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Pittsburgh Tribune-Review: “Consumption-ability”

Summary:
In my March 30th, 2006, column for the Pittsburgh Tribune-Review I reported on the comparison of ordinary Americans’ work-time prices (for goods sold by retailers such as Sears) with work-time time prices of such Americans in 1975. You can read the column beneath the fold. Consumption-ability 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

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In my March 30th, 2006, column for the Pittsburgh Tribune-Review I reported on the comparison of ordinary Americans’ work-time prices (for goods sold by retailers such as Sears) with work-time time prices of such Americans in 1975.

You can read the column beneath the fold.

Consumption-ability

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 than 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.

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Don Boudreaux
He is a professor of economics at George Mason University in Fairfax, Virginia. Previously, he was president of the Foundation for Economic Education.

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