Reducing one's adult life to two lines on a chart can be, uhm, interesting. Those big income spikes of promotion or back-pay sure disappear when the effects of inflation are considered.
https://picasaweb.google.com/lh/photo/l ... directlink
30 years of inflation
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George the original one
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Robert Muir
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@Jacson, the dark green line is the amount of the actual amount of dollars per year that George earned (in economics, these would be called nominal dollars) while the light green line is purportedly the real value of the dollars he is earning if inflation were taken into consideration.
For example, according to the Bureau of Labor Statistics, the value of $1 in 2011 would be $0.37 in 1980, $0.78 in 2000, and $0.88 in 2005. The last three years or so has been fairly static, so I agree with m741 that the slopes appear to be a bit off, but it depends on how much George made (relatively speaking) in the last decade. Like m741, I'd be interested to hear the methodology that George used to make up his chart.
For example, according to the Bureau of Labor Statistics, the value of $1 in 2011 would be $0.37 in 1980, $0.78 in 2000, and $0.88 in 2005. The last three years or so has been fairly static, so I agree with m741 that the slopes appear to be a bit off, but it depends on how much George made (relatively speaking) in the last decade. Like m741, I'd be interested to hear the methodology that George used to make up his chart.
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George the original one
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Yes, nominal dollars is the dark green line (couldn't remember what that term was...).
I used the Bureau of Labor Statistics' calculator:
http://www.bls.gov/data/inflation_calculator.htm
So $1,000 in 2010 has the same buying power as $377.88 had in 1980 and you can use 0.37788 as a multiplier for any amount of 2010 money to figure out what it was worth in 1980. I thus found the multipliers to convert to 1980 dollars for each previous year.
1991 was the first year of fulltime employment for me and I've held the same job classification since 1994.
I used the Bureau of Labor Statistics' calculator:
http://www.bls.gov/data/inflation_calculator.htm
So $1,000 in 2010 has the same buying power as $377.88 had in 1980 and you can use 0.37788 as a multiplier for any amount of 2010 money to figure out what it was worth in 1980. I thus found the multipliers to convert to 1980 dollars for each previous year.
1991 was the first year of fulltime employment for me and I've held the same job classification since 1994.
One of the great things about this forum is that whenever my husband calls me a numbers nerd, I can point to someone else here who's even better at it than I am. 
I'm off to do this myself, even though I already know that my wage will be lucky to keep up with inflation. (Something I hope to remedy soon with a new job.)
I'm off to do this myself, even though I already know that my wage will be lucky to keep up with inflation. (Something I hope to remedy soon with a new job.)
Wow! This is depressing how much inflation has destroyed the value of money! I only make about 15 thousand dollars before taxes and health insurance is taken out in 1980 dollars! And, I would only actually bring home about $900 a month! We could live on that but it would be tight and not allow me to save a decent enough cushion for emergencies if I had to make that nominal amount today!
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anastrophe
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I haven't got a cost of living since the crash... Because there is no inflation! Jeez, don't you guys watch TV or read any govt reports? There is only deflation, as has been repeated so very many times.
Meanwhile back in reality:
http://finviz.com/futures_performance.ashx?v=16
Meanwhile back in reality:
http://finviz.com/futures_performance.ashx?v=16
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George the original one
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I don't mean this to sound rude, but if you have held the same job classification since 1994, is it reasonable to expect a rise in real wages? When you say "same job classification" I interpret that as meaning that you are doing basically the same thing now as you were doing in 1994, with no increase in responsibility, value to the organization, etc. etc. etc. Forgive me if this interpretation is off base and "same job classification" means something different for your job. I would only expect to get an increase in my real wage if I had also increased in value to the organization, i.e., by taking another step up their career ladder, taking on more projects, working more hours, and so on. I am not a fan of the trend wages have been taking where they don't even keep up with inflation, but it also doesn't seem that one's real wage should automatically been going up just because you have been working a long time.
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George the original one
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> if you have held the same job classification since
> 1994, is it reasonable to expect a rise in real wages?
I wasn't complaining about a lack of rise in real wage so much as a demonstration that annual COLAs may not keep up with inflation.
> When you say "same job classification" I interpret
> that as meaning that you are doing basically the same
> thing now as you were doing in 1994, with no increase
> in responsibility, value to the organization, etc.
Government work has job classifications. One can take on additional responsibility (or be assigned additional responsibility even if one wasn't seeking it) and have different job duties without changing job classifications. In a bureaucracy, one's value to the organization increases just by knowing what the hell it is that everyone is supposed to be doing... newcomers do not understand the scope of what is going on and often do more damage by attempting organizational changes before they understand what they're tampering with.
My local government has 30+ bureaus, each of which are like independent companies with completely different missions. Sometimes the missions are exactly opposite (e.g. one bureau provides assistance to developers to keep urban decay at bay, but another bureau is responsible for finding affordable housing for those that are displaced by development).
Even within bureaus, there can be a conflict. The water bureau has to make money to provide better/expanded service, but it also has to promote conservation, which can hurt the profits.
> I would only expect to get an increase in my real
> wage if I had also increased in value to the
> organization, i.e., by taking another step up their
> career ladder
Careful with that line of thought... someone might think you believe that everyone who moves up the career ladder are actually worth more. Usually a step or two up the career ladder just means that they've changed organizations.
> 1994, is it reasonable to expect a rise in real wages?
I wasn't complaining about a lack of rise in real wage so much as a demonstration that annual COLAs may not keep up with inflation.
