Friday, March 13, 2009

Young Americans: Luckiest Generation in History

To illustrate how material abundance increases for each generation under free market capitalism, W. Michael Cox, chief economist at the Federal Reserve Bank of Dallas, has done several studies comparing the purchases that teenagers could make from a summer job at the minimum wage, in various years. Here's a summary of his 2000 article in the IBD.

Here's my own updated version of the Cox analysis. In 1949, the minimum wage was $0.40 per hour, and a full-time summer job (40 hours per week for 12 weeks) would have generated $192 in total summer earnings (ignoring taxes). Using a Sears catalog for retail prices, $192 would have only purchased the following 4 items in 1949:



Now contrast that with 2009. At the 2009 minimum wage of $7.25 per hour, a full-time summer job will generate about $3,500 this year, which would be enough to purchase the following list of 28 items (click to enlarge):

What a difference 60 years of free market capitalism makes!

According to Cox: "Add it all up. When it comes to their economic prospects, today’s young Americans are the Luckiest Generation in history—at least until their children grow up and forge an even luckier one. And even if real wages are flat, the explosion of new products over time at lower and lower prices translates into a rising standard of living for all income groups, even minimum wage workers."

MP: Teenagers today can afford things like cell phones with cameras, digital cameras, GPS systems, CD players, DVD players, laptop computers, and iPods that even a billionaire couldn't have purchased 20 years ago. As much as we might complain, just by being alive in the 21st century America, even if you're earning the minimum wage, you've "won first prize in the lottery of life."


25 Comments:

At 3/13/2009 3:27 PM, Blogger ExtremeHobo said...

Hopefully they didn't put their summer cash into shares of Lehman Brothers!

 
At 3/13/2009 4:16 PM, Blogger Andy said...

If you spent all your money on, say, going to restaurants or live entertainment (concerts, theater) then I suspect the difference will be decreased (though certainly still better now).

 
At 3/13/2009 5:25 PM, Blogger David said...

Again, your list consists only of items that are made in factories and can be shipped over long distances at reasonable cost.

 
At 3/13/2009 8:24 PM, Anonymous Anonymous said...

Thank you to Mark Levin for linking to this article from his web site and discussing it on his radio program.

 
At 3/13/2009 8:52 PM, Blogger Thomas Shawn said...

Interesting to take this into consideration when examining the mental problems of today's youth vs. 1949.

 
At 3/13/2009 9:29 PM, Anonymous Anonymous said...

David: The point is that many more conveniences and luxury items can be purchased today for the same period of work (i.e. an apples to apples comparison), not who makes these items. What was your point again?

 
At 3/13/2009 10:11 PM, Blogger David said...

Anon...my point is a pretty simple one: there are whole range of products and services that people purchase, and any serious assessment of standard of living must include things like houses, restaurant meals, transportation fares, and education, not just products that have SKU numbers.

 
At 3/13/2009 10:46 PM, Anonymous Anonymous said...

I get what the bigger point you are trying to make but unfortunately it is not only poorly made but it is absolutely incorrect. Before I go further, let me make the following statement that I do believe that many youth today (but not all) have a sense of entitlement, are poorly uneducated in real world budgeting, and typically live beyond their means. To your article it is rediculous to define's one improvement in standard of living to what someone can buy in a Sear's catalog. Health Care, Car Insurance, and Education costs (all driven by free markets) have sky rocketed way beyond the inflation rate. Additionally, if you want to participate as a professional in society, you need to have internet and a cell phone. If you don't believe me, just ask yourself if you would hire someone if they didn't have a cell phone or access to the internet. These people are considered outcasts and out of touch. Why hasn't the pure free market resulted in reduced costs in both of these catagories? In regards to education. #1 Access to school loans. The more that loans have been available to a broader demographic, the less schools have to lower costs as students can pay it back later. Health care costs have only increased because the free market allows for excessive malpractice damages to be awarded and big pharma lobbying the gov't to block the sale of drugs from Canada and other countries. So free market folks want free markets they can control. Give me a break.

People's standard of living is not based on the purchases in a sears catalog.

 
At 3/14/2009 6:03 AM, Blogger glenzo said...

interesting that the previous goods are largely no longer considered something that one would actually consider purchasing. Also, most of the goods on the second list are things that were not available during the previous list time or even invented. Interesting list.

