Sunday, November 15, 2009

The "Good Old Days" Are Now and It Gets Better All the Time, Thanks to Free-Market Capitalism

Click to enlarge.


From the BLS report "100 Years of U.S. Consumer Spending":

1. The material well-being of families in the United States improved dramatically, as demonstrated by the change over time in the percentage of expenditures allocated for food, clothing, and housing. In 1901, the average U.S. family devoted 79.8 percent of its spending to these necessities. By 2002–03, allocations on necessities had been reduced substantially, for U.S. families to 50.1% of spending (see top chart above).

2. The continued and significant decline over the century in the share of expenditures allocated for food also reflected improved living standards. In 1901, U.S. households allotted 42.5% of their expenditures for food; by 2002–03, food’s share of spending had dropped to just 13.2%.

3. Over the 100-year period, expenditure shares for clothing steadily declined. In 1901, the average U.S. household allocated 14% of total spending for apparel. By 2002–03, spending shares for clothing had decreased to 4.2%.

4. In 2002–03, the average U.S. family could allocate about 50% ($20,333) of total expenditures for a variety of discretionary consumer goods and services, while the average family in 1901 could allocate only 20.2%, or $155, for discretionary spending (see bottom chart above).

Conclusion: Perhaps as revealing as the shift in consumer expenditure shares over the past 100 years is the wide variety of consumer items that had not been invented during the early decades of the 20th century but are commonplace today. In the 21st century, households throughout the country have purchased computers, televisions, iPods, DVD players, vacation homes, boats, planes, and recreational vehicles. They have sent their children to summer camps; contributed to retirement and pension funds; attended theatrical and musical performances and sporting events; joined health, country, and yacht clubs; and taken domestic and foreign vacation excursions. These items, which were unknown and undreamt of a century ago, are tangible proof that U.S. households today enjoy a higher standard of living.


MP: As I wrote in a previous post: Teenagers today can afford products today 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 already "won first prize in the lottery of life."

HT: Lyle Meier

15 Comments:

At 11/15/2009 11:45 AM, Anonymous Anonymous said...

We must stop this unregulated capitalism immediately before it's too late. Time for the feds to take over the banks, car companies, health care system and wall street.

Oh, and don't forget the subway systems.

 
At 11/15/2009 11:50 AM, Blogger PeakTrader said...

Anon, I'm for mass transit, not because I'd use it, but because others would use it, to take more autos off the road.

 
At 11/15/2009 1:57 PM, Blogger Michael said...

It depends on your flavor of mass transit. More buses and more routes, or rail. If you favor rail, buse service tend to get cut and rate go up to prop up the cost of rail and in the end the overall rider ship of a public system drops.

And a rail system isn't always more green than autos. Often government has to use compulsory means to get the ridership numbers they want. But it never hurts to lose freedom because government has "developed" a transit system that the free market found to be obsolete in the 50s.

 
At 11/15/2009 3:00 PM, Anonymous Anonymous said...

Anon, I'm for mass transit, not because I'd use it, but because others would use it, to take more autos off the road.

The problem with public funded mass transit is that we - the taxpayers - wind up building a system that is captured by the unions, transferring all the real benefits to them in much the same way that publically built sports stadiums benefit private team owners and players.

 
At 11/15/2009 4:18 PM, Anonymous Anonymous said...

Not noted directly in the BLS report is a decrease in family size from 4.9 to 2.5 over the century. In one sense clearly the percent of income one spends on food depends upon family size ( not clear what the multiplier is but there is one). If one assumes one to one that makes the food percentage normalize to family size in 1901 at about 21% and today its 13% so thats still a major drop but not as steep. The same issue applies with a lesser multiplier for apparel, the smaller multiplier being the hand me down clothing of children. At 2.5 there is likely not a lot of this going on working in the opposite direction.
This decrease in family size does complicate a lot of the comparisons, but then thats what keeps grad students in economics busy and out of mischief, trying to figure out what is really going on. (Get thee to the Library GO!)

 
At 11/15/2009 8:33 PM, Blogger bob wright said...

I was in Bombay and Bangalore India a little over year ago.

The poorest American has truly won the "lottery of life".

 
At 11/15/2009 9:14 PM, Blogger juandos said...

bob wright makes the very salient observation: "I was in Bombay and Bangalore India a little over year ago...
The poorest American has truly won the "lottery of life"
"...

Absolutely bob!

Actually in many respects (but not all obviously) that can be said for every other country on the planet, if you're born in the US you're better off than anywhere else...

The odds are with a person in this country (well so far it has been but that could change in the very near future) making a move from the impoverished class to the wealth class relatively rapidly...

Any country that practices both democracy and free market wealth happens for more people...

 
At 11/16/2009 4:18 AM, Blogger PeakTrader said...

There were likely few autos when the Interstate Highway System was being built. That's not the case today (from Wikipedia):

"The Interstate Highway System is named for President Dwight D. Eisenhower, who championed its formation. The entire system, as of 2006, has a total length of 46,876 miles (75,440 km), making it both the largest highway system in the world and the largest public works project in history."

 
At 11/16/2009 9:20 AM, Anonymous Anonymous said...

I'll need a fast train to everywhere smalltown America at any time I want to go.

Make it cheaper than what it costs to drive. And faster. I'll need room for all my gear, boat(s), decoys, coolers, etc. too.

Thanks!

 
At 11/16/2009 1:03 PM, Anonymous Benny The Free Marketeer said...

Real wages have not increased in more than 30 years. Real average weekly wages are lower now than in 1964.
Dr Perry needs to manfully face these facts occasionally.

 
At 11/16/2009 1:26 PM, Blogger juandos said...

"Real wages have not increased in more than 30 years. Real average weekly wages are lower now than in 1964"...

Hey pseudo Benny is the sky blue on your planet?

 
At 11/16/2009 7:52 PM, Anonymous Benny Telling It Like It Is Man said...

Jaundos-

http://www.gpoaccess.gov/eop/2009/B47.xls

This is a table from the The Econmic Report of the President.

You are right. I was wrong. Real wages have not increased in 40 years in America, not in 30 years.

I stand corrected.

It has been 40 years without real wage growth in America, according to The Economic Report of the President.

Also, we pay less at minimum wage level than 40 years ago.

 
At 11/17/2009 2:10 AM, Blogger juandos said...

I don't know about you pseudo Benny but I know my wages and purchasing power have increased since I drew my first paycheck back in '62...

Minimum wage is a job killer...

 
At 11/17/2009 4:21 PM, Anonymous Anonymous said...

I suspect the measurement of wages is normalized against age and experience, since typically ones income goes up as one gains experience. The measure would be compare a job at a given experience level with one 20 and 40 years ago.

 
At 11/20/2009 4:03 AM, Anonymous Anonymous said...

I'd be interested in a closer study on the specifics of these items rather than just the raw percentiles of income spent.

Clothes, food, and housing are considered essentials, what about the quality of each item? Clothes that fall apart and need replacing every couple of years, food high in subsidized corn product that apparently leads to obesity, diabetes, and other health problems (look at the trend of medical costs over that same time period), and cheap mass produced houses with off-gassing built in the middle of nowhere forcing residents to commute to work to save a buck?

And this so that we can supposedly be "enriched" by spending money on DVDs and big-screen TVs or whatever?

Though it sounds like tree-hugger hippie nonsense, it'd be interesting to add to those graphs a line for the Happiness index (obviously historical data does not go quite so far back).

 

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