Found an incredibly helpful explanation of the radical change in the standard of living over the last 100 years. It is an explanation of the change in the price of eggs provided by Prof. Russell Roberts in his book The Price of Everything. I’ve been discussing this book in the last several posts starting here and most recently here and here.

A challenge I have had when looking at history, particularly the Civil War, is trying to relate salaries or costs from back then to today. It’s one thing to say a soldier made $10 a month or a skilled laborer made $100 a month or a set of uniforms cost $17 or a barrel of flour went from this price to that price in the South. However, I can’t relate that to anything.

How do those prices compare to now? Adjusting for inflation doesn’t really work. Comparing those prices to the cost of an ounce of gold or an ounce of silver helps a little, but that brings in distortions from inflation that we have seen in the last 30 years along with the odd things in today’s economy.

How about using a comparable job to buy a comparable product then and now?

I will drill down in my review of Mr. Roberts book by pulling together several ideas into one linear discussion.

Illustration is to compare how much labor it takes to buy a dozen eggs in 1900 compared to how much labor it takes to buy a dozen eggs today.

The first comparison by Mr. Roberts is how long a teacher works to buy a dozen eggs.

Why a teacher and why eggs? Because teaching is a skill set that’s reasonably comparable in terms of overall skills compared to the economy and in relation to social standing then and now, so it is a good measure of average income. Eggs are a good basis for comparison over time because that is a reasonably comparable product today versus 100 years ago.

So, here’s the explanation:

A schoolteacher in 1900 needed to work an hour to earn a dozen eggs. Today, a school teacher has to work about 3 minutes. A twentyfold drop in the price of eggs. How did it come to pass the teachers only have to work 3 minutes to earn a dozen eggs when they used to have to work an hour?

Wow. Lots to unpack there.

On page 197, the good professor provides the raw numbers and sources. If you really want to know the sources, you can get the book and look them up. The data, however, is that an average teacher earned $328 a year in 1900. With eggs at $0.21 a dozen that works out to about an hour of labor to earn a dozen eggs. In 2005, the average salary is about $48,000 a year (per survey from the NEA), which works out to be around two or three minutes to earn enough to buy a dozen eggs at one dollar per dozen.

Adjust the stats anyway you want. I think you’ll come up with roughly the same result – an improvement in the range of twentyfold.

Yeah, but how about the working poor, the other main character asks?

Things have gotten even better.

Back in 1900, a maid earned maybe $240 a year and worked 12 hours a day, six days a week. That’s about seven cents an hour. A dozen eggs in 1900 cost twenty cents. So it took a maid in 1900 about three hours of work to earn a dozen eggs. Today, a maid who earns $10 an hour has to pay about one dollar for a dozen eggs. Six minutes! So eggs are 30 times cheaper for someone who cleans houses today compared to someone who cleaned houses 100 years ago.

So a teacher is 20 times better off and a maid is 30 times better off.

What happen?

Technology enabling productivity improvements. 

And that in a framework of economic and political freedom with a stable rule of law.

Continued in my next post.


1 Comment

What caused the drop in hours it takes to buy eggs? – 9 « Freedom is Moral · January 25, 2013, 8:15 am at 8:15 am

[…] Previously discussed the twentyfold drop in the cost of eggs compared to hourly wage of a teacher. What caused the change? […]

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