I think the CPI or inflation index disparity mentioned, and the wage differential disparity to the CPI, disregarding tax, can be explained by lifestyle and what drives the CPI index.
The only way to establish an inflation index is to average the price of things over the years. So this begs the question -- what do the indexers average -- and do the people buy, on the average, an average of all these things in total?
For instance, let's take automobiles. Jumping ahead a scant 5 years, the average price of a Model A Ford in 1934 was 475 dollars. The idea Henry Ford had was that an ordinary, then lowly paid labourer at the Ford plant, could afford a car. In Canada the CIBC began to do a daring thing, instituting chattel mortgage on rolling stock so citizens did not have to pay cash. Other banks followed suit and America's love affair with the automobile began.
Today the Model A would cost only 6289.00 2001 dollars at the 13.24 multiple of prices from 1934 to today. I don't know any car that sells for that. Even motorcycles cost more. We pay 5 to times more for cars today even considering the inflation first. So cars and wages are about at an even 30 times ratio, but taxes today leave us behind again.
Energy? We pay lots of tax for gas they did not pay then. 1934 Oil is 13.92 a barrel in 2001 dollars. That is fairly high, but they did not have the same tax at the gas pump. Gas was 18 cents a gallon in their currency then. To buy a car you could borrow money at cheaper rates than today.
So we have to ask, does the CPI (Consumer Price Index), a dry figure, really represent the difference in affordability of the average man's lifestyle with regard to today? You have to ignore the so called "improvement" in goods today. (The idea that we can afford to have more technology and cheaper today.) If we can so what? What people needed or could have then is the key. If they could afford the perceived needs and wants then, then the life was economically comparable. Plus, we have to look at the "apples and oranges" concept a bit vis a vis quality. Where they getting more for their money for goods? Quality of goods has NOT increased since 1934. In most cases planned obsolescence, rearing its head back in the 20's, is firmly in place, and quality is markedly lower today. Goods have to be replaced more often. They are not designed to last. A man's suit in 1934 was expected to last 20 years. You are lucky to get 3 years today. Brass fittings were derigeur on machinery of the age, today we get breakable plastic, no extra charge. Cost is not always the main issue.
What is needed is an averge man's lifestyle index that takes into account the expected life then and its true cost. We know the average man invested back then, at least as much as he did 30 years later. He owned the technology of the day as it became affordable. He often owned a house and an auto. But to say he should have or desired to have so much "disposable" income is perhaps misleading. What creates disposable income and is it a fact as it is calculated today? The average wage earner I knew of in the 1980's who made let' say 45,000 a year, had to work for the government for one thing, or was in a union with a trade, and could barely afford his house, car, TV and phone bill. He was in deficit at the end of most years. This to equates to negative disposable income at the high end of the wage class.
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