Author Topic: How much money would it take to reproduce the same standard of living as 1950?  (Read 12518 times)

MoonShadow

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- 1 car.  ...Up until about 1979-80.

And it was probably a subcompact econobox or a POS Dodge.

The Family Truckster: Station wagon! Ginormous gas guzzling station wagon. Well at least in the early 1970s.

My dad had a pinto.  Two parents & three kids to anywhere.  Till 1985.  Then he got a truck and momma got the pinto till it died.

MoonShadow

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Aren't tiny houses the portable trailers basically? Not exactly the same SFH they had in the 50s right? They don't look like Levittown to me at least.

Varies. I've seen it done with a large shed with a porch, and a mattress in the "loft".  350 square feet.  Depends upon just how extreme you are willing to get.

ketchup

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Housing, childcare, healthcare, and education/student loans are what's driving the noticeable decrease in standard of living. In the 50's you didn't need a college degree to get that job that guaranteed a middle class income. Today we all know you almost have to. Part of it is just simple competition where there are just more people with degrees now and automation and other efficiencies have led to an unequal growth in opportunities in stride with growth in population. Part of it is the blue collar manufacturing jobs and even say call center jobs are being outsourced to other countries leaving a hollowing out between white collar and fast food/retail.
Living in a reasonable house, not having children or health problems (easier said than done of course), and not going to (or paying for) college solve the first part pretty quickly.  Having a job that doesn't require college education solves the second part.  Being creative solves not hitting any of what I just said.

My GF and I live in a ~1000 square foot house built in the 60s (and well maintained, not "decrepit" like you imply all old houses are) in a town that grew 87% from 2000-2010.  PITI is about 20% of our take-home pay.

We have no children, and no serious health problems (we've each had a very-warranted emergency room visit in the past 5 years, but those were each <$500/visit).  I think our health insurance together is about $200/month and covers routine stuff.

I attended three semesters of college with no money out of pocket (scholarships with a bit of parental help).  She attended half of one semester before she left, and is still paying off that (relatively small) student debt.  Neither of us have a degree of any kind.

I work in IT, and she's a traveling self-employed photographer in a very very niche market.

We have a household income above the US median, and above median in our area.  And our income will only go up with time (especially hers).  We have what I consider a pretty damn luxurious life (3 bedroom house, two cars, dogs, travel, fancy home-cooked food), and a a respectable savings rate even by Mustachian standards.  Well above the 1950s norm.

We could definitely get by on only one income if we wanted to.  FIRE aspirations would be significantly worsened, but our standard of living would remain pretty great.  Chronic expensive health problems are really probably the main thing that could sink a ship like ours if we were restricted to one income.

Oh I definitely think it's possible. And I didn't mean to imply all old houses are falling apart. But as you noted as DINKs your situation isn't really the one we are trying to draw a comparison to. You don't have the childcare expense even though both of you work and you don't need to get drawn into the trap of chasing more costly housing because of school district.
while my 1950s house isn't really dumpy and falling apart it will no doubt be razed and a 4000sf mcmansion will replace it once I sell. That is what is being done here because that's what people want/expect/can't live without even if it is for a smaller family and in the same school district. So its more for ascetics and to impress and keep up with the Jones as well as live what is precueved to he a middle class life regardless if financials. Probably the biggest things that propelled the current middle and lower classes to want and expect so many things now is availability of credit and shiney pretty things on TV. Both things uncommon in the 1950s.
When I was looking for a house last spring, we almost landed on this 50s-build little blue 800 square foot 2/1 for ~$90k.  Someone nabbed it before we could make an offer and knocked it down to put a 2700 square foot, 2 car garage house on it and it's now for sale for $475,000.  I don't get it.  And a house that big looks really stupid on such a small lot.
- 1 car.  ...Up until about 1979-80.

And it was probably a subcompact econobox or a POS Dodge.

