Wednesday, January 14, 2009

Microwave: 63.2 Hours in 1981 vs. 6.5 Hours Today

Cost of a Sears 1.5 cubic foot microwave in 1981: $469.88, or 63.2 hours of work (about 8 days) at the average hourly wage of $7.42 (total private industries).


Cost of a Sears 1.8 cubic foot microwave in 2009: $119 or 6.5 hours of work at today's average hourly wage of $18.36.

Bottom Line: If we paid the same price today as in 1981 (63.2 hours, at the average hourly wage of $18.36), the 2009 Sears microwave above would cost us $1,160 today. Or equivalently, consumers in 1981 actually paid the equivalent of $1,160 in today's dollars for a microwave oven. Or we could say that the typical consumer today would earn enough money in one day by mid-afternoon (6.5 hours) to earn enough money to purchase a brand new 1.8 cubic foot microwave oven, whereas the typical consumer in 1981 had to work full-time for almost 8 days to earn enough money to purchase an equivalent microwave then.

6 Comments:

At 1/15/2009 5:00 AM, Blogger PeakTrader said...

I bought a packet of 10 pens (made in China) for $1. I bought one packet and tested several pens for several days, and was amazed at the quality of those pens. So, I bought five more packets. I've used them for several months, and I'm still amazed they were sold for only 10 cents each. If I knew about the quality beforehand, I would have been willing to pay 50 cents or more for one of those pens.

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A related article:

BEIJING (AP)-- China surpassed Germany to become the world's third-largest economy behind the United States and Japan after Beijing on Wednesday raised its estimate of economic growth in 2007.

That would be ahead of Germany's 2007 GDP of $3.3 trillion at an exchange rate.

China's 1.3 billion people are, on average, among the world's poorest -- but reflects the country's explosive growth as it became the world's factory and a trading power over 30 years of economic reform.

"I think it will take only three to four years for China to overtake Japan as the second-largest economy in the world," he said.

The United States is the world's biggest economy at $13.8 trillion in 2007, followed by Japan at $4.4 trillion.

China's GDP per person was 19,800 yuan ($2,800) in 2007, but the country has wide disparities of wealth and poverty, and many live on far less than that. Chinese officials say more than 100 other countries have a higher income per person.

Lu said it will be decades before China can match U.S. output, if it ever can.

"Even if growth in the U.S. is zero, China still would have to double and double again to overtake the U.S.," he said. "It would be more than 20 years, and that is so far out it is very hard to forecast what will happen."

China exports much of its output, similar to Japan. They both sell their goods too cheaply and then lend those dollars back to the U.S. too cheaply, to continue their net exports (and maintain employment levels). Consequently, China and Japan GDPs are really overstated, or their living standards improve more slowly. China and Japan are to a large extent U.S. factories. China's consumption is only 36% of its GDP compared to 71% in the U.S.

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However, what's amazing is although the U.S. is a huge net importer, which lifts foreign GDPs, U.S. manufacturing continues to represent 20% of the world's total manufacturing output, although millions of U.S. manufacturing jobs were lost. Obviously, U.S. manufacturing produces a greater quantity and quality of output with fewer inputs, through efficiencies. Moreover, U.S. manufacturing has market power and improved terms-of-trade, where foreigners pay "premiums" for U.S. goods. Many export-led economies make up in volume what they lose in value, while the U.S. makes up in value what it loses in volume.

The American consumer is stocked-up with real assets and goods, i.e. houses, automobilies, and many goods bought through lower interest rates, and of course imports. At the same time, consumers of many export-led economies are broke, because they worked hard for low incomes, sold their goods too cheaply, lent their money for huge losses, and their governments are holding what's left of their money.

 
At 1/15/2009 8:26 AM, Anonymous Anonymous said...

I wonder if either of the microwaves were/are made in the USA.

 
At 1/15/2009 2:10 PM, Blogger @sethstorm said...

The difference between the two is a lot in quality. That $119 model is just a re-label of some no-name knockoff.

Even Panasonic's 1200W model from that era would have done better - where it wouldn't be unusual to see one still functioning today.

 
At 1/15/2009 2:14 PM, Blogger Trevre said...

Was that an entire Roast beef in that microwave? And did I see a pie? Seriously people, just because it gets things hot doesn't mean you should cook food with it.

Lets talk meat. How many hours would I have had to work on my farm 100 years ago to get a slab of choice beef compared to now? The grocery store is a beautiful thing.

 
At 1/15/2009 5:18 PM, Anonymous Anonymous said...

Average hourly wage is misleading. Full-time jobs were more common in 1981, and I'd guess the average commute to work was shorter as well.

40 hours "back in the day" might consume 48 hours of a person's life; these days the average person might only get 40 hours of work in 60 hours of life. You have to factor in how they commute a greater distance to the 1.5 jobs needed to cobble together those 40 hours.

I agree with the idea that material goods are cheaper, but I think your method exaggerates this too much

 
At 1/16/2009 1:15 AM, Anonymous Anonymous said...

Obviously Glenn Beck reads Carpe Diem:

http://www.glennbeck.com/content/articles/article/198/20217/

 

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