Bellamy in his utopian novel Looking Backward, such as music "piped" into homes, would soon come to pass, albeit often in different form. The number of telephones had doubled since 1886, to 340,000. By 1890, 48 percent of families owned their own homes.
A 1901 study of city families found an average $266 (43 percent) of the annual $618 outlay going for food, $112 on rent, and $80 for apparel. Another group of surveyed workingmen's families spent $8.35 of their budget on books and newspapers, more than $19 on life insurance, and paid less than $6 in taxes all year. Strict reliance upon dollar expenditures as an indicator of the cost of living, though, was proving to be a fallacy. The times and the goods were already changing too fast.
Summary: Though wages had declined a bit for the 1895 worker, his real earnings were up slightly. Moreover, prosperity would return by 1898 with a promise of better economic gains as the twentieth century began. Already, too, family income rather than a man's wages alone affected living standards. By 1900, average family income reached $899, of which some 17 percent came from earnings of the wife and children, payment from boarders, and other supplementary receipts.
The new century began prosperously. Big industry was growing bigger. Social reformers and muckraking journalists, like Upton Sinclair, pointed out serious maladies in the nation's social and economic structure. Labor strife erupted in 1903. Two years later, the Industrial Workers of the World was organized, which, though far out of the mainstream of organized labor, would have a surprising impact before it faded.
By 1910, union members numbered over 2 million – less than 6 percent of the labor force. That would double by the end of the Great War. The immigration boom grew even stronger, greatly expanding the labor supply.
Stable economic conditions broke down in 1907 with a financial panic that led to collapse of the Stock Exchange. Depression occurred in 1908, but conditions improved quickly and became quite good by 1912. That year saw the first minimum wage law (in Massachusetts), and in 1913 the federal Income Tax Amendment was approved. Depression returned in 1914, but was soon relieved by war manufacturing.
In 1913, the Department of Labor was established (including the Bureau of Labor Statistics), succeeding the Bureau of Labor that had existed since 1884. Wage and price statistics, though still far from fully reliable, are considerably improved for the period after 1913. Since then, the BLS has published its own index of retail prices: first called the Cost of Living Index, later the Consumer Price Index. Though not beyond criticism, these BLS index figures are far more acceptable to economic analysts than earlier versions.
Prices had risen by at least 10 percent since 1895. (Douglas estimated a somewhat larger boost.) Food prices from 1907 to 1914 rose at a rate much faster than general living costs. Round steak in 1910 cost more than 17 cents per pound, pork chops 19 cents, butter 36 cents. Eggs averaged 34 cents a dozen, milk 17 cents for a half-gallon.
One important commodity now existed that had barely been envisioned in 1895: the automobile. Though still largely a rich man's toy, 458,000 cars were on the road in 1910. A new four-cylinder Buick cost over $1000, a modest Sears less than $500, but a 50-horsepower American Underslung commanded a hefty $4250. The average new auto climbed from almost $1600 in 1899 to $2137 in 1907, then fell to $1246 by 1911. Gasoline sold for an average 22 cents a gallon.
A seven-room apartment on Riverside Drive in New York could be rented for $75 per month. A man's suit might cost $15 to $40 in city stores, his hat and shoes $3 or $4 each. A boy's suit could be found for $5, a woman's fashionable polo coat for $23.50.
Average annual earnings in non-farm employment now reached at least $575. An equivalent figure in 1986 dollars may be obtained by multiplying by about 12. That puts the average at roughly $6500 to $7500.
Douglas placed the all-industry average at $630 per year, versus $478 in 1895: a 31 percent increase. Annual manufacturing earnings have been estimated at $558, up 34 percent over 1895.
Manufacturing workers now averaged 20 or 26 cents per hour (depending on which study is deemed most accurate) for their 56-hour week and 9.5-hour day, a few cents less than workers in general. Either way, hourly wages climbed by about one-third during the 1895 to 1910 period.
Workers in unionized building trades averaged 52 cents an hour, up from 34 cents in 1895: $22 per week versus $17. Postal employees now made $1049 a year, a modest rise over 1895. Auto workers received an average of $731 in 1910. Public school teachers leaped from $289 a year in 1895 to $492 in 1910, as their weekly wages grew by 50 percent. To illustrate regional disparities, it is worth noting that in 1913 union carpenters made 65 cents an hour in Chicago, but only half that in Charleston.
Although sources agree that money earnings had grown considerably since 1895, evaluations of real purchasing power differ because estimates of both wage and price shifts vary. Rees deduced substantial gains in his study of factory workers, estimating that prices had not risen so sharply as previously believed. Douglas' review of the period was less favorable, even showing a slight loss for construction workers and others.
Considerable health and labor legislation was enacted during the decade, partly as a result of agitation for social reform. The Federal government was amassing vast data on incomes, expenses, and living conditions. Earlier concepts of "subsistence" income led to the "living wage," which would allow a certain level of comfort above the bare essentials for health and decency. The Bureau of Labor in 1909 prepared budgets for two different standards: one to meet "minimum physical needs," the other a "fair" standard intended for "development and satisfaction of human attributes."
Consumer affluence and tastes were flexing, thus less amenable to fixed standards. By 1910 America had over 7.5 million telephones and 15 percent of homes had electric lights. About 46 percent of families owned their own homes, a proportion that did not change much until the 1950s.
In sum, 1910 workers drew fatter pay envelopes than they had 15 years earlier, but price rises ate up part of the increase, so real earnings were a bit less promising. How much less is arguable. Some occupations fared much better than others. Postal workers lost considerable ground, while teachers shot upward in buying power. Construction workers did well on an hourly basis, but less so when the week's pay arrived.
