Luckiest Generation in History: Young Americans

To illustrate how material abundance increases for each generation under free market capitalism, W. Michael Cox, chief economist at the Federal Reserve Bank of Dallas, has done several studies comparing the purchases that teenagers could make from a summer job at the minimum wage, in various years. Here's a summary of his 2000 article in the IBD.

Here's my own updated version of the Cox analysis. In 1949, the minimum wage was $0.40 per hour, and a full-time summer job (40 hours per week for 12 weeks) would have generated $192 in total summer earnings (ignoring taxes). Using a Sears catalog for retail prices, $192 would have only purchased the following 4 items in 1949 (click charts to enlarge):

Now contrast that with 2009. At the 2009 minimum wage of $7.25 per hour, a full-time summer job will generate about $3,500 this year, which would be enough to purchase the following list of 28 items (click to enlarge):

What a difference 60 years of free market capitalism makes!

According to Cox:

Add it all up. When it comes to their economic prospects, today’s young Americans are the Luckiest Generation in history—at least until their children grow up and forge an even luckier one. And even if real wages are flat, the explosion of new products over time at lower and lower prices translates into a rising standard of living for all income groups, even minimum wage workers.

Teenagers today can afford things like cell phones with cameras, digital cameras, GPS systems, CD players, DVD players, laptop computers, and iPods that even a billionaire couldn't have purchased 20 years ago. As much as we might complain, just by being alive in the 21st century America, even if you're earning the minimum wage, you've "won first prize in the lottery of life."

Comments

[John Lounsbury:]

Nathaniel C - - -

Fifty years ago (even 25 years ago) taxes were much higher. Complain about current tax rates? You'll wish they were higher now when, in the future, they will be much higher again to try to dig out from all the large deficits of 24 of the past 27 years plus what we have coming in 2009 and 2010.

Mark - - -

One specific reason why today's youth is not better off (besides the large future tax burden described to Nathaniel):

Today many college graduates go into the world deeply in debt. Debt financing of college educations was rare 50 years ago. I worked my way through college and graduated debt free (in 4 years). My three children worked their way through college, all paying well more than half of their expenses and graduating on time. Only one had any debt at graduation, and that was only $4,000.

So the typical college graduate has some fancy electronics and other artifacts and 10's of thousands in debt, with much higher future tax burdens. That's the luckiest generation?

Mar 16 12:48 AM

[User 143167:]

In general, the world consumes as much as it produces. So if you find people now consumes way more than they could earn from producing, it is only because they are consuming others products by borrowing money.
Check your list to see how many among them are produced by Americans. Many Americans had a high living standard that they didn't deserve, it is just a tradeoff between now and future. Now people finally realize that and worry about the future, while the government and the Fed come to their rescue, trying to persuade them that debts won't be the problem as they can always dilute them by printing more $$.

Mar 16 03:05 AM

[Ferdinand E...:]

I know that something has gone wrong at many American universities, but I didn't want to believe that someone like Mr Perry could find himself with a professorship. And I still don't believe it. What I believe instead is that he wrote another article that was heavily censored by communist infiltrators, or something like that.

I consider myself to be one of the best teachers in the world, easily, but as I tell my students it's because - on the average - American teachers are the best. On the average! But if they keep appointing persons like Mr Perry to teaching positions, then I'll tell my students to find a storefront university if they want to study in the Big PX.

Mar 16 08:43 AM

[nukldrager:]

They did it by providing the main ingredient of capitalism, cheap labor.


On Mar 15 09:57 AM ron_paulite wrote:

> And they did it without debt and deficit.
> with high savings infact.

Mar 16 09:12 AM

[nukldrager:]

On the money Nathaniel C

Absurd article by Dr. Perry. Academic fantasy.


