Wealth
Published by Rick on Thursday, September 04, 2008.
As a society, we are fabulously wealthy. In the hundred years from 1907 to 2007, inflation, measured by the Retail Price Index (or its equivalent from before the Retail Price Index), has increased prices by about 70 times. That is to say, £100 of domestic goods bought in 1907 would now cost about £7,000.
Set against that, wages have increased 380 times – an annual wage of £100 in 1907 is now equivalent to £38,000.
So, for equivalent wages we can now buy over five times more than a century ago. Although this sounds excessive, it is the equivalent of wages increasing faster than prices by about 1.6% each year – almost so small as not to be noticeable year-to-year, but compounded over a century gives the dramatic result.
In actual fact, in a properly running capitalist society there is constant competitive pressure to at least keep prices low, if not to reduce them, so the benefit has come partly from increases in wages and partly from real prices falling. Low or falling prices sometimes manifest themselves as improvements in value-for-money: for example, a generation ago, a heater was an optional extra in many cars, whereas air-conditioning now comes as standard in equivalent models.
In Oscar Wilde’s comic play, The Importance of Being Ernest, first staged in 1895, Lady Bracknell asks Jack Worthing if Cecily Cardew has any little fortune. Jack’s reply is, “Oh! about a hundred and thirty thousand pounds in the Funds.” In the 113 years since then, with inflation, this would be about £9.2 million. No wonder that Lady Bracknell goes on to comment, “A hundred and thirty thousand pounds! … Miss Cardew seems to me a most attractive young lady.”
Set against that, wages have increased 380 times – an annual wage of £100 in 1907 is now equivalent to £38,000.
So, for equivalent wages we can now buy over five times more than a century ago. Although this sounds excessive, it is the equivalent of wages increasing faster than prices by about 1.6% each year – almost so small as not to be noticeable year-to-year, but compounded over a century gives the dramatic result.
In actual fact, in a properly running capitalist society there is constant competitive pressure to at least keep prices low, if not to reduce them, so the benefit has come partly from increases in wages and partly from real prices falling. Low or falling prices sometimes manifest themselves as improvements in value-for-money: for example, a generation ago, a heater was an optional extra in many cars, whereas air-conditioning now comes as standard in equivalent models.
In Oscar Wilde’s comic play, The Importance of Being Ernest, first staged in 1895, Lady Bracknell asks Jack Worthing if Cecily Cardew has any little fortune. Jack’s reply is, “Oh! about a hundred and thirty thousand pounds in the Funds.” In the 113 years since then, with inflation, this would be about £9.2 million. No wonder that Lady Bracknell goes on to comment, “A hundred and thirty thousand pounds! … Miss Cardew seems to me a most attractive young lady.”
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