After the Great War came an economic boom, followed by a serious, if short-lived, depression. It began in the latter half of 1920 as the Stock Market neared collapse, and continued into 1921. Prices fell sharply, if briefly: a 16 percent decline by 1922. Recovery was fairly rapid, and both wages and prices then remained quite stable through the end of the decade. The National Origin quota system of 1921 placed strict limits on immigration, thus cutting the labor supply.
Of greater ultimate importance than the economic depression was the development of consumerism. More and more goods were becoming available. The report of the President's Research Committee on Social Trends expressed doubt "whether any earlier decade in the country's history had seen the wholesale adoption of so many new goods, such considerable changes in the habits of consumers, as the years 1920-29."
Consumption began to take precedence over production as a personal goal. And this new consumer was being educated as such for his or her role in the shifting society.
Station KDKA in Pittsburgh broadcast the results of the Harding-Cox Presidential election in 1920. Radios sat in 60,000 homes by 1922, nearly 3 million in 1925, almost 14 million by 1930. More than 4 million new automobiles were sold in 1925, and nearly as many used vehicles. By 1926 there were more cars than telephones.
This was the era of advertising and scientific selling, of overproduction and intensive efforts to dispose of the excess goods. It was a time of go-getters, of live-wires, of boosters and pep. Chain stores were expanding, from Piggly Wiggly supermarkets to Safeway to Western Auto. Tourist courts and roadside stands sprang up to service the growing automobile traffic.
Money gained unprecedented importance. "Everyone will soon be rich" could have been the theme of the day. Yet in reality, no more than half a million Americans owned stocks during the decade.
No less vital was the widespread adoption of installment buying. As one small town merchant declared in 1928, "To keep America growing we must keep Americans working, and to keep Americans working we must keep them wanting;...and installment selling makes it easier to keep Americans wanting."
Time payments would not, of course, ultimately increase the actual number of goods each family could afford to buy. But they could alter buying patterns, allowing families of modest means to obtain many items, whether luxuries or not, that would otherwise remain far out of reach. Buying power broadened, even if it didn't enlarge.
Slogans such as "Pay as you ride" and "Enjoy while you pay" proved hard to resist. Installment purchases quintupled during the Twenties. By 1925, as many as three-fourths of all automobiles were sold on time. At decade's end, 90 percent of washing machines, 80 percent of radios, and 70 percent of furniture were bought on credit.
How much did all these wondrous products cost? A Model T Ford (without electric starter) could be purchased for $290 or less; a sporty Stutz Bearcat for $3500. The average new car in 1925 sold for at least $875. Gasoline prices peaked at an average 30 cents per gallon in 1920, but dropped to 22 cents in 1925.
Consumers in 1925 could buy an Ambler-Holman radio for $35, or an Ansco midget camera for $8.50. A reserved seat at the Ziegfeld Follies cost just a dollar, other Broadway plays up to $2.50. A vacuum cleaner might go for $29, a washing machine $100. A four-minute telephone call between New York and Chicago cost $7.70, after taking five minutes or so to make the connection. Men could be outfitted with Florsheim shoes for $10 or a pair of knickers for $7.50 to $15. Smokers might enjoy a Roi-Tan cigar for a dime or imported Dunhill cigarettes for a quarter a pack.
Computer enthusiasts might like to know that a mechanical Burroughs comptometer cost a hefty $200 in 1925. Movie prices ranged from a dime up to 75 cents or more in the lavish entertainment palaces of 1922.
Sirloin steak doubled in price between 1910 and 1925, reaching 41 cents a pound. Round steak was 36 cents a pound in 1925, coffee 50 cents a pound, a loaf of bread nearly a dime. Milk sold for 28 cents a half-gallon; eggs 55 cents a dozen. Mailing a letter still cost just 2 cents. All told, commodity prices were 87 percent higher than their 1910 equivalents.
Wages stayed as steady as prices from 1922 through 1929. Average annual earnings for workers in all non-farm industries came to $1434 in 1925, more than twice the 1910 amount. That's equivalent to almost $9000 in 1986 dollars. Most workers thus received a substantial rise in actual earnings, even taking into account the steep hike in prices since 1910. Multiplying a 1925 wage/price figure by about 6.5 gives an equivalent in 1986 dollars. The Consumer Price Index was more reliable than before, so comparisons are at least a little more accurate.
Union carpenters made an average $1.18 an hour, up 140 percent since 1907. Organized building trades generally experienced a marked rise in both money and real earnings. They now received an average $1.23 an hour versus 52 cents in 1910, for a real increase in buying power of more than 25 percent.
Factory workers did even better. Even adjusted for price changes, their hourly earnings rose by at least 30 percent over the 1910 amounts. The average 1925 wage earner in manufacturing earned 64 cents an hour for his 50-hour week, totaling $1280 a year. Auto workers, paid an average 72 cents an hour, could expect $33 a week or $1675 annually – somewhat above the crowd. They gained at least 20 percent in real earnings over 1910. Ford's radical $5-a-day wage of 1914, raised to $6 by 1925, was now actually more than $4 under the industry average.
Teachers also did well. Not only had their weekly wage more than doubled since 1910, to $37.25 average. With a longer school year, their annual earnings rose from $492 in 1910 to a healthy $1263 in 1925 – a 38 percent gain in actual purchasing power. Postal workers again stood near the top of the pile. At 84 cents an hour, their $2051 annual pay had almost doubled since 1910, though buying power gained only slightly.
Two factors are worth noting. First, unionized manufacturing workers earned about 1.5 times as much as non-union help. Second, pay differentials between skilled and unskilled workers had begun to narrow. In 1907 a skilled worker could expect more than double the rate of an unskilled person; but by the end of the war, only 75 percent more.
