Wednesday, May 7, 2014

Purchasing power of money and McDonalds. Let's go back to the Disco Era

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This menu board I posted yesterday gives me food for thought (pardon the pun).  It makes it easy to compare the purchasing power of wages in different time periods if you have actual prices people paid for things at the time.

Using these prices I can quickly show the purchasing power of the dollars in (1) the prevailing minimum wage and the average wage paid to workers (that data can be found HERE at the St Louis Fed Reserve)

In 1974 the minimum wage was $1.60 per hour (from HERE).  The cost in nominal (current) dollars to purchase a Big Mac, Large Fry and a Large Soft Drink in 1974 was $1.31 ($.65+$.46+$.20 from prices below).

It would take a minimum wage worker earning $1.60 per hour (NOT subtracting payroll taxes) 49 minutes to earn enough to purchase the meal.

Today a Big Mac Combo Meal costs $5.69 (Price HERE). At worker earning $7.25 would have to work 47 minutes to get the meal deal.

The average wage for a "production worker and non-supervisory" job in 1974 was $4.45. It would have taken this person 17 minutes to purchase the $1.31 meal.

In 2014 the average wage for the same class of worker was $20.49. It would have taken this person 17 minutes (16.8 actually) to purchase the combo at $5.69.

By EITHER measure the purchasing power of the minimum wage AND the average worker wage are about the same, 40 years apart.

So, the conclusion? No great shakes, but by this measure the purchasing power of wages, minimum and average, have not lost ground BUT it have not gained either.

What is that saying about Kissing Your Sister?

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