Wednesday, November 22, 2017

Thanksgiving Day meal adjusted for historical minimum and average wage. Are we better off?

The American Farm Bureau does an annual pricing of a Thanksgiving Day meal to illustrate the changes in prices over time. They use the following methodology:
 ""A total of 141 volunteer shoppers checked prices at grocery stores in 39 states for this year’s survey. Farm Bureau volunteer shoppers are asked to look for the best possible prices, without taking advantage of special promotional coupons or purchase deals, such as spending $50 and receiving a free turkey"" (American Farm Bureau)
Here is the graphic they post to show the nominal price of the meal and the inflation adjusted "real" price of the meal.  As you can see, the nominal price (current dollars spent) rises consistently while the "real" price (inflation adjusted) has been relatively flat for the given time span (1986-2017).

People buy stuff with the money they earn from wages--hourly wages, for the most part. While the Farm Bureau measures this market basket of food using current and adjusted prices, I would like to quickly show how the value of two measures of wages have retained their purchasing power over time: The minimum wage and the "average hourly salary of non-supervisory and production workers", which gives an idea of how much the typical worker earned per hour.

In 1986 (November) the average hourly pay for non-supervisory and production workers (source) was $9.00 per hour and the cost of the meal in nominal 1986 dollars was $28.74 (source).

So in 1986, it took a worker earning this wage 3 hours and 11 minutes ($28.74/$9.00 then converted the remainder to minutes) to make enough to pay for the meal.

In 2017. the hourly wage for the same category of worker was $22.22 (for October, the latest info available) and meal cost $49.12. It took this worker 2 hours and 13 minutes ($49.12/$22.22) to make enough for the meal, or one hour LESS in labor.

Now lets look at the other end of the labor/earnings market---minimum wage workers.

In 1986 the minimum wage was $3.35 (source) and the meal cost $22.74. It took this worker 6 hours and 47 minutes ($22.74/$3.35) to earn enough for the meal.

In 2017 the minimum wage is $7.25 and the meal cost $49.12.  It took this worker 6 hours and 46 minutes ($49.12/$7.25) to earn enough for the meal---virtually the SAME 30 years apart!

Bottom line. Using this VERY rough measure of purchasing power of a specific wage, the "average hourly earning" worker today is much better off, by 1/3, than his/her counterpart 30 years ago and the minimum wage worker has stayed the same with their counterpart.

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