Economists by the early 1920s had developed the rule of thumb that one-third of family income may be spent on housing; another third on food, clothing and essentials; and the final third (if available) on luxury and comforts. Budgets prepared by the BLS have been used to help determine whether certain classes of workers were keeping up with the rest, as overall affluence grew. A summary of budgets prepared in 1923 for a five-person family set minimum levels of $1100 per year for subsistence, $1500 for "health and decency," and $2100 allowing for "comfort."
In summary, 1925 workers for the most part did rather well compared to their 1910 counterparts, in both money received and actual purchasing power. Among the occupations noted above, postal workers received one of the smallest gains, but their total earnings were still quite high. Unskilled workers lagged some distance behind the skilled.
As for the future, the era of great expectations – of personal wage raises for oneself as well as greater possibilities for the children – had not yet arrived. That would not come until after World War II. Inklings were beginning, however, with the gradual increase in education. In 1920 just over half of 16-year-olds attended school. By 1930, two-thirds would still be in school. The apprenticeship system already was declinng, and all sons were not automatically expected to follow their fathers' line of work. Parents might not yet have expected their offspring to leap into a higher social class, but they could at least envision slightly greater opportunities for them in the spirit of 1920s prosperity and optimism.
Although far from over, the devastating effects of the Great Depression had at least subsided a bit by 1935. Unemployment, rated at a modest 3.2 percent in 1929, hit almost 25 percent in 1933 – the low point in American history. One in five were still out of work in 1935, and the rate remained above 14 percent until wartime production began in 1940. Another economic downturn would arrive in 1937-38, but the immediate outlook seemed brighter.
Brighter for those fortunate enough to have a job, at any rate. Labor actually made some of its most substantial gains during the Thirties. The National Industrial Recovery Act (NIRA) of 1933 offered labor the right to organize and bargain collectively. Declared unconstitutional two years later, the NIRA was soon followed by the National Labor Relations (Wagner) Act, which gave similar rights. Union membership then jumped from under 4 million in 1935 to 5.8 million in 1937, and at least 8.7 million as World War II loomed in 1941.
The first major "sitdown" strike, by the United Rubber Workers, took place in 1936. The highly publicized Republic Steel strike erupted in 1937. General Motors recognized the United Auto Workers Union that year. In 1935 the Social Security Act was approved, while in 1938 the Fair Labor Standards Act established the minimum wage and a 40-hour week.
Prices dropped over 24 percent from 1929 to 1933, then rebounded a little. Food prices fell somewhat more than the overall CPI: by 37 percent. Average rents declined 29 percent – and slipped slightly further in the next two years. By 1939, however, prices in general were still almost 20 percent below the 1929 level. Not all prices (clothing, for one) sank as low as is often thought.
Bread in 1935 sold for an average 8 cents a pound, while 36 cents bought a pound of round steak, pork chops, or butter. Chuck roast averaged 24 cents a pound and eggs 38 cents a dozen. Milk cost 23 cents for a half-gallon; coffee, 26 cents a pound.
Theater goers could enjoy Clifford Odets' Awake and Sing on Broadway for 50 cents to $3. Rooms at New York's Barbizon Plaza Hotel rented for $3 a day including a Continental breakfast. Easter dinner at the Waldorf Astoria cost $2.50. Families could buy a Remington typewriter for $35, a console radio for $50, a Mayflower refrigerator for $89.50 (15 cents a day on credit). Men could choose a pair of oxfords at Sak's for $7.75 or the latest Thomas Wolfe novel, Of Time and the River, for $3. A Chevrolet roadster was priced at $465, the average new sedan cost $690, and gasoline averaged 19 cents a gallon.
Major magazines and Sunday newspapers cost a dime, double features at the neighborhood movie house around a quarter, but the latest issue of Vanity Fair demanded a pricey 35 cents. Home buyers might be tempted by a six-room urban house for $2800. Round-trip air fare between Chicago and Los Angeles came to $207 (equivalent to more than $1600 in 1986).
The average worker who managed to remain employed earned $1137 in 1935, up from $1048 two years earlier (the lowest wage since 1917). Since the Consumer Price Index value of 1935 is about one-eighth the 1986 level, that $1137 annual salary roughly translates to $9000 in the latter year – just a trifle higher than the 1925 equivalent.
Hourly factory wages fell 21 percent from 1929 to 1933, then began to climb as the New Deal emerged. Production workers now averaged 54 cents an hour, just as they had in 1925, amounting to $1216 annually. Union building construction employees drew 82 cents an hour, down just a trifle since a decade earlier. Auto workers took in $27 a week (at 74 cents an hour). Annual teachers' earnings stood nearly identical to their 1925 level, amounting to about twice a typical typist's pay. Mail carriers reached an average of $1918 by 1939.
Higher up the scale, independent physicians earned an average net income of $3695 in 1935, down from $5224 in 1929. College teachers made $2666. Earnings in general fell from 1929 to 1933 in actual dollars received, but soon crawled upward again. In real terms, surprisingly, employed workers enjoyed more purchasing power by 1935 than they had in 1925. By one estimate, real annual earnings increased an average 8 percent in that ten-year period. Wages (if any) stayed ahead of prices through most of the decade. An hour's work in 1939 brought some 40 percent more buying power for a factory worker, 30 percent for a teacher, than in 1929.
Hard times or not, some apparent luxuries had already become necessities. In 1935 there were 21.5 million radio sets. About 3.3 million new cars were sold and over 5 million used ones. More than three-fourths of men and 80 percent of women stated that a car was a necessity, and 54 percent of families owned one in 1936 (about the same proportion as in the late 1920s). Not until 1940, however, would 72 percent of homes have refrigeration.
Average family income shrunk sharply, from $2688 in 1929 to $1488 in 1933, then crept up to $2288 by 1940. A larger share went for food than it had prior to the Depression. More than a half-billion dollars was spent on movie admissions in 1935 and almost half that much on radios and records. In a study of city workers in the mid-1930s, the average family spent $508 of its $1463 total outlay on food and drink, $259 on rent or home payments, $160 on clothing, $87 on a car, $59 for medical care, and $38 on recreation in the course of a year.
