It’s almost impossible to get through to young people how egregiously they are getting screwed. The current economic situation crept up so slowly that you can only see the broad strokes when you look back over decades.
It’s like the frog in the cook pot, but in this case, the frogs aren’t just sitting there—they are loudly cheering the cook. It’s beyond the wildest dreams of the rapacious classes of yesteryear.
What follows is my personal perspective on what young people in 2018 can’t see because their frame of reference is too short. I know it’s boring, but it’s your money, people. I wish you’d think about it.
I started working in the late 1960’s. It would be almost 25 more years before I worked in an office, so I had considerable contact with the realities of the working world before becoming what is now called a “knowledge worker.”
Minimum wage is a good place to start. When I started working at 15 or 16 years old at the end of the 1960’s, the minimum wage was $1.60/hour. It went to $2.00 in 1974 but by then I was wrapping up my minimum wage years.
I was a teenager but I worked with grown men who supported families on that same minimum wage. Modern feminism was just taking off back then and there were still plenty of old-school guys who expected their wives to stay home with the kids. To be fair to the old troglodytes, it was also not unusual for even young woman to have that expectation too. I think we’re all glad that’s changed but the point is, in the late 1960’s there were still guys making minimum wage and supporting families with stay-at-home mothers and mothers making minimum wage and supporting the kids alone.
Let that sink in—in the late 1960’s it was possible for one person to support a family on minimum wage. Such a family was poor, but they were getting by. By poor, I meant there’d be a lot of hotdogs and beans on the menu and the kids wore generic basketball shoes ($2.00), not Chuck Taylor All Stars ($10.00) but they weren’t destitute. Normal life required a lot less stuff back then.
Single-parent households weren’t common yet in the 1960’s but even with a significant number of women staying home with the kids, the majority of women worked too. My oldest son’s then-future mother drove a forklift in Great Bend Kansas for minimum wage and what she earned was enough to rent a nice little house. It wasn’t a share—she rented herself a house. That wasn’t some kind of outlier; my friends and I all had our own apartments on minimum wage when we weren’t yet old enough to get drafted.
A Loaf of Bread Cost a Nickel Blah Blah Blah…
How much was $12.80/day worth? The Government claims that inflation has raised nominal prices by 513% since then, which would make it $65.66/day, but that number is manifestly balls. I looked at every price I could find from those days and found nothing that rose in price by only 5.13x over those years.
For example, I knew some rich kids who lived in a very fancy house Spring Valley, DC, that was said to have cost an unimaginable $50,000. Houses in that neighborhood are worth about two million today (at least 40x increase). An average DC home in the late 1960’s cost $26,000. Multiplied by 5.13 that would be $133,380 today. You might be able to buy a house for that in Detroit, but in DC? A typical price in DC today is more like $500k (call it 21x).
A Hershey bar that cost $0.05 in the late 1960’s costs $0.80 to $1.00 today (16x to 20x). A comic book was $0.12; it might cost $4.00 today (33x). A paperback book was less than a dollar then; the first five I just pulled off the pile on my desk were marked $16, $15, $15.99, $11, and $20, so I’ll call that 15x.
Cigarettes then were $3.00 per carton or $0.30/pack. Today in DC, each cigarette costs $0.45 (30x). Gas was $0.25/gallon v. around $3.00 today (12x.) You could feed a family of four clown-meat for $2.00. A Quarter Pounder w Cheese meal is $5.79 today (11.58x).
The first apartment in DC that my future wife and I lived in cost $55/month, but that was cheap even then. The next one was $150/month. Nobody would blink at $750 and $2000 today, respectively (13x to 15x).
On Summer weekends several of us would sometimes pool our money and get a bushel of crabs delivered for $20. I just checked—a bushel of crabs from that place costs $249
(12.45x). The bus in DC was $0.25; it’s $2.00 today (8x). The subway in NY was 0.25 then and it’s $3.00 now (12x). The MSRP of a new Volkswagen in 1968 was $1699. The cheapest economy car you can buy in the US today is a Nissan Versa at $12,855, which is 7.5x.
Tuition to Harvard was less than $4000/year in 1969; it’s more than $47,000 today plus another $20,000 or so if you live on campus (11.75x to 16.75x.) I can’t tell from the 1969 numbers whether it includes living on campus, so take your pick
Or think of crime. When D. B. Cooper hijacked a plane and ransomed it for $200,000 in 1971, $200k was retire-to-the-Caribbean-and-drink-Pina-Coladas-for-the-rest-of-your-life-crazy-money. What would that kind of crazy money be today? Definitely not a million-two (5.13x). It would be millions and millions. What’s the first number that comes to your mind for that kind of crime of the century score? Ten million? That would be (50x.)
The Value of Money
It is impossible to make sense of any of this without pinning down a number for how the value of a dollar has changed.
I think the above is a fair, if unscientific, sample. Minimum wage then was closer to a plain-vanilla tradesman’s wage than it is now, but today a vanilla tradesman in the Easter Seaboard Megalopolis gets about $300/day. So a day’s pay for today’s tradesman buys bushel of crabs plus beer, while it took a day and a half’s minimum wage to buy just the bushel of in 1969. Sounds about right.
