#454. Today’s Young Americans: luckiest generation in history
Posted on | The AgurbanToday’s Young Americans: luckiest generation in history
Mark J. Perry | September 17, 2013, 8:55 pm
When we saw the above titled article from the American Enterprise Institute, we were intrigued. We particularly like the author, Mark J. Perry’s, response at the end.
To demonstrate how free market capitalism and “the miracle of the marketplace” generate increased prosperity over time for average (and especially low-income) Americans, economist W. Michael Cox has compared the purchases at different points in time from the income earned by college-bound teenagers working at a full-time, minimum-wage for 12 weeks during the summer (ignoring taxes).
Here’s a new update, which compares a group of electronic and household items that could have been purchased by college-bound students in 1973 from the income generated working full-time at a summer job earning the prevailing minimum wage then, to a group of items that a teenager could purchase this year from 12 weeks of full-time summer work at today’s minimum wage.
In 1973, the minimum wage was $1.60 per hour (equivalent to $8.43 in today’s dollars), and a full-time summer job at 40 hours per week for 12 weeks would have generated $768 in total summer earnings for a college-bound teenager (ignoring taxes). Using retail prices from a 1973 Sears Spring and Summer Catalog, I found that a college-bound student in that year would have only been able to purchase the following five items for his or her college dormitory room using their entire pre-tax summer earnings of $768 from a minimum wage job: Power Return Electric Typewriter, $193; Pocket-Size Electronic Calculator, $ 99; 12-Inch Portable Color TV, $190; Stereo FM/AM Radio-Tape Player, $188; 5.4-cubic foot Compact Refrigerator, $100; TOTAL $770.
Now compare that pretty pathetic group of five items in 1973 to the cornucopia of 19 electronic and household items in the table below that could be purchased by a teenager or college-bound student heading off to a dormitory this year with summer earnings of $3,480 (ignoring taxes) from working at the current minimum wage of $7.25 per hour, based on prices from the Best Buy and Amazon websites: HP – ProBook 4400s 14″ Laptop Computer, $575; Apple iPod Classic, $240; Apple iPhone 5, $100; Apple iPad 2, $400; Garmin, $120; Canon Powershot 12.1 Megapixel Digital Camera, $280; HP Photosmart Wireless All-in-One Printer, $130; Philips 32 inch LCD TV (HDTV), $290; Sony Smart Blu-Ray Player, $ 80; Samsung 500W 5.1-Channel Smart Blu-ray Home Theater System, $220; Haier – 2.7 Cu. Ft. Compact Refrigerator, $160; Sony PlayStation, $200; Kindle Paperwhite, $119; Philips Sonicare Elite Premium Edition Toothbrush, $110; Sony Clock Radio with Apple iPhone and iPod Dock, $50; TiVo Roamio DVR, $200; XM – Onyx Satellite Radio Receiver with Vehicle Kit, $60; DeLonghi – Pump Espresso Maker, $100; HP 10bII+ Financial Calculator, $ 28; TOTAL $3,462.
Pretty amazing contrast, isn’t it? And keep in mind that today’s inflation-adjusted minimum wage is actually 14% below the minimum wage in 1973, so today’s teenagers would actually have more than $4,000 to spend on today’s electronic gadgets if the minimum wage was adjusted to $8.43 per hour to make it equal to the 1973 minimum wage on an inflation-adjusted basis.
MP: The 1973 vs. 2013 summer-job at the minimum wage comparison above illustrates that we’ve made a lot of economic progress over the last 40 years that has increased our national prosperity – and that march of progress has happened in spite of six recessions during that period, the stagflation of the 1970s with 18.5% mortgage rates and a 20% prime rate, the savings and loan crisis with almost 3,000 bank failures in the 1980s and 1990s, several major stock market corrections, and the Great Recession.
The economic challenges facing past generations didn’t stop innovation and prosperity in the long run, and neither will the current challenges stop prosperity from rising over time. Just like today’s teenagers are exponentially more prosperous than their counterparts in 1973 and can afford items not available to billionaires of past eras, the teenagers 40 years from now in 2053 will likely be exponentially more prosperous than today’s teens and will be able to afford products that today’s billionaires can’t even imagine, much less afford.