Acceptable family budgets now emphasized "social" adequacy to prevailing levels. The 1938 BLS budget's minimum standard paid attention to health, efficiency, nurture of children, social participation, and self-respect – a far cry from the bare subsistence budgets produced in earlier periods. They didn't help unemployed workers much as relief rolls filled and funds were depleted, but attitudes were changing in preparation for the better times that lay ahead.
Wages and prices were held in check through World War II by a national policy of stabilization and controls. Returning veterans were easily absorbed into the labor force, especially since the G.I. Bill sent many of them to school for a few years. Business had done well financially during the war, and many new goods were needed after the long years of rationing and scarcity.
Vets looked forward to a home in the suburbs with one or more cars in the garage, plus shorter work hours to allow more leisure time. Temporary quonset huts and innovative Lustron prefabricated homes helped ease the housing shortage during the early years of the postwar boom.
Recessions in 1948-49 and 1953-54 recovered quickly and completely. Inflation rose during the Korean War, but not drastically enough to offset wage gains.
Union influence stood near its peak as membership approached 18 million in 1953. Starting with the General Motors/United Auto Workers contract in 1948, cost-of-living escalator clauses, tied to the changing CPI, became part of wage negotiations.
Fringe benefits gradually gained importance in the wage package. Workers now were learning to expect regular wage hikes to keep pace with the steady rise in prices. Escalator clauses, admitted GM's management, would make the workers' buying power "increase as the Nation's industrial efficiency improves."
Postwar life was different. Conformist Fifties workers strove for careers rather than jobs. Americans grew more status conscious, defining their personalities by their possessions. Owning a big car, suggested some psychologists, allowed the worker to feel that he too was big. Youngsters were rapidly indoctrinated and absorbed into the burgeoning consumer society, by both peers and parents.
Soon the face of society would change even more. Television would have a far greater influence than had radio. Air transport was already challenging the railroads' dominance in long-distance passenger travel. In 1955 the first McDonald's was erected, though few dared predict its eventual impact.
Workers were encouraged to buy the American dream for "no money down." Delayed gratification was a reminder of the past, not a tone for the prosperous present and future. "The spending of our parents," wrote Dr. Arthur F. Burns in 1955, "may have been somewhat rigidly tied to their current incomes. That is surely not true of us."
By 1950, 55 percent of families owned their own home and the percentage was rising. More wives would be working. Expectations grew in terms of formal schooling, food and nutrition, and access to medical services.
Altered notions of living standards are shown by the change in official family budgets. A "modest" budget was now 30 to 60 percent higher (adjusted for price changes) than the "minimum comfort" budget of the early Twenties. Not that everyone was satisfied. When the BLS issued a city workers' budget in 1948, the employers' representative on the committee didn't approve it, and organized labor declared it inadequate.
A typical family spent 30 percent of its total budget on food, but the proportion was declining. All told, the percentages devoted to food, housing, clothing, recreation and other life needs were surprisingly similar to those of Depression 1935.
Prices overall had almost doubled since 1935. but the average annual wage had tripled. The 1953 CPI stood at about 12 times its 1925 level and climbed almost constantly through the postwar years. In a word, inflation.
Food prices had more than doubled since 1935, rent and medical care less than double, while gas and electricity rates were almost identical – even adjusted for price changes. An average of only 30 weeks' work was now needed to buy a new car, as opposed to 37 weeks in 1925.
Bread cost an average 16 cents a pound in 1953, round steak 92 cents, butter 79 cents, chuck roast 53 cents. Eggs were 70 cents a dozen, milk 47 cents a half-gallon, and coffee 89 cents a pound.
Traveling coast-to-coast (one-way) cost almost $57 on Greyhound, $99 on TWA. An off-brand air conditioner was priced at $289 at Macy's, while a new Buick Special sold for $2286. Seats for Rodgers & Hammerstein's Me and Juliet on Broadway ranged from $ 1.80 to $7.20.
Average annual earnings amounted to $3581: triple the 1935 amount, and 2.5 times that of 1925. In 1986 dollars, that was equivalent to about $14,700. Wages and prices of 1953 may be multiplied by 4 to derive a rough equivalent in 1986 dollars. That average employee grossed $64 a week at his $1.61 hourly rate.
Auto workers now earned an average $2.14 an hour or $68 a week, more than triple the 1935 figure. Manufacturing workers had a similar gain, reaching $4053 annually. They now earned an average $1.74 an hour for a 40-hour week. Building construction workers drew even more: $2.48 an hour, just over triple their 1935 wage.
Full-time mail carriers earned almost $3300 in 1949, rising to well over $5000 in 1959 – still high on the scale of workers' wages. Carpenters made slightly less than mail carriers through this decade, at an average union wage of $2.83 an hour. Teachers in city schools did a little better than 1953 factory workers, collecting $4254 per year.
Farther up the ladder, physicians' incomes more than tripled between 1940 and 1951, reaching well over $13,000 a year. Lawyers, on the other hand, netted $8730 in 1951, not quite double their 1940 amounts. From 1929 to 1949, the increase in doctors' incomes virtually matched those in the general labor force.
Greatest gains came to the lowest-paid workers in the early postwar years, just as the healthiest rises between 1929 and 1949 occurred in low-income regions of the country. Hourly earnings increased steadily from 1947 on. So did real wages, adjusted for the CPI, until a slippage in 1974. Real annual earnings, then, rose by 61 percent between 1935 and 1953, and by 15 percent since 1947.
Median family income in 1953 came to over $4200, up from $3031 in 1947. Black families, as usual, received little more than half that much; they would not reach 60 percent of their white counterparts' incomes until 1966.
