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The ‘good old days’ are now: Home appliances today are cheaper and more energy efficient than ever before
From Mark Perry.
"I haven’t done any
price comparisons lately of the time cost of goods today versus periods
in the past, so here’s one for the summer season on the cost of room
air conditioners — today vs. 1973 (updated from this 2013 CD post).
In
1973, the 8,000 BTU room air conditioner pictured above was advertised
in the Sears Spring/Summer catalog at a price of $216.75. At the average hourly wage in 1973 of $4.15,
the average American would have had to work more than a week — 52.2
hours or 6.5 eight-hour days — to earn enough pre-tax income to purchase
the room air conditioner from Sears.
Fast forward 40 years to 2015. The Kenmore 8,000 BTU room air conditioner
pictured below is available today for $219.99, so the retail price at
Sears has barely changed in more than 40 years, even though the overall
CPI has increased 5.4 times since 1973, and the average hourly wage has
increased 5.1 times. At the current average hourly wage of $21.01, the
work time necessary to purchase today’s Sears 8,000 BTU room air
conditioner is only 10.4 hours, or a little more than a day of work.
MP:
Measured in what is ultimately most important — our time — the cost of a
standard room air conditioner at Sears has fallen by more than 80% over
the last 40 years, bringing the cost of what was likely a high-priced
luxury item in 1973 down to a price that is affordable by even
low-income Americans today. If room air conditioners had increased in
price since 1973 at the rate of inflation, today they would cost almost
$1,200, more than five times the actual cost today of only $220, and
would still be a luxury item not easily affordable by the lower- and
middle-class Americans.
But it gets even better, because today’s
appliances are so much more energy-efficient than in the past,
generating additional savings for consumers today from the
lower operating costs of appliances like air conditioners. In the 32
year period between 1981 and 2013, the energy efficiency of room air conditioners increased by more than 46%
— and the energy efficiency of other household appliances increased
even more — as high as a 217% increase in the energy efficiency of
refrigerators.
Bottom Line: Today’s affordable
and energy-efficient household appliances like room air conditioners are
part of the “miracle of manufacturing,” which continues to deliver
cheaper and better goods to American consumers year after year, which
translates into a higher standard of living for all Americans,
especially for lower and middle-income households. If we wanted to
identify a “golden era” of prosperity for middle-class America based on
the affordability of common household appliances like room air
conditioners, today’s consumers are many times better off than the
consumers of any past decade, including the 1950s that Paul Krugman and others wax so nostalgic about.
The significant reduction in the cost of purchasing and operating
common household appliances like room air conditioners help us
understand that the “good old days” are now!
And it’s not just air
conditioners that have gotten cheaper over time. The chart below shows
that household spending on “life’s basics” – food, clothing and shelter –
has steadily declined over time as a share of after-tax personal
income, from more than 50% in the 1930s and 1940s, to more than 40% for
most of the 1970s when it took more than a week of work to buy the air
conditioner featured above, to only about 32% in recent years. The
gradual increase in our standard of living thanks to the falling prices
(measured in both inflation-adjusted dollars and in the “time cost”) of
appliances, food, clothing, cars and household appliances is an
under-appreciated and under-reported benefit of the “miracle and magic
of the marketplace.” As Larry Kudlow always reminds us “Free market
capitalism is the best path to prosperity.”
"
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