Many people fall under the assumption that it costs much more to live today than it did in years gone by. They may quote the price of certain products, like a gallon of gas or a loaf of bread when they reminisce about the “good old days,” when prices were affordable. True, prices are higher than ever on many items but the median income in the U.S. has likewise increased. Why is it that people accept and pay the going rate for some things and balk at the perceived high price of others? It has to do with how we spend that income at a given point in time.
Prices increases 1964 to 2014
Take the past 50 years for example. The average household income in 1964 was $6000; in 2012 (the most recent figure available) it is 51,371, representing about 8 ½ times more income. Many prices have more-or-less kept up with that rate of increase, including:
1964 – Gallon of gasoline – 25¢ (2014 – $3 – $4)
1964 – Loaf of bread 21¢ (2014- $1.50 – $3)
1964 – First class postage stamp – 5¢ (2014 – 49¢)
1964 – Movie ticket – 75¢ (2014 – $7.50)
1964 – New car – $2,450. (2014 – $30,000)
1964 – New home – $20,500 (2014 – 150,000 – 250,000)
The above prices have increased somewhat in accordance with incomes. This is not the case on every item, however. Some notable exceptions include: A gallon of milk cost $1.06 in 1964 and today costs $2 -$3, representing an increase of only three times the cost. The price of a television in the early 1960s (which was its infancy) was no more than $250 – a strikingly similar price to some television prices today. There are clearly other factors influencing price increases besides the passage of time itself.
What we spend money on changes
The adage, “Charge what the market will bear,” continues to rule the price of everything. Manufacturers and service providers set their pricing according to consumer demand because if they know we want it, we will find a way to pay for it. Two factors that affect price increases over time and the way we perceive them include:
1. New priorities
In 2014, we still buy gasoline, milk and homes but we spend much of our money very differently than households did 50 years ago. We live in bigger homes (which are more costly to maintain and run) and own multiple vehicles and TVs. Although the cost of dining out has risen considerably throughout these 50 years, today’s on-the-go lifestyles and less focus on “home and hearth” has allowed people to accept paying more to eat at restaurants far more frequently than people did 50 years ago.
2. Time marches on
In addition to a different lifestyle, time and technology has provided us with new things to buy and do. We now own – and could scarcely live without – computers and electronics in addition to a plethora of appliances that hadn’t been dreamt of back then. Cell phones are a fact of life now but non-existent then. In 1964, television was free. Today, most households pay for cable or satellite TV. Current technology has even made improvements that make a higher price less of a negative than you would think… Consider that a gallon of gas that now costs us over $3 fuels as much as three times more miles in our newer, more fuel efficient vehicles.
It’s a natural tendency to strive for the best quality of life our income will allow as defined by the times in which we live. While prices are higher now on many items, with the passage of time comes more than simply a higher price tag. As time goes on, there are different things on which to spend money, which cause us to adjust our priorities and spending habits accordingly.
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