History

Barbie Dolls and Women’s Wages

Jeremy Horpedahl5 Comments

I was reading “The Ultimate Guide to Barbie” the other day, and I noticed an interesting piece of data towards the end of the magazine: the original Barbie doll in 1959 retailed for $3. Today, according to the magazine, a Barbie costs around $14-19. And they further told us that adjusted for inflation, that $3 original Barbie is about $24 today.

I’m not sure exactly where they got that number. Using the BLS CPI tool, it’s more like $31.50. And while I appreciate the attempt to give us historical context, I think for the typical reader will still be a bit perplexed. What does it mean to say $3 in 1959 is equal to $24 (or $31.50) today? Well, it means that the price of Barbie dolls has risen more slowly than other goods and services (quality adjusted). But I think we can do better on the context.

Here’s my best attempt to give context:

The chart shows the number of minutes of work that the median woman would need to work to purchase a Barbie doll for her daughter. In 1959, it took almost 2 hours of work. Today, it takes only about a half hour (I’m using the lower range from the magazine, $14 for a Barbie today, although there are plenty of $10-11 Barbies on Amazon).

Another way of thinking about it: with the same amount of work, a working mother today could buy her daughter 3-4 times as many Barbies as her counterpart in 1959.

I deliberately used median female wages here to make another historical comparison. Women’s earnings have increased much more than men’s since 1959. Back then, median female earnings for full-time, year round workers was only 61% of male earnings. Today, it is close to 85%. True, that’s still not parity. And for those that know the history, you will also know that the closing of that gap has stagnated in recent years. But this is still some major progress during the Barbie Era.

Finally, as I have emphasized before, looking too much at the cost of one product over time has limits. What about other goods and services? A toy, even a well-known brand like Barbie, is a tradable good that can be manufactured anywhere in the world (it looks like Indonesia is where many Barbies are made today). So it wouldn’t be surprising that it has got cheaper over time. But what about all goods and services?

Here’s where inflation adjustments are most useful. Not for individual goods and services, but for looking at incomes over time. How much stuff can a given income purchase compared to the past? That’s what inflation adjustments are for. And this chart shows male and female median earnings in 1959 and 2023, with the 1959 figures adjusted to 2023 dollars using the PCE price index.

When we adjust for changes in all prices, not just Barbies, we can see that median female earnings have roughly doubled between 1959 and 2023. That’s not quite as robust as the “Barbie standard of living,” which allows you to purchase 3-4 times as many dolls. But 2 times as much stuff is pretty good. It’s especially good when compared with male earnings growth, which grew about 44 percent.

It should be obvious here that these are just the raw medians, not controlling for anything like education, experience, or occupational choice. Controlling for those will shrink the gap a bit more. But the gains for women in the labor market since the introduction of Barbie are large and worth celebrating.

Prohibition Reversals

Zachary BartschLeave a comment

We have all heard of the prohibition era. Popularly, it refers to the period from 1920-1933 during which it was illegal to sell, transport, and import alcohol in the US. National prohibition was enacted by the 18th amendment and repealed by the 21st amendment. That’s the basic picture.

But did you know that there were state alcohol prohibitions prior to the national one? In fact, there were 3 major waves of state alcohol prohibitions. The first was in the 1850s, the 2nd was in the 1880s, and then the 3rd preceded the 18th amendment. The image below illustrates the number of states that had statewide dry policies. You can see the first two waves and then the tsunami just prior to 1920.

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Gari Melchers

Zachary Bartsch2 Comments

Who’s your favorite artist? Warhol? Picasso? Van Gogh? Maybe someone much earlier, such as Michelangelo or Titian? Of course, there is something about the style or subjects that you enjoy. But something about the artist’s personal life might also matter to you. Personally, I’m a fan of Hieronymus Bosch, about whom we know little, and William Blake, who had some social and political opinions that would still be considered liberal even today.

Picasso, Dalle, and Warhol were all eccentric. Picasso had multiple girlfriends who didn’t get along, Dalle enjoyed exemplifying surrealism in his dress and behavior, and Warhol was a reclusive hoarder. Their eccentricity increases their allure and fosters an aura of mystique that they are privy to some unknown truths.