On Mar 15 02:19 PM Nathaniel C wrote:

> As a young person I do not feel particularly lucky. Quite the opposite.
> Approx. 60% of what I earn is stolen by our illegal government who
> then hands it over to the Wall Street banks.
>
> 33% goes to the Federal Government
>
> 10% goes to the California state government
>
> 7.5% to Social Security and Medicare (talk about a ponzi scheme),
> which I cannot opt out of. If I do not pay this unconstitutional
> tax I will go to jail.
>
> 8.25% for California Sales Tax
>
> 1% property tax. (you see it is by default the government's land,
> even though I pay for the mortgage.)
>
> 3-5% is stolen through inflation by the Federal Reserve (kudos the
> Ben Bernanke and his banksters) and remember this tax compounds every
> year, becoming more and more oppressive
>
> I do not see how this makes me lucky. Almost everything I earn goes
> to taxes. I even left out other taxes like gasoline tax (35 cents
> a gallon), car registration tax ($500 for the privilege of a car),
> etc.
>
> As a young person my goal is to get the hell out of this country,
> to a place where I will have personal and economic liberty. America
> used to be a free country but that ended in 1913.

Mar 16 09:30 AM

[Leftfield:]

Comments point out well the fallacy of your examples. C'mon, they're all items that have benefited from technological advances the most.

Not only is housing and taxation ridiculous, but, for far less inflation-adjusted taxation, a perk of citizenship in CT was once free UConn tuition. Now, only government employees get that. My kids face the college tuition bubble. Where are universities putting all that money?

The whole big-brother side of big government is enervating and threatening to our well-being and dignity. They are deadening financially and to the spirit. Laws, regulations and bureaucracies are added to daily for the average person. More of the same is big government's solution to the ongoing failure of their policies. This does not point to a better life in the future.

Of course, government fails to regulate itself (I don't see corruption reduced) and the big players like banksters and Madoff. Despite costing us ever more.

The only way I see the next generation being lucky is if the economic implosion we're in causes real reform despite the huge vested interests in status quo.

Mar 16 09:40 AM

[nukldrager:]

Good point Moon.

"...But hey, must we be too serious all the time? More importantly is that you are spending your current money rather than spending your future money using plastic.
And thus the real problem arises. Relatively speaking, we are digging ourselves a very big hole in our future income just keeping up with the Jones who are doing the very same thing".


Current money and future money concepts are missing in K through 12 curriculum.
Gaining a working knowledge of these financial basics would make one lucky in any generation.

Mar 16 09:42 AM

[Lok Sang Ho:]

Dr Perry's point reminds us of the importance of managing expectations and fostering a sense of gratitude. The tragedy of this century is that many hearts are empty in a land of material abundance.

Mar 16 10:29 AM

[Paul Killinger:]

Mark,

I do hope Larry Kudlow highlights this one tonite!

I remember when my summer jobs paid $2 per hour, and liberal overtime made it $3. Tuition was $1,600 a year. I thought myself the luckiest kid in the world.

Let's hope our kids don't have to live overseas to find those types of opportunties in the future.

Mar 16 11:00 AM

[Paul Killinger:]

Nukl,

You don't have to live overseas to rid yourself of CA's oppressive tax load. Anyway, not quite yet.

But wherever you go, choose carefully. Find someplace where you'll be happy, because last I checked we only come this way once.

Mar 16 11:09 AM

[CLH:]

This generation of negative people who sit on their can waiting for govt. help do not deserve to be so well off. Read the comments--- most are sickening.

Mar 16 11:35 AM

[Stephen Wol...:]

Material things and money are not responsible for happiness. Should have seen study on CTV W5 programme "In Pursuit of Happiness" (aired Saturday July 22 at 7pm ET). Also to put finances into perspective one should visit Peter Joseph's Zeitgeist Addendum to see how screwed up the money system is!

Mar 16 11:42 AM

[Paco6945:]

Once again, I find myself reading comments about Mark Perry's articles and wondering what in the world people are commenting about.

Here's all the article says:

If I, as a (16 YO?) teenager in 1949, worked all summer at a job that paid minumum wage, I would have made $192.

If I, as a (16 YO?) teenager in 2009, work all summner at a job that pays minimum wage, I will make $3,504.

(I would point out that these earnings are before taxes. In 1949 I would have paid SS taxes of 1% or $1.92; in 2009 I will pay SS/MC taxes of 7.65% or $268. In addition, I may have top pay income tax on the money I earn in 2009.)

Now, about what products I might have bought in 1949 or might buy in 2009, I probably wouldn't buy a toaster or waffle maker, but it isn't far fetched to think that I would spend almost everything at Best Buy. The fact is that there are a lot more buying options today for teens than there were in 1949. Maybe the lone exception is that in 1949 I could buy cigarettes -- for 20 cents a pack.