Another recession loomed for 1957-58, but workers looked forward to ever-increasing prosperity and an expanding number of consumer goods to fill their insatiable homes. Low-paid workers at the 75-cent-an-hour minimum wage might be excused for being less optimistic about their futures.
President Lyndon Johnson's combination of social programs and deficit financing of the Vietnam War had not yet triggered the steep inflation that would plague the Seventies. Jobs were plentiful in 1967. Affirmative action for minorities and the women's movement were having a marked effect on labor force composition and earning patterns. Union membership stood near 20 million and still growing.
Potential negative effects of growth and industry received increasing attention, yet optimism seemed reasonable. Many Americans were frightened by the emergence of the counterculture and the sharp growth in protest movements – whether against the war or promoting social issues. Educated "flower children" from upper-middle-class families had a choice. They could remain out of the job market in their 20s, or move into a career. Working-class Americans, whether Black or white, could not be so
blas$eacute; about the future.
Prices overall stood 25 percent above their 1953 levels. Bread averaged 22 cents a loaf, eggs 49 cents a dozen, milk 57 cents a half-gallon. Butter and bacon each cost around 83 cents a pound, round steak $1.10, and a chuck roast just over 60 cents. Coffee sold at around 77 cents a pound. Mailing a letter cost a nickel, but would leap to 6 cents in 1968.
Food price comparisons between 1967 and earlier eras point out intriguing variations among items. While the official price index for 1967 was 4 to 5 times that of the 1890s, meats cost almost 10 times as much. Milk stayed very close to the overall rise, while 1967 eggs cost only 2.5 times their 1890s price.
Fuel prices had climbed only 16 percent since 1935, though the overall CPI was 2.5 times as high. Housing costs stuck very close to the CPI between 1953 and 1967, while restaurant meals showed a greater rise. Services in general grew more expensive than the overall figure suggests.
Breakdowns of family expenditures show that proportions had not changed drastically since 1929. Food and clothing took a bit less out of the family budget. Americans spent twice as much on medical care (proportionately) in 1967, and almost one-third more on transportation. Yet on the whole, typical family budgets for those two years look surprisingly similar.
Average annual earnings of full-time workers in 1967 came to $6230, up 74 percent over 1953. That was equivalent to a little over $20,000 in 1986. Wages and prices of 1967 may be multiplied by about 3.3 to obtain a 1986 dollar value. In real terms, adjusted for the CPI, earnings grew less than 40 percent.
Workers in private industry averaged $102 a week, or $2.68 an hour. Manufacturing workers, as usual, had slightly larger earnings: $115 a week and $2.83 an hour. Automobile workers drew an average $3.55 an hour, or $142 a week. Union carpenters made about $5 an hour. Median net income for doctors was now close to $35,000, for dentists almost $23,000 annually. Urban teachers approached $7500 a year.
Conclusion: Without a doubt, most families experienced substantial gains between 1953 and 1967, as well as compared to earlier years. Average earnings climbed far more sharply than prices. Median family income amounted to almost $8000 a year and the non-wage portion was growing, especially for upper-income people.
Furthermore, modern "subsistence" living included many more goods and services than "comfortable" family life at the turn of the century. More than 60 percent of American families now owned their own home. Each was expected to contain a TV set, stereo, and collection of electrical appliances. Occupants were "entitled" to regular vacations and other luxuries. Inflation lay ahead, but prospects appeared favorable for most families, even if their sons and daughters dressed and behaved strangely.
The Seventies "me" decade brought a return to emphasis on money, income, and possessions. Early signs of the burgeoning "yuppie" trends of the Eighties became evident as the counterculture faded away.
Whether unionized or not, workers now expected regular pay boosts and allowed for them in planning the family budget. Nearly everyone was aware of the sharp price rises each month, and wished to be certain of coping.
Milk almost doubled in price during the 1970s, beef more so, while coffee cost nearly 4 times a much. The "all item" price index nearly doubled from 1967 to 1978. Home prices stayed very close to the CPI, while the rent index held considerably lower. Gasoline prices shot up quickly in the aftermath of the 1973-74 Oil Crisis. Not everything changed equally, though. New car prices, for one, stayed well under the overall inflation rate.
Average annual wages for full-time workers in all industries amounted to almost $13,300. That's equivalent to about $22,300 in 1986 dollars, using a multiplier of 1.7 to compensate for the CPI increase since 1978.
Wage controls early in the decade, under the Nixon administration, had only a temporary effect. In 1978 the average worker in private industry earned $5.69 an hour for a 36-hour week. As usual, manufacturing workers made more: $6.17 an hour, or $249 a week. Auto workers earned about $8.50 an hour; construction carpenters, $7.64 ($290 per week).
Teachers' salaries had grown faster than wages in general through the Fifties and Sixties, in response to rising demand for their skills to educate the "baby boom" generation. That increase slowed in the 1970s. City school systems paid around $15,450 in 1978. The 5.3 percent average annual growth in teachers' pay from 1953 to 1978 hung very close to that of hourly workers in industry.
Gender differences attracted more attention. Median earnings of year-round male workers reached past $16,000, but women drew only $9641. Median family income of $17,640 was more than double the 1967 amount.
Sharp jumps in inflation, naturally, mean declining real earnings. Between 1977 and 1978 the CPI went up 7.7 percent. Double-digit inflation (11.3 percent) arrived the next year, as it had in 1973-74. After a long, almost constant rise, real annual earnings began to decline after 1976. This was a new phenomenon for American workers: an actual loss in buying power from one year to the next, which persisted through the Carter administration and into the early Reagan years.