The Family Truckster: Station wagon! Ginormous gas guzzling station wagon. Well at least in the early 1970s.
I've still got my early 90s equivalent! 

ender

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while my 1950s house isn't really dumpy and falling apart it will no doubt be razed and a 4000sf mcmansion will replace it once I sell. That is what is being done here because that's what people want/expect/can't live without even if it is for a smaller family and in the same school district. So its more for ascetics and to impress and keep up with the Jones as well as live what is precueved to he a middle class life regardless if financials. Probably the biggest things that propelled the current middle and lower classes to want and expect so many things now is availability of credit and shiney pretty things on TV. Both things uncommon in the 1950s.

Housing size is fascinating to me. I grew up in a house that was a... lot of square feet. Probably well over 2000 above ground square feet?

We're buying a house that is still relatively large, I think about 2000 total finished square feet including the basement. But what is crazy is how many houses are so much bigger than this place.

I don't think it takes much in absolute dollars to have the same standard of living. Maybe 50K outside of HCOL metro areas? That number may be way too high, I really don't know.

But how would you actually replicate that lifestyle? If I go to the hospital, am I going to refuse the CT? Opt for the surgery with a huge incision instead of a couple small holes that quickly heal?

On housing, do developers even build 900 sq. ft. houses anymore? Due to building codes, I can't opt of new but costly features like integrated fire alarms. Then there's resale. I may be perfectly fine with a 2 bedroom home, but these days that's going to dilute your pool of buyers and the price they're willing to pay right?

We clearly cannot live in 1950 now. But that does not mean we cannot look into the differences in expected lifestyle between then and now and look to see how much more expensive (or less) the same type of lifestyle of luxury is now vs then.

The main reason I am curious about all this is that I see a lot of lamenting how expensive everything is nowadays. How you can't make it. Etc. I expect however if you were to live the same level of luxury that people had around 1950, the income required to sustain that in 2016 would be much lower than the inflation adjusted equivalent was in 1950.

The problem I have with CPI is it doesn't really account for this and instead assumes the new levels of luxury are "normal" and so inflation basically incorporates level-of-luxury inflation by setting newer luxuries as the expectation.


Spork

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But how would you actually replicate that lifestyle? If I go to the hospital, am I going to refuse the CT? Opt for the surgery with a huge incision instead of a couple small holes that quickly heal?


It isn't "refuse the CT".  It's "ask the doctor if the CT is really necessary."  In many cases they do it to be "complete" or to provide a liability trail.  In many cases they know the answer without the CT.  The whole "get a barrage of tests regardless of cost" is a big part (but not all) of the US health care problem.  If we spent the money like it was ours instead of like it was coming for free from our insurance companies... I think we'd be better off.

As to incision vs laproscopic scars... Some things do better with one vs the other.  Laproscopic techniques are awesome, but my Dad complained they were too broadly applied.  For an appendectomy he'd ask "would you rather have 3 two inch scars in your belly or one 3 inch scar below your bikini line?"

randymarsh

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But how would you actually replicate that lifestyle? If I go to the hospital, am I going to refuse the CT? Opt for the surgery with a huge incision instead of a couple small holes that quickly heal?


It isn't "refuse the CT".  It's "ask the doctor if the CT is really necessary."  In many cases they do it to be "complete" or to provide a liability trail.  In many cases they know the answer without the CT.  The whole "get a barrage of tests regardless of cost" is a big part (but not all) of the US health care problem.  If we spent the money like it was ours instead of like it was coming for free from our insurance companies... I think we'd be better off.

As to incision vs laproscopic scars... Some things do better with one vs the other.  Laproscopic techniques are awesome, but my Dad complained they were too broadly applied.  For an appendectomy he'd ask "would you rather have 3 two inch scars in your belly or one 3 inch scar below your bikini line?"

That's a valid point, but I'm saying in general many medical advances done today do save lives and they cost money. Regarding the surgery example, maybe things were different previously, but my 3 scars are nowhere close to 2 inches. A few centimeters and only one is even remotely visible 3 years later.

zolotiyeruki

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Replying to subscribe--this is certainly an interesting discussion.  DW's grandparents raised 8 boys in a small house.

Kaspian

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in general, this topic fascinates me.  It's something I've thought a lot about over the years.  Middle class folks in the 50s/60s thought they had things REALLY GREAT.  And today a vast majority of (non-mustacian) people would be horrified to live without much of what we consider "necessities."