 
At 3/14/2009 10:18 AM, Anonymous Anonymous said...

and are they happier? I'm always struck by the short cut; having more = being better - that's simply not true

 
At 3/14/2009 11:56 AM, Blogger Shamim said...

While it is true that products are growing increasingly cheaper and more sophisticated, this article fails to mention the rising cost of education and how that is affecting young Americans.

 
At 3/14/2009 3:32 PM, Anonymous Anonymous said...

That's not a triumph of capitalism -- it's a DISGRACE OF SOCIALISM!! It's shameful that we guarantee a minimum wage; teenagers should NOT be able to "work" for just a summer and purchase all of those goods. If the market for wages and work were really allowed to be free, this would NOT happen.

 
At 3/14/2009 5:36 PM, Anonymous Anonymous said...

Health Care, Car Insurance, and Education costs (all driven by free markets) have sky rocketed way beyond the inflation rate.

What color is the sky in your world? Health care is mispriced through regulation and cost shifting. Ditto, auto insurance. And education is massively subsidized and run like an entitlement program for aging leftists.

 
At 3/14/2009 6:43 PM, Blogger Mikes said...

I must reply to the long post from Anonymous. Many youth do have an entitlement mentality, which is sad. But what does one expect from one if not THE most expensive government run school system in the world. (results are pathetic) Government does very little right, and most of what they do is not authorized by the Constitution. The point is well taken that “X” hours of work when equated to the same “X” hours of work when buying NON ESSENTIAL ITEMS proves what progress has been made. In 1947 there was health care, there was education, and from what I see today, education that was substantially more comprehensive and effective than that of today. Maybe people took charge of their own lives? The statement Anonymous makes about participating in a professional society today without a cell phone or internet is ludicrous. As one who started a company in my garage, and grew it to $110m in sales in 18 years, I hire many professionals in sales, accounting, inventory managing and forecasting. Knowing software in some cases is important, for the specific job, just as in 1947 if you are an account you better know how to use a manual lever driven calculator. But to imply that you have to have a cell phone or internet to get hired, is making a statement that implies that the value of an individual is not the individual him or herself. If someone has to have a crutch like a cell phone or internet, then that person is probably not worth hiring. You hire based on the individual and what they can produce for the company. It is apparent that Mr. Anonymous has never hired anyone. He is correct, malpractice has increased healthcare but I am not sure what that has to do with equating material purchasing power examples. You want lower health care, get the government out of it. Government is the most inefficient way to do anything, and their rules and regulations from HIPPA on down are costing billions of dollars – and of course, those are our dollars as government has no money but what they take form us. And since Mr. Anonymous has brought up drugs from Canada, that are made and RESEARCHED in the US, one question, who pays for the R&D? Canada subsidizes US drugs to Canadians, and US citizens have fond a way to take advantage of the Canadian subsidies. Big Pharm? Hey, without Big Pharm, doing BIG R&D, Canada and the folks buying drugs up there don’t GET any drugs, because there aren’t any, unless of course you are going to let the FDA run the R&D and develop the product. Still waiting for that border fence to be built.

 
At 3/15/2009 12:49 PM, Blogger 1 said...

"my point is a pretty simple one: there are whole range of products and services that people purchase, and any serious assessment of standard of living must include things like houses, restaurant meals, transportation fares, and education"...

From a summer job?!?! Surely you jest...

"this article fails to mention the rising cost of education and how that is affecting young Americans"...

Hmmm, interesting point and one I've wondered why parents of these kids haven't gotten a bit more belligerent about and demanding price roll backs on the tuition...

 
At 3/16/2009 10:57 AM, Anonymous Anonymous said...

OMG! The Liberals will read this and say: "See we raised the minimum wage to what it is today and look what it can buy!"

 
At 3/16/2009 5:29 PM, Blogger Colin said...

Just ask yourself this: is there another time you would rather be alive?

 
At 3/16/2009 9:03 PM, Anonymous Born in '52 said...

I would have rather raised my 4 kids' (ages 22 to 32) back in the day. Gangs, drugs, sex content on prime time tv, sexting (sex texting), fifth graders with cell phones and ipods, sex offenders, internet, etc. Kids get bored during summer vacation now. There wasn't enough time in the day and enough days in the summer when I was a kid. We played baseball without parental involvement. Football with no helmets. Walked everywhere we went. The only time we were picked up from school was for a dentist appointment. I was about 9 when my friend Lee told me he was moving from Milwaukee to Florida with his mom. I understand that, what about his dad? He said something about divorce. My mom had to explain this to me. He was the only kid I knew for years that had divorced parents. My youngest is a teacher in Milwaukee. She has broken up more fights in a couple of weeks than I witnessed in 12 years of public schools. Her life has been threated twice this semester. This is in a K-8 charter school. Kids nowadays have more material things, but does that mean they have it better? I don't think so. If a typical one of them writes a book about their childhood in 50 years, what would it be like? All that said, I'm all for capitalism, never worked for a poor man. Just wish we had the old family values back.

