Cost of Living and Wages
(Topics: The Economy | Back to Home)
You hear this phrase in the news or when thinking about moving: the cost of living. That is, how much money do you must spend to live a reasonably comfortable life. We understand what this is: we need to be able to cover your housing, transportation, food, clothing, utilities, and miscellaneous expenses. According to the government, that cost is about $5,100 a month.
Obviously that is an average. If you're a single person, it's lower. If you are supporting loved ones or children, it's higher. But the point is that we all have to spend a certain amount of money each month. That is the cost of living.
Trends in the Cost of Living
Has living gotten more expensive in America? Basically, yes. But at the same time, life has also gotten better. We have access to a wider variety of food, safer cars, and better healthcare.
But still, we all need to spend more money to be comfortable than we did only a few years ago.
But that doesn't tell you much, because of inflation. Because the factory that is our economy is always trying to grow, the value of a dollar goes down over time. Money isn't worth what it is used to be, which means things cost more and we get paid more at the same time.
However, wages haven't grown very much over time for most Americans. The following chart (from the Congressional Research Service) has five lines: one for each 20% segment of the population by income. Only one of the lines has made much of a change.
That means 60% of all Americans are making about what 60% of Americans made fifty years ago. The upper middle class is making a bit more. And the richest 20% has more than doubled their income.
This is what's going on with cost of living and wages. To summarize:
- Living a reasonably comfortable life in America has continued to get more expensive
- The definition of a reasonably comfortable life has changed; we now feel that most everyone will have Internet access, and if they own a car it will have airbags. This is part of the reason cost of living has gone up.
- Wages have increased dramatically, but when taking inflation into account they