That's why I am curious about this subject in general, too.

Horrified is right.  People would feel as deprived as fuck.  The problem is way too many youngsters watched all the seasons of "Mad Men" and think that life was all hunky-dory. 

I actually collaborated (Liar!  All you did was send him an e-mail!) with Living Stingy about this topic:
http://livingstingy.blogspot.ca/2016/03/1960s-work-ethic.html

On a sidenote:  I bet this woman in the UK who lives every day like it's 1940 is rich as hell!
http://www.dailymail.co.uk/femail/article-3467851/1940s-obsessive-eats-rations-sleeps-air-raid-shelter-dreams-traditional-housewife.html

nereo

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Ender - great topic.

As others have pointed out, there's so many things today that are different that it's hard to do an apples to apples comparison.
Also, inherent to the thread is the question "what's middle class"?  IN a very basic sense you can define "middle class" as "around the median (ave)". But there are dragons here too - suppose real compensation doubles (which is has since 1950) - "middle class" is now able to afford so much more of everything then they could before.  Since your question is "how much money would it take to reproduce the same standard of living as 1950" I believe we should consider what an average ("middle class") person would be able to afford in 1950.

A few other things I've encountered:
IN 1950 the laborforce participation of men 65+ was 47%.  Today it's 21%  This is largely due to the fact that the average retirement age is currently 62.
In 1950 about 1/4 of those 65+ were considered to be living in poverty.  Today it's about 10%.
The average work week has dropped from 40 (1950) to 39 hours (2014)
In 1950 the average family spent 30% of its budget on food.  Today it's about 13%
Medicare did not exist until 1965
traditional IRAs did not exist until 1974
401(k) plans did not exist until 1980
average real-adjusted SS benefits: $321 (1950) vs $1,277 (2010)
Pensions covered roughly 1/4 of workers (1960) vs 20% (2010)
Commercial air travel was basically non-existent in 1950. So was the interstate system.
Median life expectancy at birth for white males was 66.3 (1950) and 76.3 (2015)
Median life expectancy at age 60 for white males was 75.7 (1950) and 81.5 (2011).
Average new-construction home size 983sqft (1950) vs 2,521sqft (2015) - a 2.6x increase
Average family size: 3.54 (1950) vs 2.54 (2015)
Median household income (adjusted to 2015 dollars): ~$24,000 (1950) vs $51,900 (2015)
Lowest tax bracket was 17.4% (1950) vs 10% (2015) - note, i have no idea how deductions were done in 1950, and can't comment on average taxes paid.

So what can we say from this list of facts & figures pulled off the internet?
In 1950 a 'typical' family would most likely have 2 children and earn around $25,000 (in today's dollars).  They would live in a 1,000sqft home and be taxed at 17.4% (but no idea about deductions).  There was no medicare available.  SS existed but payouts were low for someone retiring in 1950 for two reason; i) the program was still being phased in and ii) SS payouts are calculated both on wage growth and inflation, so todays payouts reflect that. There's about an even chance the breadwinner of this family would still be working after age 65, and he could expect to die 6 years sooner.  They might have a car but travel more than a few hundred miles from their home would be very rare.
In contrast, a 'typical' family in 2015 would have 1 child and just over twice the income.  Tax rates for median-families are lower and SS payments are higher.  There's more of a social safety net in place (e.g. medicare).  They probably own at least one car, if not two, and long-distance travel is affordable and available to them.  Chances are they will retire before age 62, and be less likely to be in poverty when they do retire.

Note: I started referencing all the sources I used, but this got too long. Either believe me or not, but most of hte facts and figures come from my friend FRED and the Bureau of Labor Statistics.


Spork

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Awesome list, nereo.  Perspective.

I've tried to explain "In 1950 the average family spent 30% of its budget on food.  Today it's about 13%" to folks.  People do whine and complain about the ridiculous cost of food.  And it's dirt cheap now in comparison.  Maybe it's how many days they go out to eat a week. 

samustache

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All these gloom and doom threads about "everyone makes less" or "can't provide for family the way you used to be able to" makes me wonder:

  • How much money would you actually need now to live with the same standard of living as 1950?
  • What would the additional costs be, that didn't exist then (for example cell phones)?
  • What are the additional luxuries/needs that people include as mandatory now that were not in that time (level of healthcare? home size? etc)?