1986 and Beyond
Among the most startling bits of economic news in the mid-1980s was the fact that workers were no better off than they'd been in 1968. Wages rose an average 5.4 percent per year in the first half of the Eighties, but prices grew slightly faster for a net decline. In 1983 the average full-time wage was $19,460. Men earned $22,500 annually, women less than $14,500. Median family income (including dividends, interest, rents, and other non-wage sums) reached $26,433 in 1984 and nearly $29,000 early in 1986.
Average weekly earnings in 1985 ranged from $305 for private employees in general to $390 for manufacturing production workers. That comes to $8.68 an hour for all private workers and $9.55 in the factories. Auto workers made an average $13.50 per hour, or $586 a week. Urban teachers reached $22,000 by 1984. Construction carpenters in 1985 commanded about $420 weekly. Median wage/salary earnings of American families in 1985 reached $522 a week, up almost 5 percent over the previous year.
All these dollar increases sound impressive, but prices early in the decade absorbed most of the gain. Even the diminished inflation of the mid-80s did not allow workers to regain their 1960s level.
Prices overall were 70 percent higher in 1986 than in 1978, but everyone seemed to have stories of specific items that leaped far more rapidly than the CPI suggested (or were believed to have done so). The 22-cent postage stamp sounds expensive compared to the 6-cent rate of 1970, but it wasn't that much more than the "all item" CPI rise since that year. Hospital rooms, on the other hand, cost more than 7 times as much per day in 1980 as in 1960, even though the CPI didn't even triple during that interval – and rates had shot far higher since 1980. Between 1978 and 1984, food rose somewhat less than prices as a whole, and clothing at less than half the general rate.
Rents, contrary to popular belief, had risen less than the CPI in recent decades. New home prices went in the other direction: about $87,000 in 1986 versus $10,000 in 1949, almost twice the growth of prices in general. While the overall price index figure of 1983 stood at 10 times its 1913 level, rents multiplied less than 5 times over that seven-decade span, clothing less than 7 times.
Perceptions of economic change often are flawed. Expectations alter reality. A McDonald's hamburger used to cost 15 cents, it's true; but in 1986 people preferred a Big Mac for 10 times the price. That little 'burger was still available, priced in accordance with other commodities, but Americans wanted the deluxe versions – whether of fast foods or sophisticated appliances. A "modern" consumer expected to own all the household "basics" and much more, whereas in 1900 only 15 percent of families had a flush toilet, and 82 percent had no refrigeration of any kind.
Low-wage workers, it must be noted, may have been in trouble. The minimum wage had not been increased since 1981. Millions of workers earned $3.35 an hour ($6968 for a full-time year) or close to it. Far up the scale, on the other hand, affluent professionals and administrators may have felt they could not survive without a BMW and health club membership, whereas their ancestors were content with far fewer consumer goods.
When this Article was originally written, in 1986, inflation had slowed to a modest rate. Unemployment, while substantial, was not frightful. The economy wasn't likely to expand as it did between 1947 and the 1973 recession, but modest growth was expected. Prospects would appear to be good for most workers, except for the ominous notices of layoffs and wage roll-backs, which could hold down real increases in earnings – if not hasten their decline.
Predictions that the greatest increases in employment to the end of the century would be in service industries did not bode well for a return to progress in real earnings. Those occupations tended to provide minimal economic rewards. If traditional industries (whether in new or old manufacturing regions) could re-emerge as a potent force, the entire earnings picture might change, allowing larger numbers of workers to forge ahead.
Time will tell, as always. But the historian of the 21st century looking backward, comparing wages/prices of 1986 with the years discussed above, may conclude that 1986 workers were doing well indeed, if not exactly better than ever. Perhaps better than they ever would again.
COMING SOON: Because A Century of Pay and Prices was researched and originally written in 1986 (but never published), its data and analysis stop with that year. The author is currently working on an update, right up to the present day (2022).
Comparing wages, prices, and the cost of living between one historical period and another is not so simple a task as it might appear to be at first glance. Drawing inferences from such comparisons is risky, if a significant degree of precision is expected in the result.
Problems abound in evaluating both wages earned by workers and prices paid for goods, as they change over a period of years. Even greater challenges emerge when attempting to combine the two, to arrive at estimates of change in the overall American standard of living. That standard (in economic terms) is determined by calculating how much can be purchased with one's earnings.
Is it akin to comparing apples and oranges? Not quite. But it can be like matching a juicy red Delicious with a puny, shrunken apple that's fallen off the tree. Or like comparing fruits sold by the pound to those dispensed by the dozen.
Put simply, if earnings double between year A and year B but prices remain the same, buying power has doubled. You can buy twice as many goods for a given amount of work. The same holds true if wages remain stable while prices are cut in half. If wages increase by 40 percent while prices fall 20 percent in the interval, the change in buying power is easy to calculate (up 75 percent in this example).
Statistics that give average wages are more than plentiful. Price indexes show shifts in the cost of a typical "market basket" of goods between one year and another. Combining the two produces an evaluation of relative buying power.
Simple mathematics, but the equations rest on a shaky foundation. Averages for both earnings and prices are loaded with ambiguities and inconsistencies.
Comparisons between years that are not too far apart (and fairly recent) may be valid. Even if figures themselves for wages or prices are arguable, trends – tangible shifts from one year to the next – are usually easy to spot. As the years separate, however, and reach farther back in time, validity even of trends becomes ever more susceptible to dispute.
The Consumer Price Index (CPI), for instance, is useful indeed for comparing 1986 to 1985 prices, or 1966 to 1964. It is less than perfect when matching 1986 to 1966; doubtful for 1986 and 1926. And since the "official" Bureau of Labor Statistics (BLS) index goes back only to 1913 and previous versions vary widely, trying to compare 1986 to 1886 becomes little more than an educated guess.
Definitions and methods change. Interpretations differ. Acceptable figures covering a certain period of years often cannot be linked directly to those from an earlier (or later) time frame. Today's values for annual wage/salary earnings, for instance, are not directly comparable to those prior to the 1960s. Almost, but not quite.
