I had to share. I'm trying a novel-pocketbook on SOL just to see what they were like back then. This is from a story that takes place in the San Fran area:
Roger makes good money, almost a thousand dollars a month. ... We have almost eleven thousand dollars saved. That ought to be enough for that split-level in San Bruno.
I remember when I was a kid that many places had burgers five for a dollar - and they were good burgers!
Its not so much that relative prices have gone up, its that dollars buy so much less. Inflation and all that debt the government prints money to pay the interest on have an impact. There is something called the rule of 72. Divide an interest rate or inflation rate into 72, that tells you how many years it will take for money in dollar terms to double. At 2%, 36 years. At 4%, 18 years.
In 1971 I got out of the army and got a job as an underwriter trainee at $8,000 a year. I bought a Dodge Dart for $2,000. Rent for a 2 bedroom apartment downtown about 6 blocks from where I worked was $135 a month, plus $7 for a parking place. Dicks Drive In sold hamburgers for 19 cents, and Thriftway sold steak for about a dollar a pound. And of course Gold was $35 an ounce (troy ounce, somewhat different than normal ones.) This was in Seattle, where the Boeing depression was in effect, they went from somewhere over 100,000 employees to about 40,000. There was a billboard, "Will the last person to leave Seattle turn out the lights." So rents might have been depressed compared to other cities.
Cars cost more now than what houses went for then. Gold is north of $1,000 an ounce, last time I looked. Dicks sells hamburgers for $1.40. There is agitation, successful in some places around here, to raise the minimum wage to $15 an hour. For a 2,000 hour years (50 weeks at 40 hours a week) that is $30,000 a year. People especially families may have difficulty living on that wage, certainly if they want to live downtown.
The problem with raising income levels is the cost of living also increases. When those are out of balance everyone loses.
I remember about 30 years ago I got curious about why all those Japan products were selling so cheap. I know the government and the unions kept saying wages were cheap as all hell. But I started looking at the more basic information. You know cost of food, cost of housing, all those costs that everyone has to pay regardless of where the jobs are. I very seriously doubt that wages were cheaper. The cost of living was so much higher it was ridiculous. No work force is going to work for less than it takes to survive anywhere in the world.
Under pure capitalism, people have to take what people are willing to pay them. Prison workers get ridiculously low wages, of course their food, clothing and a place to sleep are furnished, not that any of those are wonderful. Before unions, work forces had little choice but to accept what was offered, or they could stay on the farm and work for food and maybe some clothing when the family farm had a good year.
If you are a fisherman and have no other practical way to earn food, you may work all day to catch a fish for dinner. If you don't catch one every day and suffer from malnutrition, you will keep trying as the alternative is to die sooner rather than later. If the alternative is death, you might switch to robbery or other violence to get enough to live on. Malthus got his ideas about population growing faster than food to support it from observed data. Some work forces will work for less than it takes to survive, if the alternative is worse.
I remember the line the government and unions used back then in regards to new tech designs by Americans to improve production. It went like this it will cost the workers their jobs if used here in the USA. So they sold those new inventions and ideas to Japan and other countries. Those countries put them to use. Those new designs and tech wound up costing the American working man and woman their jobs when Japan among others outproduced us and undercut the prices here. The quality was as good or better and it was cheaper. So everyone bought it even union workers. Its like saying it costs too much to do basic maintenance on a car. But sooner or later that idea turns out to be very wrong.
There is something called the rule of 72. Divide an interest rate or inflation rate into 72, that tells you how many years it will take for money in dollar terms to double. At 2%, 36 years. At 4%, 18 years.
That implies that your money would double in one year at 72% interest, I don't think that's right.
Its an estimate. A shortcut, a simplified way to calculate compound interest. at interest rates of 25% it is off by about 10%, according to an online discussion I looked at. The right number for the best estimate might be 69.3 but 72 has a lot more factors and makes calculation easier. The fact that the error using 72% interest is quite high doesn't mean the rule is wrong, its not designed to be exactly correct in every case. On line there are formulas for compound interest that involve calculation of the natural logarithm of numbers. It looks like getting exactly the right number is challenging. At likely interest rates or growth rates the rule of 72 is close enough for government work. And lots of economists use it. And you are right, to double your money in one year you need a 100% annual interest rate. If the rate compounds more frequently the rate could be less. One hundred percent compounded at six months would generate 50 dollars interest at six months and (earning interest on the fifty dollars for the last half of the year) I think would give you $225 at the end of the year. I am not mathematician enough to give you an interest rate that compounded daily would double your money in a year. It would be more than 72% but less than 100%. If you can find an investment that offers to double your money in a year, be careful, likely it is a scam. Or its in a hyperinflation period like Germany after World War One when it took a wheelbarrow full of marks to buy a very inexpensive item, and people got paid twice a day so they could go out at lunch and buy something that would keep its value with the half day's pay.
Back around 1970 or so, my dad and I were both working for a neighbor hauling hay. As it happened, we were both in the barn stacking the bales, and got to talking. I asked him what he made a day when he was my age doing the same job we were doing. After discussing various prices then and then, we came to the conclusion that the actual amount of compensation hadn't changed in 25 years, just the dollar amounts. It took about the same amount of labor to buy a meal, buy a week's groceries, buy clothing, etc., in 1940 as it did in 1970. Granted, not very scientific, but very interesting anyway.
PS: My pension is $1,450 a month after taxes, and I manage to keep myself alive and have a little spending money each here in the wilds of Iowa. Wouldn't work in a big urban area, but does just fine 'out here in the fields'. (Bonus points for the source of the quote!)
My disability income is around 700 a month. Yet I am able to have a few extras you might say. Of course any major expenses have to be carefully planned, but I think that is true for everyone.
Of course my income would be the same in Iowa as it is here in Georgia. I learned a long time ago how to make a little go a long way.
