Measuring Worth, $1 at a Time
Photo by Flickr user borman818
Paul Solman answers questions from the NewsHour audience on business and economic news here on his Making Sen$e page. Here is Thursday’s query:
Question: Exactly how much is $1 worth today?
Paul Solman: It depends on what conversion method you use — and the year, of course. Wednesday’s $1 is worth almost exactly $1; last year’s dollar is worth about 98 cents, and so on.
The website MeasuringWorth.com provides a variety of conversion options such as “real price,” “labor value” and “economic power.” Click on each and the definition appears. “Real price,” for example “is measured using the relative cost of a (fixed over time) bundle of goods and services such as food, shelter, clothing, etc., that an average household would buy. This bundle does not change over time. This measure uses the CPI.”
Go to the site, fill in the initial year (though not before 1774), the initial amount – in this case, $1 — and the desired year, which would be 2011, the latest for which the data have been updated. It’s an instructive exercise.
In 1774, it turns out, $1 would buy you about $29 worth of the same basket of goods today. But $1 worth of wages for an unskilled worker in 1774 is equal to more than $500 in unskilled wages today. This is because a constant basket of goods has become relatively cheaper, relative to income. This is why an unskilled worker is so much better off today, materially speaking, than he or she was 238 years ago.