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A Dangerous Year For Economists

James Bailey2 Comments

I’m not sure exactly how many notable economists I expect to die in a year, but as of early July I feel like 2023 has already seen a year’s worth:

Robert Lucas, helped re-found macroeconomics with micro-foundations and a focus on growth, influential even as Nobel Prizewinners go

Paul David, economic historian and economics of technology

Stanley Engerman, economic historian, author of the much debated Time on the Cross

Herbert Gintis, game theorist and big picture thinker

Bennet McCallum, macroeconomist and pioneer of nominal GDP targeting and monetary rules

Barkley Rosser, eclectic thinker on chaos, complexity, catastrophe

Luigi Pasinetti, post-Keynesian

Victoria Chick, post-Keynesian

Li Yining, Chinese reformer, helped re-establish the Chinese stock market

Padma Desai, Indian reformer and scholar of planning

Rebecca Blank, labor economist, UW chancellor, acting US Secretary of Commerce

Harry Markowitz, won Nobel for “pioneering work in the theory of financial economics” (finding the risk-return optimal frontier for a portfolio)

Not all the biggest names, but all important enough that I knew of them despite not working in their subfields and, unfortunately, not having met them personally.

Let me know if I’m currently missing anyone, though let’s hope the list doesn’t get much longer by the end of 2023.

Economic Growth in the United States

Jeremy Horpedahl1 Comment

The United States has problems and always had. But the historical record of the United States as an economic powerhouse is unrivaled. The US had a bit of a head start on economic growth, being a direct descendant of the country that really kicked of the Industrial Revolution. But we took that head start and really ran with it, now being by far the highest income large country, and the highest income country that does not derive a significant part of its GDP from fossil fuels or being a tax haven.

The average American has, as best as we are able to measure it, a standard of living that is at least 20 times greater than Americans when this country began.

Source: the indispensable Our World in Data

Competition and Racial Exclusion

Zachary Bartsch1 Comment

There is a narrative about US history that goes like this: “Historical racism was really bad and limited opportunities for blacks. Blacks were not allowed to participate in a set of occupations and other civic life. The absence of blacks from typically higher income occupations reduced the number of competitors in those sectors. Not only did blacks have fewereconomic opportunities, the whites who were insulated from competition earned monopoly rents. Therefore, if blacks were excluded, the whites who were in exclusive sectors earned profits at the expense of blacks.”

The logic is neat. Are there any holes in it?Let’s see.

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The Cost of Raising a Child, Revisited

Jeremy Horpedahl1 Comment

Last week my post was about a new article I have with Scott Winship on the “cost of thriving” today versus 1985. That paper has gotten quite a bit of coverage, including in the Wall Street Journal, which is great but also means you are going to get some pushback. Much of it comes in the form of “it just doesn’t feel like the numbers are right” (see Alex Tabarrok on this point), and that was the conclusion to the WSJ piece too.

Here’s a response of that nature from Mish Talk: “There’s no way a single person is better off today, especially a single parent with two kids based on child tax credits that will not come close to meeting daycare needs.”

He mentions daycare costs, but never comes back to it in the post (it’s mostly about housing costs). Daycare costs are undoubtedly an important cost for families with young children (though since Cass’ COTI is about married couples with one earner, they may not be as relevant). And in the CPI-U, daycare and preschool costs only getting a weight of 0.5%. Surely that’s not reality for the families that actually do pay daycare costs! If only there was an index that applied to the costs of raising children.

In fact, there already is. Since 1960, the USDA has been keeping track of the cost of raising a child. Daycare costs are definitely given much more weight: 16% of the expenditures on children got to child care and education. And much of that USDA index (recently updated by Brookings) looks similar to what COTI includes: housing, food, transportation, health care, education, but also clothing and daycare. I wrote about it in a post last year and compared that cost to various measures of income (including single-earner families and median weekly earnings). But what if we compared it to Oren Cass’ preferred measure of income, males 25 and older working full-time? Here’s the chart.

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The American Family Is Thriving, Even if They Only Have One Male Earner (But Most Don’t)

Jeremy Horpedahl5 Comments

62 weeks. That’s how long the median male worker would need to work in a year to support a family in 2022, according to the calculations of Oren Cass for the American Compass Cost-of-Thriving Index released this year. Not only is 62 weeks longer than the baseline year of 1985 (when it took about 40 weeks, according to COTI), but there is a big problem: there aren’t 62 weeks in year. It is, by this calculation, impossible for a single male earner to support a family.