Questionable methods may have been used to obtain data. One set of statistics might apply to "all" workers in a category; another only to some. More troubling yet, statistics that appear to cover identical ground can produce wildly disparate totals.
Accuracy of raw data is just the beginning. Next comes the problem of averages. Those "average" wage earners (and average prices) can prove nearly as elusive as the "reasonable" man who serves as the basis for our legal system. Attorneys never really find this reasonable fellow, just as economists never quite grasp the average man. Neither sufficiently resembles people in the real world.
Discrepancies between mean and median amounts also appear. The mean (average) is obtained by adding all reported amounts and dividing the total by the number of entries. The median is the mid-point figure on a scale from highest to lowest. (It's usually lower than the mean.) Both are useful. Problems arise only when one of each must be used, because no matching figures are available or suitable.
Wage amounts. Accuracy depends first upon the data source: payroll records, union rates, industry-wide figures, or some combination. Raw figures are "weighted" by various factors, such as the amount of employment in a given industry, to determine values that apply to the population as a whole. Modern statisticians can derive surprisingly valid results from comparatively small numbers of individual reports, but early methods weren't always so sophisticated. Researchers also disagree strongly about the emphasis that should be given to each adjustment factor.
Recent wage figures, compiled from a large number of sources using refined sampling techniques and weights, are most reliable. The Bureau of Labor Statistics (BLS) prepared studies of selected industries in the early years. Monthly BLS reports on employment and payrolls have been issued since 1915.
Wage figures prior to the 1920s – especially in the nineteenth century – are far more questionable. Pre-1890 figures derive from two important reports. One, the (Nelson W.) Aldrich Report of the 1890s, is based on data collected by the Commissioner of Labor. The Weeks Report used figures produced by Joseph D. Weeks in 1886, as part of the 1880 census. Weeks' data was broader in scope. obtained from more states and businesses, with less occupational bias. These figures were re-evaluated much later by Clarence D. Long, in his study of 1860-90. Stanley Lebergott relied on the Weeks data for the early portion of his long-term study of American wages.
For wage data from the 1890s to 1920s, historians have relied heavily on the painstaking and pioneering effort by University of Chicago economist (and later U.S. Senator) Paul H. Douglas. His study of real wages from 1890 to 1926, covering 22 million of the 27 million wage and salary workers, was published in 1930. Douglas himself was well aware of the problems involved, referring to "the fragmentary and scattered nature of the wage data upon which any such analysis must be based."
Thirty years later, Albert Rees produced a comprehensive study of 1890-1914 real wages in manufacturing for the National Bureau of Economic Research. It applauds Douglas' monumental contribution but takes issue with some of his conclusions. Rees believed that Douglas relied too heavily on union wage rates, for one, producing artificially high earnings. He also determined that prices had not risen nearly so much as had previously been thought.
Later wage data from the U.S. Office of Business Economics and Bureau of Labor Statistics. while hardly beyond criticism, are more acceptable to researchers.
Biases take many forms. Many studies of the past have covered only wage earners. Professionals and the self-employed are under-represented. if included at all. Little or no account may be taken of regional differences even though wages vary dramatically between north, south and west, as between large cities and rural areas. Earnings differentials within occupations may be overlooked. Disparities between skilled and unskilled workers, and between racial/ethnic groups, are not always reflected accurately in averages.
Short-term aberrations, such as labor disputes, might distort wage figures, suggesting a universal trend that doesn't exist. As time goes on, the average "wage-earning man" is more likely to be a woman. Increased educational levels tend to drive up average wages, but differences between the well-trained and unschooled may lie hidden within the totals.
"Real" wages/earnings. The wages discussed above are "money" wages (also called "dollar" or "current" wages): the actual amounts a worker received in his pay envelope, or the gross amount of earnings on his paycheck. Statistics might be given as an hourly wage, a daily or weekly rate, or annually. Money wages allow absolute comparisons of levels between one year and the next. If postal workers were paid 76 cents an hour one year and 79 cents the next, they have experienced an increase in money earnings. Similarly, if average annual earnings rise from $1200 in one year to $1400 a few years later, that too is a boost in money earnings.
That increase tells little about the true value of those earnings, if prices of consumer goods and services have changed appreciably. "Real" earnings (also called "adjusted" or "constant" or "deflated") take prices into account. The actual dollar amount paid in each of the two years being compared is adjusted for the shift – whether upward or downward – in prices for an "average" number of goods.
Too many evaluations have been based on hourly wages. Annual earnings figures tend to be far more revealing. Buying power obviously is diminished if the wage earner – even at a high hourly rate of pay – works only part of the year, or fewer hours per week than his lower-wage colleagues. Construction workers are the most obvious example. Their high hourly rate does not always compensate for time lost during a full year. Allowances made for unemployment and underemployment, however, differ substantially.
Prices have their own set of problems. Not only are the prices for individual items subject to dispute, varying considerably between regions and between urban and rural retailers. Even more critical is the way in which items to be included in the "average" market basket are selected, and how content changes from one era to another.
Consumer Price Index figures have been issued yearly (and monthly) by the BLS slnce 1913, to reflect changes in the cost of this optimum market basket. One year is selected as the base point and assigned an index value of 100. A CPI number of 140 means prices are 40 percent higher than in the base year; a 70 index figure shows they are 30 percent lower. (Similar indexes are used to display wage trends without using actual dollar amounts.)
The CPI for past years is revised periodically, to improve accuracy. The composition of the market basket also is updated regularly, based upon consumer buying patterns. Restaurant meals, for example, were not included until the 1950s, and have been adjusted since that time as eating out became more common.