P.S. Professor Banks: You've got a lot of nerve. All one has to do is look at your profile. Any self-proclaimed "THE leading ... expert in the world" clearly has deep psychological issues.

Mar 16 12:48 PM

[MichaelJ007:]

The article's comparison has so many flaws it's laughable, taxes and living expenses being the central theme. Oh, but fortunately the only thing we need to consume is electronics. While the boomers and Xers where making $ on the latest techno gadgets they completely neglected the real important things like managing healthcare costs and education. But don't worry, the younger generation may come up w a solution that will rescue you 20 yrs from now when ur in the longterm federal healthcare system you created for yourself. Or maybe we'll just visit you w ur grandchildren once a year and play on our Blackberry and Nintendo DS while you ramble on about when you used to buy a coke for a nickel.

Mar 16 01:56 PM

[henarl:]

Your comparison is more about the amazing advances of technology than about the free market system. The real question is: Are the teenagers of today HAPPIER than those of 1949?
Extreme consumerism of high tech toys doesn't necessarily lead to extreme joy and happiness.

Mar 16 02:15 PM

[Paco6945:]

The article is about the current generation of teenagers being the luckiest ... until the next generation of teenagers. Most teenagers who take summer jobs LIVE AT HOME. They don't pay for "living expenses ... healthcare costs and education."

The skill of reading involves comprehension. Comprehending what is written before posting is a worthy enterprise.

Also, I don't think the word HAPPIER or any derivative of it appears in the article. Perry is just trying to show what a typical teen might have been able to buy with summer earnings in 1949 versus what a typical teen might be able to buy with summer earnings in 2009.

Go to Best Buy some Saturday and see who is there buying.

Mar 16 03:42 PM

[Paco6945:]

WAKEUP--

It would help if you would point out what IS NOT the truth in this article. I have no axe to grind one way or another, but it seems to me that 90% of the comments have nothing to do with the article.

Is there some reason that you and others dislike Perry? If so, it would also be useful to state your reasons. Perry seems to be a capitalist. Am I to assume your reasons are ideological. If so, read your screen name and follow the instruction.

Mar 16 05:02 PM

[User 377523:]

If things = happiness, and I think the current maliase demonstrates that it does not, and certainly not for the entire spectrum of the world's population. I think a lot of people were happier and more fulfilled in a simpler mode of existence. Another example, while Americans arecrazy about their cars, they kill 40 000 Americans each year, and over a million globally.

Mar 16 05:53 PM

[Dirk McCoy:]

I've done the comparison on non-electronics, and for any item (airfares, rent, food, clothing) not fettered by union labor (government, education, US autos) the same holds true- free trade and capital investment in technology have made our lives materially better. And that's not even including advances in health care- MRIs, cancer and heart treatments, etc. that have made living longer- and feeling well while doing it- possible.

You can't blame Dr. Perry that so much increased wealth has been created by our capitalist system that we give much of it to unproductive single mothers who create most of the problems many of you complain about. I'm still waiting for the plan to deal with the 40% of babies today being born to unwed mothers.

Mar 19 11:34 AM

[The Donald:]

Moron... 4 gallons per hour then vs. 3 gallons now. Then a 1949 Chevy got 10 miles to the gallon (i had one), now you can buy a $5000 used car, which is better and more reliable than a new 1949 car, and get 30 miles to the gallon. In 1950 a 1300 square foot home cost $20,000 to build excluding the lot. Today, you can buy a 1,600 square ft town home for $165,000!! And you wonder why you can't balance your check book.


On Mar 15 09:23 AM Truthmeister wrote:

> Nicely misleading article. In 1949 the minimum wage was raised from
> .40 to $.75 an hour. Also, what does the article prove except that
> the price of electronics has come down? A gallon of gas was $.17
> in 1949, so the minimum wage worker was earning 4 gallons an hour,
> now we earn 3 gallons an hour as long as the price doesn't go back
> up. Average price of a new car was $1400. Please try to make the
> point that other than electronic gadgets, we have more purchasing
> power today, I don't think that you can.

Mar 21 02:44 PM