Good Old Days - Part 2

Last October I wrote a blog called “Good Old Days” in deference to my father-in-law’s propensity to look nostalgically at his boyhood in the 20’s and 30’s. My main point was that during his lifetime, we have become voracious consumers of a very different sort.

Yesterday I read a tweet from AARP’s LifeTuner site that confirmed this perspective. It referenced an article in the Atlantic summarizing information complied by the Bureau of Labor Statistics. The data goes back to the turn of the century and shows how consumer incomes were spent. The dramatic results are illustrated in the chart above. American used to spend more than 50% of their incomes on food and clothing - two necessities. Add in the third necessity, housing and you account for 80%. Not much left over for other stuff. This is an era when 22% of families report income from children and only 9% from wives and half of American workers are on the farm.

By the 1950’s, the cost of food and clothing declined as efficiencies in agriculture and manufacturing drove down the costs of these goods. But the essentials, food clothing and housing, still took 70% of the household income since spending on housing increased. There is an increase in the “Other” category from 13% to 21% mostly reflected in increased spending on transportation as fewer workers lived on the farm and more and more people commuted to a workplace.

Buy the end of the century things the household budget was completely transformed. Essentials now took up just 50% of household spending with much of the reduction coming from apparel and food. The shift to overseas manufacturing of clothing and other textiles is why apparel only represents 4% of household spending today even though we all have much larger wardrobes than our grandparents did. Increased efficiencies and government policies pushed food cost down to just 13% of spending. Some would argue that the availability of cheap, processed food is the source of America’s obesity epidemic. Now the biggest piece of our spending pie is the “other” category and ½ of that is transportation related. The ubiquitousness of car ownership is the chief reason. We Americans love our cars, our highways, and our freedom to make our own schedules.

My father-in-law likes to point out that life was simpler in the “good old days.” These BLS statistics back him up. After all if 80% of what you make is used to provide food, clothing and a roof over your head, there is not much left for the other stuff.

Fortunately, we have something that's very close to an aggregate receipt for the American family going back more than a century: "100 Years of U.S. Consumer Spending", a report from the Bureau of Labor Statistics.

    -Derek Thompson - The Atlantic

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