Yes 1950 is arbitrary.

My biggest problem with using the CPI is that it doesn't keep standard of living constant. It adopts an approach which they call hedonic quality adjustment. Which attempts to account for situations like TVs got cheaper but better and the overwhelming majority of consumers still purchasing them.

It does not, however, effectively take the level of luxury in 1950 and keep it constant - it adjusts, based on what people are purchasing.

I think you have this backwards. Hedonic quality adjustments are for trying to increase the accuracy of quality of life measures . If you take the average wage in today's dollars  in 1950, which implicitly implies using hedonic adjustments, and subtract it from today's, you will find a dollar value of the real increase in standard of living.

boarder42

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i think nereo has summed it up pretty well.  we have it way better. so we can stop complaining about how much more it costs now.

Spork

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I think there is a psychological factor that has not yet been mentioned.

Most people in the 1950s had some exposure to the Great Depression.  They either lived through it or they lived with parents that lived through it.

My parents were very young during the depression, but that said: I believe it greatly affected their ways of thinking.  They understood what it was to be devastatingly poor.  Looking back, I think we were pretty well off.  And there were some areas where it was apparent.  (We had a big house, for example.)  But having lived really poor, my parents were really frugal in many ways -- even after they had obviously "made it." 

* rarely ever ate out.  When we did, it was a big deal.  And even then, it would be Luby's cafeteria.
* family vacations were one or less a year.  We always drove.  We never stayed in anything nicer than Holiday Inn.
* there were some rooms in that big ass house that sat unfurnished for years
* bought cars once and ran them into the ground.  (I just sold Dad's 1990 Blazer.)
* to the day dad died, he mostly watched a 13 inch black and white TV with rabbit ears
* never bought into the social scene
* etc.


ender

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I think you have this backwards. Hedonic quality adjustments are for trying to increase the accuracy of quality of life measures . If you take the average wage in today's dollars  in 1950, which implicitly implies using hedonic adjustments, and subtract it from today's, you will find a dollar value of the real increase in standard of living.

This is why I want to avoid CPI entirely - I want to say, "what is the cost in 2016 of living at the standard of living in 1950."

Using CPI (or inflation, calculated from it) implicitly adjusts for quality/standard of living in a way which causes what I think are misleading results. If inflation adjusted wages in 1950 were $50k/year and now are $45k/year, what meaningful conclusions can you draw?

It does not automatically mean our standard of living now is worse for the same income. Making $45k/year in 2016 might actually be a considerably "better life" than $50k (or even higher) inflation-adjusted in 1950.


nereo

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This is why I want to avoid CPI entirely - I want to say, "what is the cost in 2016 of living at the standard of living in 1950."


I think the best way of answering your question then is to approximate (to the best of our abilities given the changes in our culture) what a 'typical' family in 1950 would have.
From my list they would be a 4 person family living in a 1,000sqft home (or slightly smaller) and own at most 1 car.  They wouldn't take any vacations that involved air travel or going more than a few hundred miles from home.  One parent (almost certainly the mother) would stay home and by necessity the father would work until his mid-late 60s.  Adjusting for increases in life expectancy I think it's fair to say that he would have to work into his early 70s today.

Regarding the "other" things that are common today but didn't exist in the 1950s, like cell phones, laptops, digital cameras - that's a much harder distinction. One would have to look at what percentage of a family's income was discretionary spending in the 1950s... FRED shows that real disposable (not discretionary) income has gone up from ~$2k in 1960 to $12.5k in 2015, a 5x increase.  Statistics on discretionary income dating back before the 1990s seem hard to come by, though I expect they've followed similar trends.  As noted food has become a smaller portion of our budget, and tax rates are lower.
I did find that shows we spend roughly the same %  of our budget on "entertainment" in 2003 (about 5%) as we did in 1950 (about 4%) - given that real earnings are just over 2x today what they were in 1950 this is a considerable increase in absolute dollars spent on non-essentials.

samustache

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I think you have this backwards. Hedonic quality adjustments are for trying to increase the accuracy of quality of life measures . If you take the average wage in today's dollars  in 1950, which implicitly implies using hedonic adjustments, and subtract it from today's, you will find a dollar value of the real increase in standard of living.

