Inflation Calculation

[Undertow]

Also keep in mind that inflation is not calculated on individual items, but all items as a group. As with any statistics, there are going to be inaccuracies based on singular items that behave differently than expected.

I think this is what Lizzie was talking about. I imagine a good example would be the Compact Disc players released to the public in 1982 which were about $730. You couldn't really convert that and expect to get an accurate feel for the same units in the 1990's.

[ShadedDude]

So then on Oct 24, 1938, when minimum wage was $0.25 an hour

Gold was $34.85 an ounce you worked for 139.4 hours to make an ounce of gold.

Today gold is $1637 an ounce (plus change)....at 7.25 an hour you have to work 225.79 hours to make an ounce of gold.

Am I correct in thinking that the equivalent minimum wage would be $0.15 cents an hour?

No wonder I'm so tired.

[LizzieMaine]

The thing with gold prices as an index, however, is that they're driven to the height that they are today by speculation. There was no gold speculation in 1938: it was illegal. Gold was worth what it was because the government said so, not because of an agreed-upon price at the market, so the price was stable. Today, it isn't. So I think even there you get artificial distortions.

[jamespowers]

So then on Oct 24, 1938, when minimum wage was $0.25 an hour

Gold was $34.85 an ounce you worked for 139.4 hours to make an ounce of gold.

Today gold is $1637 an ounce (plus change)....at 7.25 an hour you have to work 225.79 hours to make an ounce of gold.

Am I correct in thinking that the equivalent minimum wage would be $0.15 cents an hour?

No wonder I'm so tired.

Actually your calculation works in 1938 gold dollars. 25 cents per hour in 1938 would be the same as $11.75 today based on the per ounce price of gold calculation. (.25/34.85 = x/1637)

[LizzieMaine]

I think this is what Lizzie was talking about. I imagine a good example would be the Compact Disc players released to the public in 1982 which were about $730. You couldn't really convert that and expect to get an accurate feel for the same units in the 1990's.

Or, consider what it cost to buy a new Victor Home Recording console radio in the fall of 1930 -- the introduction of a new technology targeted to upscale purchasers. The top of the line model sold for $285 less tubes, which translates to -- $3885, according to the Inflation Calculator. Now, I have no idea what modern electronics cost -- but I'd think that's way out of line for any comparable item today.

[jamespowers]

Or, consider what it cost to buy a new Victor Home Recording console radio in the fall of 1930 -- the introduction of a new technology targeted to upscale purchasers. The top of the line model sold for $285 less tubes, which translates to -- $3885, according to the Inflation Calculator. Now, I have no idea what modern electronics cost -- but I'd think that's way out of line for any comparable item today.

http://luxedb.com/incredibly-expensive-sound-systems/

[Undertow]

Aha, here we go - something to chew on!

This link is to LIFE Magazine Aug. 08,1938. Page five shows a new fad called "shooting sticks", which are basically just seats at the end of a metal pole. The article advises that these sticks cost roughly $10-$35 in the US. I have found a modern version, in fact this website specifies it is an updated "shooting stick" chair. Cost $61.95.

So if you take the more advanced 1938 stick chair at roughly $35 and compare it to the modern version at $61.95, you'd only have a jump of 75%; i.e. it didn't even double in price. I guess that's a good example of supply/demand and the lack of an "inflated" rising price. According to the gold standard conversion JP created (nice job by the way), it should cost $1646.75 and according to automated calculator, it should be something like $565.12.

Of course, the fact is I'm comparing apples to oranges; I'm discussing prices vs. actual currency inflation and conversion. Which means I pretty much screwed up this thread by not giving it the appropriate title. But at least I have a better idea of what I was talking about!

[Noirblack]

Usually inflation rates are based on a "basket of goods and services" that a household typically buys over a set amount of time, like a week or a month. So any inflation calculator based on inflation rates will only give you a general overview of how much it costs to live now vs in the past. But you have to consider that taking just one item out of the basket from years gone by and comparing it to its modern counterpart might not give you a perfect comparison. Some items in the basket of goods and services will have greater variance over time, and some will have lesser variance. It really only makes sense to get a general overview with inflation information and not try to apply it to specific items. So you can draw inferences like if you lived in 1930 and earned $300 per month, you would need to earn $2000 per month today to have the same standard of living.

But I wouldn't even use it for comparisons over such a long period of time because the basket of goods and services changes. For example, in 1930 yourstatistical bureau probably included things like kerosene for lamps in the basket of goods along with light bulbs. Eventually the kerosene would be dropped. Now they include things like cell phones and monthly service fees, ISP fees etc. So the more the basket changes, the more meaningless the comparison is.

[jamespowers]

Usually inflation rates are based on a "basket of goods and services" that a household typically buys over a set amount of time, like a week or a month. So any inflation calculator based on inflation rates will only give you a general overview of how much it costs to live now vs in the past. But you have to consider that taking just one item out of the basket from years gone by and comparing it to its modern counterpart might not give you a perfect comparison. Some items in the basket of goods and services will have greater variance over time, and some will have lesser variance. It really only makes sense to get a general overview with inflation information and not try to apply it to specific items. So you can draw inferences like if you lived in 1930 and earned $300 per month, you would need to earn $2000 per month today to have the same standard of living.

But I wouldn't even use it for comparisons over such a long period of time because the basket of goods and services changes. For example, in 1930 yourstatistical bureau probably included things like kerosene for lamps in the basket of goods along with light bulbs. Eventually the kerosene would be dropped. Now they include things like cell phones and monthly service fees, ISP fees etc. So the more the basket changes, the more meaningless the comparison is.

Good points there. The expanding yardstick makes it hard to measure.

[Undertow]

Good points there. The expanding yardstick makes it hard to measure.

But wait...how much are they charging for that expanding yardstick now as opposed to then!?