The market basket has been based on expenditures of moderate-income families in larger cities. Its validity is more questionable for families much wealthier or poorer than average. Affluent families tend to spend considerably more on recreation; poor families on food. Differences are taken into account, but like all averages, the CPI cannot represent everyone.
Price indexes for the nineteenth and early twentieth centuries were prepared by contemporary researchers and reworked by subsequent scholars. Many were criticized for overemphasizing food prices. Where figures were lacking, economic researchers have used newspaper ads and mail-order catalogs to deduce prices of the past.
Three major contemporary indexes have served as a basis for nineteenth century trends: one by Roland P. Falkner prepared for the Aldrich Report; a second by Wesley C. Mitchell in the Weeks Report: and a third by W. Randolph Burgess. Paul Douglas calculated a workingman's index covering 1890-1926 for his massive study of real wages. Like others, his was later criticized for showing too great a price rise in the 1900-14 segment, in part because of reliance on wholesale rather than retail prices for clothing and home furnishings. More modern revisions by Ethel D. Hoover for the 1860-1880 period, C. D. Long for 1880-90, and Albert Rees for 1890-1914, are widely used.
The current CPI has been used above to give an equivalent figure for annual wages, in terms of today's prices. Though valid enough for the postwar era, it can provide only a rough indication of the differences when applied to earlier years.
Economists asked to give a ratio of prices between 1920 and 1980, for example, have offered estimates between 8:1 and 15:1, depending on the item. The CPI value for 1980, almost four times that of 1920, offers only a starting point. Some items will have increased far more in price over those years, others less than expected.
Attempting to compare prices and expenditures of periods far apart chronologically is a risky exercise. Inaccuracies and gaps in actual prices, temporary blips due to scarcity or surplus, and flawed interpretations of the likely market-basket composition of an early day, are only part of the problem. More serious is the flux in availability of consumer goods. There were no automobiles in 1895, no radios in 1910, no television sets to speak of in 1935, no stereo systems in 1950. But soon after those years such items came into existence and eventually became commonplace, seriously altering buying and ownership patterns. And at the same time, distorting the "typical" market basket.
As technology develops it alters living standards, making comparisons tricky. Bicycles in the 1890s, airplanes in the 1950s, power mowers, improved fabrics and cleaning processes, better food processing methods, central heating and air conditioning – all have changed our buying patterns.
How can you compare a kerosene lamp of 1900 to a light bulb of today? A curling iron heated on the stove to the latest electric styler? A crude Buick touring car of 1905, made before mass production, to its contemporary descendant? How is it possible to compare prices of goods so different in quality, purpose, and construction?
In addition to providing so many new goods, technology has caused some to fall enormously in price. Take something as simple as a light bulb. A minor item today, but its one-dollar price tag around 1915 demanded more than three hours of an average worker's toil. So how do yesterday's and today's bulbs fit into the "average" price structures? It's difficult enough trying to compare quality of products at the same time, much less in different historical periods.
Beyond that, the concept of "needs" and "necessities" as opposed to "luxuries" and "comforts" has undergone drastic redefinition. Yesterday's frivolous toy soon becomes today's desirable convenience – and tomorrow's utter necessity, without which life is barely worth living. When did the video disc player and personal computer become "necessities," as did the radio, color TV, and automobile before them? And how do they affect the "average" market basket?
"An abundance of wants characterizes the American culture," declared economist Elizabeth Hoyt in the 1950s. And the level to which those wants – beyond true needs – are satisfied determines a family's standard of living. Just as there is a "poverty" line, there are several other "lines," above which a more affluent family's income must fall to produce economic contentment: As those new cravings become fulfilled, the "cost of living" changes – which may not be reflected in the CPI until much later, if ever.
Income vs. Earnings. Wages once made up most, if not all, of workers' economic rewards. Since World War II, non-wage amounts have formed a greater part of total family income, thus expanding its buying power. Hardly a modern family lacks at least some income from supplementary sources – whether interest, Social Security payments, rentals, or whatever. Since 1947, total median income of families (and unrelated individuals) has been reported by the BLS and used as a secondary basis for determining purchasing power.
Income has its own problems. People are reluctant to disclose their finances. Economist Hoyt stated in the Fifties that there is a "tendency for people to underreport their incomes and thus to appear poorer than they really are." That tendency may be even stronger today.
During the 1940 and 1950 censuses, there was considerable protest over questions of income. Senator Charles Tobey told 1940 radio audiences that such questions "constitute an unwarranted prying into your personal affairs." Herman P. Miller of the Census Bureau insisted that the general public was less adamant, so inaccuracies were not serious. Recent household survey data is adjusted for estimated underreporting.
Turn-of-the-century BLS family income figures, on the other hand, probably show an upward bias because they included a larger number of workers who were unionized, owned property, or were otherwise atypical. Non-money income also affects buying power, but isn't always considered.
Douglas, in his 1930 book, summarized the magnitude of the problems as succinctly as anyone. "Not only is the material for both wages and living costs frequently fragmentary and incomplete," he wrote, "but very different meanings can be attached to what seem to be such simple terms as 'wages' and 'relative living costs.'"
For our purposes here, approximations and rough comparisons are sufficient. They offer a valid and valuable notion of trends and shifts in dollar amounts, both of money figures from the time and in equivalents to inflated modern-day dollars.
Wage/price trends over the century seem almost to cry out for rigorous computer analysis. The mountains of available data and the multitude of variables could be dealt with. But the dangers of building upon such a shaky statistical footing should immediately be apparent. Accuracy cannot evolve from unreliable data. Only if an economic statistician could be sent back in a time machine, armed with the latest sampling methods and a comprehensive plan of action, could perfection be approached.
Perhaps we'll never know precisely how the 1886 worker fared compared to his later and modern counterparts. This chronology at least gives a picture of each period, even if
a perfect "number" cannot reasonably be assigned to each year.