 
At 3/17/2009 2:48 PM, Blogger tippet523 said...

in 1982 you could make enough in the summer to have a little fun and put yourself through a state school( Purdue, Indiana or Illinois). Now how far will 3500 get you. not even one semester.

On top of that you have to figure in the 10,000,000,000,000 of debt they will ahve to repay at somepoint for our generations unwillingness to control spending and tax enough.

good luck to them. i am buying my kids a 2,000,000 insurance policy so they can use those assets to pay the higher taxes they will soon be paying

 
At 3/17/2009 6:20 PM, Anonymous Anonymous said...

Why didn't you take into account the taxes the kids have to pay?

 
At 3/17/2009 7:03 PM, Anonymous Anonymous said...

About the notion that a comparison like this should include the cost of heathcare, which has increased far beyond the inflation, I agree. But it would only reinforce the point being made. In 1949, our intrepid summer worker could not buy a polio vaccine (as it did not yet exist). Nowadays, it can be purchased easily and cheaply. The quality of medical knowledge and medical care has increased astronomically, which is easy to forget if you just focus on the price. I would not want to be sick in 1949 with only a 192 bucks in my pocket. Given a choice, I'd take being sick in 2009 with $3500 any day.

 
At 3/18/2009 11:20 AM, Blogger der schwarze Ritter said...

Anon: You say that high costs for Health Care, Car Insurance, and Education are driven by free markets. That is incorrect. In each of these cases, the market has been perverted by the intrusion of government. Low Medicaid reimbursement rates have resulted in higher costs for doctors and cost sharing by patients with private insurance to subsidize those patients on government insurance. Guaranteed issue (where no one can be denied health insurance because of pre-existing conditions), where it is practiced, has resulted in higher costs for the rest of us. State mandates (for anything from acupuncture to psychiatric services, etc.) has also resulted in higher costs. Public education is in the control of teacher unions which lessons competition and drives up costs. Moreover, every year around budget time, we can count on the commercials that say we have to "sacrifice for our children's sake," however, everyone knows that throwing more money at government-run monopoly schools isn't going to result in better educated students. In the case of higher education, Pell grants and guaranteed government scholarships have only increased the amount of money in the system, resulting in higher tuition. So you see, it is not free markets, but government intrusion into those markets that has resulted in unnecessarily higher costs for everyone. I guess you could say that government has the "anti-Midas" touch: Everything it touches, turns to lead.

 
At 3/19/2009 4:48 PM, Anonymous Anonymous said...

Who cares about the teenagers? Yes, all those neat toys on your second list are things that yuppie's kids would like to buy. The problem is that we have far too many adults (with kids of their own) fighting for those minimum wage jobs today. And these adults are too worried about buying gas to get to work, paying a babysitter while they're at work, and fixing their broken furnace, to really enjoy the fact that they can buy an MP3 player (made in China) for only a couple days' salary. And those kids with all those gadgets aren't going to get a very good return on their investment when they trade all that crap in to the pawn shop after their parents kick them out of the house for using meth. Yeah, I'd go back to 1949 if I could . . . if only to slap some sense into the morons who made the decisions that resulted in this piece of crap world.

 
At 3/19/2009 8:37 PM, Anonymous Anonymous said...

Perhaps you should do the same comparison for college tuition. I bet that 1940's kid gets to go to college, but the 2000's kid maybe can live at home and go to community college if he can aford the gas.

 
At 3/26/2009 11:37 PM, Anonymous Anonymous said...

i'm only 28 and don't really relate to this. i worked a second job so my family would have a little extra money for food, clothes and gas to take us into town. the items on that list are only a diversion to teenagers to take their minds off of topics of importance. it's my understanding of society that so long as the mob has their collor t.v. 300 plus channels and microwave; they care little of the things around them. a life of ignorance is where materials lead people. is that better then 40 years ago?

 

Post a Comment

Links to this post:

Create a Link

<< Home