Is this true? In our new AEI paper, Scott Winship and I strongly disagree. First, we challenge the 62-week figure. With a few reasonable corrections to Cass’ COTI, we show that it is indeed possible for a median male earner to support a family. It takes 42 weeks, not 62 as reported in COTI.

But wait, there’s more. Much more. In our paper, we provide a range of reasonable estimates for how the cost of thriving has changed since 1985. In the COTI calculation, the standard of living for a single-earner family has fallen by 36 percent since 1985. In our most optimistic estimate, the standard of living has risen by 53 percent. The chart below summarizes our various alternative versions of COTI. How do we get such radically different results? Is this all a numbers game?

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“Good Money at the Time”

Jeremy Horpedahl2 Comments

On summer vacation, I recently visited Mount Rushmore. It’s amazing structure, and the story of its construction is as impressive as the monument itself. Much of the story you learn when visiting is the story of its creation. As an economist, of course seeing the following display with wage data got me very excited:

While the sign says that laborers made 30 cents per hour, searching online it appears that 50 cents was more common. More skilled workers, such as assistant sculptors, made $1.50 per hour. These were, as the sign says, “good wages” for that time. In the economy generally, production workers made around 50 cents per hour our as well around that time period, and most of the construction of Rushmore was during the Depression (some of the workers were WPA funded), so having any job, much less one that paid pre-Depression wages, was certainly a good one.

How does this compare to wages today? This is always a tricky question, as I have documented on this blog several times before, but the most straight forward approach (and good first approximation) is a simple CPI inflation adjustment. Using 1929 as the baseline year, when construction was in full swing, 30 cents an hour is roughly $5 today, 50 cents per hour is close to $9, and $1.50 would be about $26.50. That doesn’t sound too bad!

The best comparison I like to use is BLS’s average hourly earnings for private production and non-supervisory workers. Averages aren’t perfect, but this measure excludes management occupations that will be distorting the average. In May 2023, that wage was $28.75 per hour. So the average worker today earns 3-6 times as much per hour as these “good paying jobs” in the late 1920s and the Depression. And, as the Rushmore signage notes, these jobs were seasonal. Their off-season jobs probably paid even less.

The wage of the assistant sculptor does compare well with average wages today, but that pay was unusual for the time and was likely a highly skilled worker. The only record I can find of anyone making that much at Rushmore was Lincoln Borglum, the son of the main sculptor Gutzon Borglum. Lincoln oversaw the completion of the project after Gutzon’s death, and it was only in later years on the project that his pay was increased to $1.50 per hour.

For the typical laborer on Rushmore, having a good job was indeed good to have, but the wages pale in comparison to a typical worker today.

You Cannot Cut Nominal Wages: Weavers in 1738

Joy BuchananLeave a comment

I’m reading The Fabric of Civilization (see my AdamSmithWorks on specialization). This is a fascinating story about cloth and markets:

In November 1738, clothier Henry Coulthurst informed weavers that he was cutting their piecework rates and would henceforth pay them in goods rather than cash. Needless to say, they were upset. Food prices were rising, and lower wages meant hunger and want.

Over three days in December, the weavers rioted. They smashed Coulthurst’s mill, wrecked his home, and “drank, carried out, and spilt, all the Beer, Wine and Brandy in the cellars.” They returned the following day to demolish Coulthurst’s house…

Wow. Our paper on cutting nominal wages is called “If Wages Fell During a Recession” We ran an experiment in which workers could retaliate if they experienced a nominal wage cut. They did! They couldn’t smash their employer’s house, but some of the slighted workers dropped their effort level down to the minimum level which meant that their employer made no more money in the experiment.

In my talk at IUE (show notes here and YouTube video), I connect the wage cut paper to another experiment on beliefs. One wonders, considering how serious the consequences turned out to be for Henry Coulthurst, why he was not able to anticipate the backlash against wage cuts. Being wrong was costly for him.

People are not always good at appreciating how strongly others have become attached to their own reference points. That’s why the paper on beliefs is called “My Reference Point, Not Yours“