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The Lie of “Real Wages”

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There are many sites that condemn the lack of increase in real wages since about 1975 — the Department of Labor lists the facts. They’ll say that your dad/mother had a better standard of living than you do. This Radio Shack ad from 1991 clearly shows what a poor measure real wages (as calculated) are. The article is really about how much technology has converged on the smart phone — in this case an iPhone. But be sure to look at the numbers toward the end:

The cost of all the items the iPhone replaces in the ad is over $5,100.00 in today’s money. You can get an unsubsidized iPhone 5s for $800.00. That means the real cost has dropped by a factor of 5.

That comparison doesn’t even take into account how much better the iPhone is at just about everything compared to the items in the ad. Those relics might as well be in the Flintstone’s house:

  • The personal stereo and clock radio — if you insist on AM/FM radio, then the iPhone comes up short, but there are many radio stations available through their own apps or others, and then there are services like Pandora and iTunes radio. The clock radio probably only supports one alarm, while the iPhone can have many, and also has a calendar.
  • There are calculator apps on the iPhone that do things no calculator in 1991 could do.
  • The Tandy 1000 did not have a million apps available for it, didn’t play multimedia, and was in pretty much every way possible inferior to the iPhone, even as a general computing device.
  • A VHS camcorder records maybe an hour in less-than-NTSC quality. The iPhone records in 1080p, can store many hours of video, lasts for hours on a charge, and lets you edit your videos as well.
  • As a cell phone, the iPhone has incredibly better signal and coverage than any phone available in 1991. It offers more talk time, and more standby time. It works internationally, often transparently and with no prior setup. It costs less to use in general, and (if you’re on T-Mobile at least) offers unlimited calling, texts, and data. Not to mention easy conference calls and countless other features.
  • The iPhone makes a portable CD player look like that bird playing a stone record on the Flintstones.

In addition to the above superior features, there are all the communications options on the iPhone. In 1991 the internet was practically unknown, and the growth of text messaging was in the future. Instagram, Facebook, Twitter, SnapChat, and more — all were unheard of in an era when AOL and Compuserve were the main means of communication.

For many, the iPhone is their only phone, and can possibly be their TV and cable service as well. And all of this fits easily in your pocket or purse. It’s more portable than even the pocket radio. It has better battery life, and is rechargeable. It has no moving parts, and will generally survive a fall that would break most of the items listed in the ad.

There’s simply no comparison: the iPhone costs 1/5 as much, and does so much more than anyone in 1991 would have thought possible, it might as well be magic.

Times are hard. It’s unfortunate that measurements of things like real wages give such an imperfect view of what people are really getting for their money.

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One thought on “The Lie of “Real Wages”

  1. LR

    I would like to see a similar analysis for the cost of necessities. You can’t eat an iPhone, nor will it keep you out of the weather, clothe you, or heat your apartment. Clearly, certain kinds of goods which are less important have become far cheaper, but I don’t know about the others.

    A decline in “real wages” affects those who don’t make much in the first place far more than those who can afford stereos, expensive phones, etc.

    Check out this chart of median rents:
    https://sites.google.com/a/wyo.gov/ai/-median-gross-rent-in-2011-inflation-adjusted-dollars
    Note how much difference there is in total cost and percentage variation over time between different locations.

    I wouldn’t call “Real Wages” a lie. Rather it’s an attempt to approximate something very complicated.

    Reply

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