By Don Boudreaux
Thursday, March 30, 2006
Consumption is the ultimate purpose of economic activity. And one
of the most reliable measures of an economy's success is how much ordinary
people can consume out of their incomes.
If
an ordinary person's "consumption-ability" increases over time, he is
better off than before and the economy is doing well. In contrast, if this
person's consumption-ability decreases, he is worse off and the economy is
doing poorly.
This
is true regardless of what happens to per capita gross domestic product, the
consumer price index or any other measure of economic activity reported
regularly in newspapers and on television.
So
what has happened to the consumption-ability of ordinary Americans over
the past 30 years? Is it true, as many pundits allege, that middle-class
Americans' living standards have stagnated during this time?
Let's
take a page from the work of W. Michael Cox and Richard Alm, authors of the
1999 book "Myths of Rich & Poor" and compare how much the average
hourly wage bought 30 years ago to how much the average hourly wage buys today.
At
the end of 1975, the average hourly wage of nonsupervisory workers in the
United States was $4.87 (in 1975 dollars); today's average hourly wage of
nonsupervisory workers is $16.34 (in 2006 dollars).
We
can get a pretty good idea of changes in consumption-ability by looking at the
Fall/Winter 1975 Sears catalog and asking: How many hours did the typical
nonsupervisory worker have to work in 1975 to buy an assortment of the goods
offered in that thick book -- and how many hours must the typical nonsupervisory
employee work today to buy similar goods available now at Sears.com at
today's prices?
The
results suggest that our consumption-ability today is much higher than it was
30 years ago. For example, to buy Sears' lowest-priced 10-inch table saw in
1975, the typical worker back then had to work 52.35 hours; to buy the
lowest-priced 10-inch table saw available today at Sears requires today's
typical worker to toil only 7.34 hours.
Here
are results for several other goods:
· Sears’ lowest-priced gasoline-powered push lawn mower: 13.14
hours of work required in 1975; 8.56 hours of work required in 2006
· Sears Best lawn tractor: 340.1 hours vs. 116.3 hours
· Sears’ lowest-priced telephone answering machine: 20.43 hours vs.
1.1 hours
· The lowest-priced garage-door opener: 20.1 hours vs. 8.57 hours
· A one-half horsepower garbage disposer: 20.52 hours in 1975; 4.59
hours in 2006
· Sears highest-priced Die Hard auto battery: 9.23 hours vs. 7.32
hours
· Sears Best freezer: 79 hours vs. 39.77 hours
· Sears Best side-by-side refrigerator-freezer: 139.62 hours vs.
79.56 hours
· Sears highest-priced work boots: 11.49 hours in 1975 vs. 8.26
hours in 2006.
Of
course, the above sample is small. But if you perform the same exercise,
choosing whichever goods catch your fancy, you'll find the same pattern:
Generally, goods of the sort sold by Sears require less work time to buy today
than did their counterparts in 1975. (Among the exceptions I found -- water
heaters and bras.)
One
objection to drawing conclusions from this research is that many things that
Americans buy are not sold in department stores. If the prices of these
nondepartment-store items -- such as housing and higher education -- have risen
faster than wage rates, then ordinary Americans might still be worse off.
In
fact, the amount of time the ordinary American worker must work today to
purchase a house, a car and a four-year college degree is greater than
it was in 1975. But houses today are larger and much-better equipped than they
were 30 years ago; automobiles are enormously improved and more durable; and
the addition to lifetime earnings generated by a college education is
significantly higher.
In
other words, the products bought today are radically better than were their
1975 counterparts.
Indeed,
this quality issue makes the conclusion I draw from the Sears catalog even
stronger. Each good listed above is better today than in 1975. Today's lawn
mower is bigger and has more horsepower; today's answering machine has longer
recording times; today's work boots contain lighter-weight and more
water-resistant synthetic materials that were unavailable just a few years ago.
Speaking
of things being unavailable, perhaps the most noticeable feature of the 1975
Sears catalog is what it does not offer.
Sears
customers in 1975 found no CD players; no DVD or VHS players; no cell phones;
no televisions with remote controls or flat screens; no personal computers or
video games; no food processors; no digital cameras or camcorders; no Spandex
clothing; no down comforters (only comforters filled with polyester).
But
they did find typewriters.
Donald
J. Boudreaux is chairman of the department of economics at George Mason
University in Fairfax, Va. His column appears twice monthly.