About that stick of butter
With the insanity of the debate among conservatives of late, it was only expected that we would end up arguing about the price of a stick of butter in the ’80s, but here we are.
In his National Review piece, Kevin Williamson expounds on the benefits of globalization and how this leads to wealthy families no longer needing to be concerned about the cost of butter:
The manufacturing numbers -- and the entire gloriously complex tale of globalization -- go in fits and starts: a little improvement here, a little improvement there, and a radically better world in raw material terms (and let's not sniff at those) every couple of decades. Go back and read the novels of the 1980s or watch The Brady Bunch and ask yourself why well-to-do suburban families living in large, comfortable homes and holding down prestigious jobs were worried about the price of butter and meat, and then ask yourself when was the last time you heard someone complain that he couldn't afford a stick of butter. That change happened a little at a time, here and there.
Having watched The Brady Bunch, I must have missed those episodes where "well-to-do suburban families living in large, comfortable homes and holding down prestigious jobs ... couldn't afford a stick of butter."
Perhaps unsurprisingly, the Bureau of Labor Statistics keeps data on the historical price of butter, and back in 1984 it averaged $2.10 a pound. In fact, the price of butter was about $2 a pound throughout the 1980s.
The average per capita consumption of butter in the 1980s was 5 pounds per person per year, a value that has held more or less steady since the early 1970s. So unless there was an anomalously high amount of butter consumption on The Brady Bunch, we have to reasonably assume that each character was consuming only 5 pounds of the fatty yellow delight each year – like all other Americans.
According to the World Wealth and Income Database, the top 10% average income in 1984 was $151,225 in 2014 U.S. dollars, or about $66,326 in the dollars of the day. So let's say this well-to-do suburban family has four members, and only one of them is holding down a prestigious job. That translates to a family income of more than $66,000 at the time. And unless this family of four is rabidly addicted to butter, its members are consuming only a collective 20 pounds per year, which costs them $40 annually in the family's butter costs.
This was a major financial stressor for wealthy families in the ’80s? Sure it was.
Even average families in the Reagan era were not suffering under the costs of butter. The median household income in 1984 was $22,415, making that $40 annual butter expenditure for a family of four hardly the source of an ulcer. The nominal minimum wage at the time was $3.35 per hour, meaning that a poor person working at this rate would have to work just three hours to pay for his entire year's supply of butter. What a tragedy.
Perhaps it is the other costs of living – beyond butter – that are causing financial stress for the average family?
Take the cost of housing. In 1984, the median sales price for a new house was $80,000, or 3.6 times the median household income. As of 2014, the median sales price for a new house had reached $284,000, or 5.3 times the median household income of $53,700.
Forget the globalization-induced impacts on the price of butter, which are irrelevant to everyone's finances. From 1984 to 1990 alone, the median price of a new home increased by $42,000, or more than 50% – while the price of butter stayed constant in nominal terms. That increase in the price of a new home over just six years in the latter half of the ’80s amounts to a millennium (i.e., 1,000 years)’s worth of butter consumption for the same family of four that wants to live in a new house.
So maybe because of globalization, the average family of four is saving $10 a year or so on its inflation-adjusted collective butter expenditures relative to the 1980s, but that same family has to spend an extra $100,000 on a new house relative to the household income because said household income has remained flat with respect to inflation over the past 25 years. That's 1,300 years’ worth of butter for this family.