YOUNG AMERICANS: LUCKIEST GENERATION IN HISTORY
March 19, 2009
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.
Mark J. Perry, a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan, updated 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 four items in 1949: Typewriter: Smith-Corona, $84; Argus 21 35mm Camera, $52; Silvertone FM-AM Table Radio, $33; Silvertone 3-Speed Phonograph, $25; Total: $194.
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.
- This would be enough to purchase the following 28 items: Dell Laptop Computer, $549; HP Color Ink Printer, Scanner, Copier, $99; Canon 8.0 Mega Pixel Camera, $99; Portable GPS System, $89; 32 inch LCD HDTV, $397; 8GB iPod Nano, $149; GE 1.1 cu ft. Microwave, $69; Haier 4.1 Cu. Ft. Refrigerator/Freezer, $239; Toshiba DVD/VCR Combo, $78; RCA 5-Disc DVD Home Theater System, $174; Uniden Cordless Phone, $27; RCA AM/FM Stereo CD Boombox, $29; HP 10bII Financial Calculator, $30; Camcorder, $149; Cusinart Blender, $99; KitchenAid Toaster, $50; Oster Rice Cooker, $40; Rival Slow Cooker, $40; Cuisinart Waffle Maker, $30; Breadmaker, $60; Oster Blender, $33; Sony Playstation 2 Console, $150; Nintendo - Nintendo DSi (Blue), $170; Weslo - Pursuit 360 R Exercise Bike, $200; Frigidaire - 6,000 BTU Window Air Conditioner, $180; Honeywell - Tower Air Purifier, $100; Hoover - Tempo Widepath Upright Vacuum, $75; Philips Sonicare Power Toothbrush, $100; Total: $3,504.
What a difference 60 years of free market capitalism makes, says 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, says Cox.
Source: Mark Perry, "Young Americans: Luckiest Generation in History," Carpe Diem, Mark J. Perry's Blog for Economics and Finance, March 13, 2009; and W. Michael Cox (Federal Reserve Bank of Dallas), "Capitalism's Many Benefits Create 'Luckiest Generation,'" Investor's Business Daily, October 2, 2000.
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