> When you say "same job classification" I interpret
> that as meaning that you are doing basically the same
> thing now as you were doing in 1994, with no increase
> in responsibility, value to the organization, etc.
Government work has job classifications. One can take on additional responsibility (or be assigned additional responsibility even if one wasn't seeking it) and have different job duties without changing job classifications. In a bureaucracy, one's value to the organization increases just by knowing what the hell it is that everyone is supposed to be doing... newcomers do not understand the scope of what is going on and often do more damage by attempting organizational changes before they understand what they're tampering with.
My local government has 30+ bureaus, each of which are like independent companies with completely different missions. Sometimes the missions are exactly opposite (e.g. one bureau provides assistance to developers to keep urban decay at bay, but another bureau is responsible for finding affordable housing for those that are displaced by development).
Even within bureaus, there can be a conflict. The water bureau has to make money to provide better/expanded service, but it also has to promote conservation, which can hurt the profits.
> I would only expect to get an increase in my real
> wage if I had also increased in value to the
> organization, i.e., by taking another step up their
> career ladder
Careful with that line of thought... someone might think you believe that everyone who moves up the career ladder are actually worth more. Usually a step or two up the career ladder just means that they've changed organizations.
Be not (too) afraid of inflation!
I am keeping my yearly expenditures now for 18/19 years. (I lived in that period in The Netherlands, in UK and in Austria, but let's say inflation is about the same in Europe as in US). My total expenditures in 2011 are only 60 % of those in 1993. That is not accidental, but over the whole period my (median) expenditures are degressing, inspite of the (enormous) inflation over this period!!
My analysis of this fenomenon is: the constant aplying of "ERE" principals is much more of influence on the financial needs (of a family of two) than (even a fierce) inflation.
Just one example due to choosing a (much) smaller house (and in winter even a more smaller) my cost of heating is only 10% now than in 1993.
I am keeping my yearly expenditures now for 18/19 years. (I lived in that period in The Netherlands, in UK and in Austria, but let's say inflation is about the same in Europe as in US). My total expenditures in 2011 are only 60 % of those in 1993. That is not accidental, but over the whole period my (median) expenditures are degressing, inspite of the (enormous) inflation over this period!!
My analysis of this fenomenon is: the constant aplying of "ERE" principals is much more of influence on the financial needs (of a family of two) than (even a fierce) inflation.
Just one example due to choosing a (much) smaller house (and in winter even a more smaller) my cost of heating is only 10% now than in 1993.
@J_: that is interesting that you've kept 19 years worth of data! I agree with you that applying ERE you can overcome any inflation we've seen so far. So far.
I think the natural tendency of technology/business lower cost of production helps hide the true extent of inflation. Unfortunately quality of product has also suffered with the march of technology and globalization.
I think the natural tendency of technology/business lower cost of production helps hide the true extent of inflation. Unfortunately quality of product has also suffered with the march of technology and globalization.
One strategy to reduce the impact of inflation could be to "inflation-proof" your expenses as much as possible:
- Buying a house instead of renting
- Vegetable garden
- Solar panels
- Smaller car
Etc. Reducing or fixing your future expenses by making an investment today. I try to go through all my expense categories and see where this can be applied.
- Buying a house instead of renting
- Vegetable garden
- Solar panels
- Smaller car
Etc. Reducing or fixing your future expenses by making an investment today. I try to go through all my expense categories and see where this can be applied.
"While the weak breaks under pressure, the strong improves from stress, the magnificent is rather independent from the outside world. [...] But it was the Stoics, perhaps the earliest antecedent to these systems of thought, who brought to us the notion of total robustness, the independence from anything external, as the condition to aspire to in order for one to attain the level of a Stoic sage. One enters a state of aspiring after nothing, fearing no deterioration of one’s condition; seeking no improvement to it, neither fragile nor antifragile, immune from external circumstances, focusing on the labor not the fruits of the labor, on acts and not their results. It is a merger with the cosmos and the laws of nature: death is a product of birth and comes with it."
-- Nassim Taleb, from the prologue to "Antifragility"
In short, antifragility benefits from spikes in inflation as well as troughs of deflation. It is possible to prepare for both by either being a) incredibly rich, or b) incredibly flexible, w/ minimal needs. In between those, you have the possibly robust position of one who has large savings, but also relatively rigid needs and expectations of returns and SWRs. And to the far end, a very fragile individual who owns nothing, is beholden to a corporate paycheck, and lives his life according to the consumer frenzy of the modern world.
-- Nassim Taleb, from the prologue to "Antifragility"
In short, antifragility benefits from spikes in inflation as well as troughs of deflation. It is possible to prepare for both by either being a) incredibly rich, or b) incredibly flexible, w/ minimal needs. In between those, you have the possibly robust position of one who has large savings, but also relatively rigid needs and expectations of returns and SWRs. And to the far end, a very fragile individual who owns nothing, is beholden to a corporate paycheck, and lives his life according to the consumer frenzy of the modern world.
Real wages have been stagnant for many years. It may be that the returns to labour decreased as a result of globalization and the mechanization of production. Conversely, the returns to capital improved dramatically over the past 30 years.
One thing to be careful (IMO) about going forward is extrapolation from the past. It will be more likely that we face a period of deflation before any meaningful inflation returns.
One thing to be careful (IMO) about going forward is extrapolation from the past. It will be more likely that we face a period of deflation before any meaningful inflation returns.