Prices, Wages, InflationWe all say, "Everything is more expensive than it used to be". This paper shows how much more expensive things are and compares purchase prices with the UK national average wage.
Question: If an article cost £10.00 20 years ago (1987), on average how much would the same article cost today (2007)?
Answer: Nearly double - £19.44
Illustrating Price Inflation, here are figures showing the cost today of an item costing £10.00 in a range of past years:
Year / Price in 2007:1900 £847.00
The figures shown (the so-called Real Terms) are averages; some items have increased in price less than the average; for example, electronic goods, clothing made in low cost labour countries such as China or India. The price of some items has increased more than the average, mostly items or services which are labour intensive.
The Price Inflation Rate over the last 50 years averaged 5.9% a year. The rate in the 1970s was well above average. The rate over the last 10 years only was 2.6% a year.
The price of goods and services has gone up every year but the amount of money people earn has gone up too.
The average weekly wage for a male manual worker 50 years ago (1957) was £12.10 per week. 20 years ago (1987) it was £186 per week. Now, in 2007, the average male manual worker's weekly wage is £457 per week.
Illustrating Wage Inflation, here are the average weekly wage amounts for male manual workers from 1938 (the year before the start of WWII) up till 2007:
Year / Average Weekly Wage1938 £3.50
The average Wage Inflation Rate over the last 50 years was 7.5% a year. Over the last 10 years only, the rate was 3.9%.
BETTER OFF? OR WORSE OFF?
Both prices and wages have gone up, but have wages gone up as much as prices, or less? Are people better off or worse off now than were their counter parts in the past? And by how much?
In 1938 the average weekly wage of a male manual worker was £3.50.
Let us say he spent that £3.50 on family necessities. What would the price of those purchases be today, in 2007?
The average weekly wages of a manual worker today is £457.
Therefore, the wages of worker of today could buy the same items as his counterpart of 1938 did and there would be £301 left over!
Records show that prices have gone up but wages have gone up much more than prices. The wage earner of today is very much better off than the wage earner of 1938. From a 'Cost of Living' aspect, the proportion of a week's wages taken up by an item purchased today is much less than it was for the purchase of the same item in the past - in that sense, goods and services are less expensive today than they were at any time in the past. It seems that Prime Minister Harold Macmillan's famous remark in 1957 "...you've never had it so good..." still applies today!
In contrast, the records also show that people on fixed incomes are very much worse off.
Here are the figures showing how much better off the manual workers of today are than were their counterparts of the past.
Year / Actual Wages / at 2007 Value / Actual 2007 Wages / Difference
1938 £3.50 £156.00 £457.00 £301.00
1940 £4.60 £178.00 £457.00 £279.00
1950 £7.20 £170.00 £457.00 £287.00
1960 £14.10 £227.00 £457.00 £230.00
1970 £26.80 £284 .00 £457.00 £173.00
1980 £112.00 £336.00 £457.00 £121.00
1990 £240.00 £384.00 £457.00 £73.00
2000 £364.00 £400.00 £457.00 £57.00
Source: UK Office of National Statistics. All figures are in pounds sterling