You might have read that incomes have been stagnant in the United States for the last 30 or more years. The rich are getting richer, of course, but all of us folks in the middle and lower class have been held in place, no growth, for decades.
Of course, for those of us who actually remember the 1980s and 1990s, this impression might seem a little off. My middle class life in the 1980s wasn’t nearly as plush as my middle class life is now, but perhaps I’m just mis-remembering things.
A look online shows up a median household income in 1982 of $18,801. Adjusting for inflation, that’s about $46,123 in 2014. Median household income in 2014 … $49,486. So there has been growth, but not much growth. The median income does appear to have been fairly stagnant over the past thirty years.
Focusing on incomes, however, misses the other side of the coin … expenses. Let’s look at groceries. I found a few prices from the 1980’s. We can adjust them for inflation, and then compare to modern prices I plucked from the internet.
According to this data, food prices are generally lower now than in the 1980’s. I remember eating lots of ground beef and tuna casserole in the 1980’s and not much steak, so this rings true to me. Steak was a treat when I was a kid. Heck, Shake-N-Bake chicken was a pretty big deal back in the day.
It’s not just food. In 1986, you could get a nice Commodore computer for about $400. In modern dollars, that’s about $864. A modern, base line Dell computer (with monumentally more computing power than that old Commodore) runs about $400 as well. A thousand times more computer at half the price. Not too shabby.
How about smart phones? A modern smart phone can replace all sorts of 1980’s technology – brick phones, the Sony Walkman, cameras, video cameras, digital watches, personal computers, GIS systems (to which nobody but the military had access). Add these together, and you’re looking at about $5,000 worth of tech (most of it from the mobile phone alone) in 1980’s dollars, and about $11,000 in today’s dollars. A new smart phone comes in at around $300 to $400.
Of course, this is not the case with everything we buy. Stamps in 1980, adjusted for inflation, were about $0.03 cheaper than then they are today. Comic books are more expensive (and smaller) now than then, but they’ve also shifted from being sold on newsstands to children to being sold to adults in boutique comic book stores. Books are also more expensive now than then (even on Kindle). A Camero Coupe in 1980 went for an adjusted $18,600. A modern Camero Coupe goes for $23,700 MSRP – a higher price, but for a superior automobile. Gas is cheaper at the moment (around $2.03 per gallon now vs. an inflation adjusted $2.96 per gallon in 1980), though that might change, and of course a year ago gas would have more expensive now than then. Note also the meteoric rise in the cost of education and health care – two segments of the economy with significant government involvement (just sayin’).
It is also enlightening to look at adjusting asking rates for commercial real estate. While I don’t have asking rates going back to the 1980’s, I do have asking rates going back to 2002. If we adjust those old rates to 2014 dollars, you realize just how inexpensive commercial real estate has become.
The story here is not just how much or how little incomes have changed, but the buying power of the dollar. The marketplace has knocked down prices on not only our day-to-day needs, but also on luxuries. Despite seemingly stagnant incomes, Americans today have much more buying power than they did decades ago, which begs the question … why are we so deep in debt?