Op-ed published exclusively on our website.
As you read these lines, you’ve surely finished your Christmas shopping. If not, good luck in the coming days! While you were out there, did you have the impression that “everything is more expensive” or that “your purchasing power is stagnating,” as we often hear in conversation and in the media?
In fact, just about everything is less expensive today, compared to three decades ago.
We compared the prices in 2018 of a basket of goods that could be offered today as Christmas gifts with the prices of these same goods back in 1984, using a Consumers Distributing catalogue from back then and the Amazon.ca website. To properly measure purchasing power, we also took into account the average hourly wage of Canadian workers in 1984 with the average wage in 2018.
The goal: to establish how much time an individual had to work back in the day to pay for a video game console or a television, for example, and how much time an individual has to work today to purchase the same good, or its closest equivalent. The comparison is not intended to be strictly scientific, but it is nonetheless illuminating.
Time is money
For example, to buy a 20-inch cathode-ray tube colour television, a worker had to work 49 hours in 1984, or more than a full workweek. In 2018, a worker could buy a 20-inch flat screen colour television by spending just nine hours on the job, barely more than a single day of work.
A cordless telephone for the home required almost ten hours of work in 1984. In 2018, just two hours and a quarter would suffice for a similar, but superior, product. In the same vein, a Sharp scientific calculator cost a worker in 1984, in terms of hours worked, nearly five times more than a worker in 2018. And the “scientific” calculator back then had 61 functions… versus 640 for today’s version!
Even for consumption goods without a significant technological component, today’s shopper stands to save, if somewhat less spectacularly. For instance, a small freezer (4 ft3) required 25 hours of work in 1984, compared to 16 hours today. The hours of work needed to buy a circular saw (4.5 hours in 1984 versus 2.5 hours in 2018) or an iron (3.5 hours in 1984 versus 2 hours in 2018) have also fallen substantially. For certain goods, however, the cost in hours worked today is almost the same as it was in 1984. For example, a 335-piece Lego set cost 2.9 hours of work in 1984, while another set, with the same number of pieces, costs 2.7 hours of work today. Thus, by reconstructing a basket of goods that could be found underneath a family’s Christmas tree, we can see that the goods in the 2018 basket cost around half of what those from 1984 cost (47% less on average) measured in hours of work.
Moreover, in the great majority of cases, today’s goods are of higher quality and have more functions. Most also use less energy and are less polluting than their equivalent predecessors.
Why are living standards rising?
If the cost of typical consumer goods in terms of hours worked has tended to fall over time, it’s mainly because of the general increase in productivity. Indeed, capital investments over the years on the part of businesses, as well as technological innovation, lead to large increases in the productivity of both machines and workers, with the latter having better tools to work with.
To this must be added the growth of human capital, namely the knowledge and skills that workers acquire through education, training, and experience, which raise the value of work, and as a result, the average wage. The competition and efficiency gains entailed by international trade have also contributed to the phenomenon.
We sometimes have the impression that the average worker has trouble making ends meet, and this is true in some regards: The price of housing, for example, can be a challenge in certain cities. This should not blind us, though, to the fact that in many regards, this worker has never been richer.
David Descôteaux is a Public Policy Analyst at the Montreal Economic Institute. He is the author of “Christmas Costs Less Than It Used To” and the views reflected in this op-ed are his own.