This is why I want to avoid CPI entirely - I want to say, "what is the cost in 2016 of living at the standard of living in 1950."

Using CPI (or inflation, calculated from it) implicitly adjusts for quality/standard of living in a way which causes what I think are misleading results. If inflation adjusted wages in 1950 were $50k/year and now are $45k/year, what meaningful conclusions can you draw?

It does not automatically mean our standard of living now is worse for the same income. Making $45k/year in 2016 might actually be a considerably "better life" than $50k (or even higher) inflation-adjusted in 1950.

I think if it were the case that we made 50k today and 45k in today's dollars in the 1950s you could safely draw the conclusion that we are worse off in terms of standard of living. I'm not going to look it up but I suspect the average 1950s wage is something like 12000/yr in today's dollars, or less.

Where most of the confusion happens, say with comparisons of household income between today and the 1980s, is that household composition is much different. Does it make sense to compare a 50/50 single person / married split to a 30/70 single/married household split? Not really, and those that do usually have a political bone to pick.

ender

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I think if it were the case that we made 50k today and 45k in today's dollars in the 1950s you could safely draw the conclusion that we are worse off in terms of standard of living. I'm not going to look it up but I suspect the average 1950s wage is something like 12000/yr in today's dollars, or less

See, I don't feel this is true at all.

I think that over the last 65 years the expectations for what is "worse off" has changed dramatically. The reason I started this thread is because I think that if we were to as best possible reproduce the standard of living we had in 1950 (or 70, whatever) that it would be considerably easier to afford now than it was then.

People constantly talk about "stagnant wages" and other stuff like this but I don't think that properly accounts for actual quality of life. Expected quality of life? Sure.  But actual? I don't think so, partially because of how CPI is used to calculate inflation.

Median inflation adjusted income in 1950 was $32,761.88 (using $3300 in 1950).

This pdf has some interesting charts. This one in particular is interesting, here:



Quote
Where most of the confusion happens, say with comparisons of household income between today and the 1980s, is that household composition is much different. Does it make sense to compare a 50/50 single person / married split to a 30/70 single/married household split? Not really, and those that do usually have a political bone to pick.

I'm not convinced this is very compelling. Again, I am purely curious about income required in 2016 to sustain normal a normal-ish lifestyle in 1950.

If anything, I would expect current family composition makes it easier to afford the same standard of living as was present in 1950, because more people are not having children and having them later when they do so.

samustache

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I think if it were the case that we made 50k today and 45k in today's dollars in the 1950s you could safely draw the conclusion that we are worse off in terms of standard of living. I'm not going to look it up but I suspect the average 1950s wage is something like 12000/yr in today's dollars, or less

See, I don't feel this is true at all.

I think that over the last 65 years the expectations for what is "worse off" has changed dramatically. The reason I started this thread is because I think that if we were to as best possible reproduce the standard of living we had in 1950 (or 70, whatever) that it would be considerably easier to afford now than it was then.

People constantly talk about "stagnant wages" and other stuff like this but I don't think that properly accounts for actual quality of life. Expected quality of life? Sure.  But actual? I don't think so, partially because of how CPI is used to calculate inflation.

Median inflation adjusted income in 1950 was $32,761.88 (using $3300 in 1950).

This pdf has some interesting charts. This one in particular is interesting, here:



Quote
Where most of the confusion happens, say with comparisons of household income between today and the 1980s, is that household composition is much different. Does it make sense to compare a 50/50 single person / married split to a 30/70 single/married household split? Not really, and those that do usually have a political bone to pick.

I'm not convinced this is very compelling. Again, I am purely curious about income required in 2016 to sustain normal a normal-ish lifestyle in 1950.

If anything, I would expect current family composition makes it easier to afford the same standard of living as was present in 1950, because more people are not having children and having them later when they do so.

Everything you're saying seems to indicate that you like hedonic adjustments, you just don't think there's enough of it or you would do it differently :)