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In 1920, the Internal Revenue Service reports, the average income was $3,269.40 per year.
The averages for males in all States were $36.67 in 1 $37.35 in 1928; for females, $23.40 in 1925 and $24.50 in 1928; and for both sexes, $36.37 in 1925 and $37.05 in 1928.
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- It cost fifty cents to get into the Savoy Ballroom
- A steak sandwich at the Cotton Club cost $1.25
- You could buy a record for $0.39
- A raccoon coat would set you back $39.50
- A console radio was $72.50
- A man’s suit (Coat, Vest, 2 Pr. Pants) was $15.85
Sounds great, huh? All you have to do is get in your time machine with some pocket change and come back with an armload of vintage treasure. Well, it turns out that these prices are quite misleading. To get them into todays’s dollars, believe it or not, you have to multiply them by the whopping figure of: 32.35. That is $1 in 1927 had the same purchasing power as $32.35 in 1998. The Factor would be between 35 and 40 for adjusting costs to 2013
Incentives or not, Ford’s wages were good wages. My dad had a job unloading freight cars that paid about fifty cents a day — and guys would stand in lines for hours to get that kind of work. And — it got worse during the depression when about 35% of the population was unemployed.
For the average guy, times were tough and things like dancing and movies were expensive luxuries. Throughout the depression, however, folks went out in droves. To get an idea of how much they sacrificed, we decided to take a look at price changes and put 1927 into 1998 dollars.
There are three major factors that have gotten us to where we are: Taxation, Revaluation of Gold, and “Inflation”. Take a few seconds and look at some math and economics.
1.Taxation: You buy things with money that is left over after you pay your taxes. In 1927, income tax was about 1% on incomes over $10,000. There was no FICA, city, or state income taxes and there was no sales tax; there were special purpose taxes and fees for lots of things. Today, the federal Income tax rate is about 32%, FICA eats up about 7.5%, City and State taxes take 9% and sales taxes are about 5-8%. Allowing for deductions and other niceties, the average family in 1927 got to keep about 92 cents for every dollar of income. In 1998, the same family gets to keep about 46% of what it earns. Thus, a dollar of income in 1927 has double the purchasing power of a dollar of income in 1998 because you got to keep just about twice as much.
2.Revaluation of Gold: In 1933, by executive order, President Roosevelt raised the price of gold from about $16 per ounce to about $25.00. Thus in 1933, every ounce of gold in Fort Knox could support 1.56 (=25/16) times the number of dollars that it could in 1927. Guess what? Uncle Sam, being on the Gold Standard, printed these extra dollars and put them into circulation.
This was good news for everyone except those who held gold-backed bonds, since they made their investment in dollars expecting to get a certain number of ounces of gold in the future; with one stroke of the pen, they got 64% of what they thought they were going to get. But, as the saying went at the time, that was a small number of Plutocrats who probably caused the depression anyway. Whatever they were or did, they were no fools; by 1933 you needed $1.56 to buy what $1.00 had purchased in 1927.
3.Inflation: The Department of Labor hired a lot of statisticians during the 1930s and began to study the phenomenon of “inflation”. That is, every year, they would compare prices for the same “market basket” of goods; year-to-year changes in price under this method are called “inflation”. This is also known as the “Cost of Living Index” which forms the basis for those “Cost of Living Adjustments (COLAs)” that you see in the papers today. The COLA from 1933 to 1998 is 10.37, according to the Labor Department.
- Put them all together and we get a price multiplier of 32.35 (= 2.0 x 1.56 x 10.37)
- Inflation from 1998 to 2013 would bring the factor to about 35.
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