There is a famous British comedy sketch called the “Four Yorkshiremen,” performed at various times by some or all of the cast of Monty Python. Four well-heeled fellows chat as they smoke cigars talking about the bad old days. They are competing for who can spin the worst tale of hardship from their childhoods. One gentleman claims that when he was a lad, for supper he had to make due with just a cup of tea. Another says he had to make due without milk, sugar…or tea. Another says all he had was a cracked cup. Another says things were so hard when he was a kid, a cup would have been a luxury, because in his household you had to suck tea from a damp cloth. The tales get worse from there.
We misremember the past, and inflation is part of the reason.
My dad likes to tell the tale of how little he was paid early in his career. We didn’t suck tea out of a damp cloth, but he once mentioned to me how in 1968, he was paid an annual salary of $8500 in his job as a college professor. At first blush, that number seems shocking. True, we only had one modest car, didn’t own a home, and our TV was a 14 inch black and white model from Sears, but I was in no way deprived.
One reason is inflation. We stare at the raw number, but we constantly forget to factor in the general erosion of the value of a dollar over time. My dad’s $8500 salary in current dollars, is worth $58,193. That’s not a king’s ransom for someone with a BA, an MA, and a PhD, but it is what some professors get paid today.
One defining feature of inflation is that in the past, you might not have been paid as much, but things do often (but not always) cost less. When my father remembers paying a nickel for a New York City subway ticket when he was ten in 1944, his recollection is spot on. The fare wasn’t hiked to a dime until 1948. But let’s not forget to factor in inflation. If you turn a 1944 nickle into 2014 money, that subway ride costs the equivalent of 68 cents, which remains an amazing bargain when you note the actual cost of a 2014 subway ticket in New York these days is $2.50.
This fall on Marketplace we are going to have some fun examining inflation. We have chosen as our time frame changes in prices over the last quarter century, if for no other reason than this year is Marketplace’s 25th anniversary. You may be amazed what got cheaper. You may be outraged what got much more expensive beyond the rate of inflation. Embedded in this inflation topic are crucial questions about our society: For instance, does a low-income family living at the margins care if a DVD player gets radically cheaper if the cost of eating a decent breakfast is spiking?
When I started out in the radio business as a teenager in 1976, I was paid $2.25 an hour as an announcer on a local radio station. That was minimum wage at the time. Using this meager number, I have tried to impress my own children with the austerity of my youth. In doing so, I have again failed to compensate for inflation. $2.25 an hour is $9.42 in today’s money. That is rather higher than current federal minimum wage of $7.25, but don’t tell my kids.