I had a conversation with my father over salary when he last visited a couple of weeks ago, and we were comparing his highest salary with my current one. As he was laid off in 1986 and never made more money at his subsequent jobs than in that year, his highest salary occurred in that year, and my highest salary is the one I have currently. He mentioned that it was quite amazing to have the ability to make what I do, and that it was great to see that the next generation was doing better than the previous one. Of course, I happened to think of inflation, and wondered whether I was actually doing better.
It turns out that I’m not! This can be demonstrated, using any online inflation calculator. (Here I’m using dollartimes.com: http://www.dollartimes.com/calculators/inflation.htm) Since my salary is double what my Dad was making in 1986, I can examine the phenomenon with any two numbers, the second of which is twice the first. Making the math easy, I chose $50,000 1986 dollars, to see what they would be worth in 2012.
It turns out that $50,000 dollars in 1986 is the equivalent of $103,235.13 today. That means that my double salary is actually LESS than the comparable salary of my father just twenty-six years ago. I would have to earn roughly 6.4% (the difference of $3,235.13 over $50,000) more than I do to make the equivalent salary that my Dad made in 1986. While these numbers are examples, the actual numbers tell the same story.
In just twenty-six years, the value of the dollar has gone down by more than 50%. My generation is doing worse than my Dad’s generation, and the American concept that succeeding generations do better is quickly falling by the wayside. This does not bode well for anyone, especially at the rate that our government continues to Operation Twist more printed money into the economy.
(Picture from eftrends.com.)