Some things went up more than others, but all the numbers above seem like reasonable numbers that it would make sense to average. All except for one number. The government inflation number is clearly grossly out of line with everything else. I can’t find anything that I can buy today for anywhere close to 5.13x what it cost in 1968 except cars, at about 7.5x, and even that price is almost 50% higher. Just about everything else is more like 12x to 20x more expensive now, with outliers like cigarettes and housing higher still.
But is the 5.13x number a lie? Not exactly; it’s just that the truth is more complicated. It is manifestly impossible for one number to sum up the change in the value of money when so much has changed. We buy different things now and the products are available have changed (e.g., there were no cell phones, computers, or portable music fifty years ago.) The relative pay among countless occupations has shifted radically and the demographics of work have changed.
So while there may be some set of criteria by which the 5.13x number makes sense, it is an absurdly low number if you’re talking about what money bought then and now for the great mass of people between rich and dirt poor.
How Are We Doing?
If the minimum wage had merely kept pace with the government’s official 5.13x number, then adjusted for inflation, minimum wage should be $8.20 today. It’s not that far off, at $7.25.
But seriously, 5.13x is manifestly absurd. For our purposes, a more reasonable estimate for inflation has to be more like double to triple the government’s number, and if that doesn’t convince you, a person could live on minimum wage then. I did and practically everyone I knew did. We had decent apartments and plenty of walking around money.
There’s absolutely no way you could do that on $8.20/hour today. Not even close. Not even with two people working overtime.
Is the $5.13 number a lie? Not exactly. One of the big things that often goes unsaid is that we’re not dividing up the same size pie. Productivity has more than doubled the total amount of wealth we collectively generate. So it makes no sense to talk about raw dollars. You have to talk about the relative slice of the pie.
So even if you took that 5.13x number seriously, and you shouldn’t, you have to at least double it to preserve comparative income in terms of slice-of-the-pie. So even the number implied by the government index should double to $16.40/hour.
But 5.13x is clearly not in any reasonable sense accurate. What would it take to support a family today–the bare minimum? I’d say it’s more like $40k to $50k. That’s barely getting by for a family, not getting rich, and it’s approximately triple what the government claims the multiplier for minimum wage is, which would be $16,416/year.
And that’s very much in line with the numbers above, which cluster around something like 12x to 15x the late-1960’s prices. In other words, the minimum wage today should be more like 15x what it was then, or about $24/hour.
$24/hour is about $48k/year. If that sounds like a lot for minimum wage, you have to think about how the entire distribution of the collective pie has changed.
The entire range of pay, from minimum wage to a CEO’s salary was not nearly so wide fifty years ago. Minimum wage and the wage of a typical skilled tradesman were closer together too.
A typical skilled worker—not a high-end tradesman—in NY or DC makes about $300. That’s $37.50/hour, or $75k/year. But the working person got none of the doubling of wealth. That skilled tradesperson’s real number should be closer to $150k/year if the working person’s slice of the pie were kept constant.
So that theoretical $48k/year is only a third of what a typical skilled tradesperson should be pulling down if we hadn’t redistributed the wealth. It’s not a lot.
It’s hard to grasp how much the distribution has changed. The slice the low-earners get shrank radically, and the slice the top earners get ballooned in size. Somewhere in the middle there has to be a stratum that didn’t change (the mean-value theorem if you remember high school math.). The thing is, that stratum, for whom the slice remained about the same, is really high up the ladder. You can argue about exactly where it is, but it’s somewhere in the top few percent. Everyone below that point lost and the majority lost big. People in the middle got a slow-motion 50% pay cut, and people at the bottom got a 75% pay cut.
Would You Resent It?
If you have education and/or skills and you’re not making that much more than $48k, you might resent low-skilled minimum wage pulling down $24/hour. But that’s because you’re forgetting to double or triple your own pay before you compare. Your $48k/year today would be well north of $100k if we hadn’t redistributed the lion’s share of your former slice of the pie onto the plate the 1%.
To Sum Up
You can argue forever about the exact figures, but the basic principle is clear. If productivity has increased, and your group’s income, after adjusting for inflation, has not at least doubled, then there has been a redistribution of wealth. It’s a mathematical tautology.
Not all redistributions are unfair or undesirable. Your share (unless you’re in the top couple of percent) is half of what it once would have been and even less if you’re at the low end of the pay scale. If that seems like a reasonable deal from where you sit, then you have nothing to complain about.
Can I make this any clearer to you? Go get your last pay stub. If you’re in the 98%, whatever it says you make, it should be about double that; the redistribution gave the rest to the top one or two percent. A typical big-city high school might have 3,000 kids. One percent of that would be the number of kids in a single classroom. So out of the entire school, the kids in one or two classrooms got the productivity increases that would once have belonged to the entire school
Just a few months ago they “redistributed” another trillion dollars in one big lump. A billion, a trillion, who even knows what it means? Remember, the difference between a billion and a trillion is the same as the difference between one penny and a roll of quarters.
A trillion is $6,000 dollars for every taxpayer in the country. How are people not hearing this? They just put six grand on a credit card that has your name on it and then asked you to cheer because your paycheck might go up by a nickel.
Why are you reading this? Why are you not out collecting pitchforks, torches, and paving stones?