Study: Americans' buying power higher today than 1950s
March 27, 1998
Web posted at: 10:59 p.m. EST (0359 GMT)
DALLAS (CNN) -- Americans have more buying power today than in the 1950s because the real cost of living is less today, according to a new study by the Federal Reserve Bank of Dallas.
The study took a look at the buying power of Americans going back to the turn of the century. And instead of just looking at prices, the study's author, Michael Cox, measured the cost of goods by how long the average worker has to work to pay for them.
For example, the average hourly wage in the United States is $13.18, so it takes about 5.7 minutes of work in 1998 to earn enough to pay for a gallon of gas. Back in 1950, the average hourly wage was $1.44 per hour, which meant it took about 9.4 minutes of work to pay for a gallon of gas, which back then was 23 cents.
Cox says he used this method in the study because, thanks to inflation, simply looking at prices can be misleading. He contends that American workers have more buying power today because improved technology allows them to produce more in any given hour of work.
That increased labor value is why workers now spend less time on the job in order to pay for such products as homes, autos, kitchen ranges or dishwashers, Cox said.
The worker used to make comparisons for the study was an average American manufacturing plant worker whose annual salary was $2,900 in 1950 and $26,500 today.
And what items require more worker hours to pay for today than in the 1950s? According to Cox, college tuition and medical costs fall into that category.