A longer perspective on prices

The Baltimore Sun

Stuff is cheap. Really.

Yes, a gallon of gasoline is far more expensive than it was last year, but adjusted for inflation it costs about what it did in 1981. In fact, lots of things, such as clothing, electronics and restaurant meals, are, by historical standards, inexpensive.

In December 1978, newspaper ads listed a VCR at Sears for $795, more than $2,500 in today's dollars. A basic five-cycle washing machine? Back then, $319.95, which translates to about $1,000. It's cheaper now to enjoy an eight-day vacation in Honolulu.

So why do we feel so squeezed?

It's the reality of our new world order: Stuff is cheap, but the things that truly sustain us are not. Globalization and efficiencies in distribution and retailing have cut production costs and consumer prices widely. Americans now spend about 10 percent of their income on food, down from 18 percent in 1958. But while prices have dropped for consumer items over time, so have real wages.

Average weekly earnings in the private sector in 2007 were 15 percent below the 1972 peak in real terms, according to the Bureau of Labor Statistics.

Along with falling wages, we are paying more for benefits. Health insurance premiums rose 78 percent from 2002 to 2007, according to the Kaiser Family Foundation.

And we're spending a lot more on education. Yearly total costs at some private colleges now exceed the U.S. median household income.

There's another side to the equation. As we earn less, we want more. In 1970, 36 percent of new homes were less than 1,200 square feet, the National Association of Home Builders reports. Today, 4 percent of new homes are that petite. One in 10 new houses was 2,400 square feet or more in 1970; 42 percent are that large now.

The want-more scenario is also the case with cars, which cost more even adjusted for inflation. A 2008, six-cylinder Honda Accord makes greater horsepower (268) than a 1990 Porsche 911 Carrera (247). The price of the Accord's power is gas mileage (19 miles per gallon in the city) that's not much better than that of the Porsche (16 mpg).

That's our world today. Because it costs less to produce things, and often costs less to buy them, many of us can easily afford items once considered luxurious. But things we once took for granted as affordable cost us dearly, and for many are out of reach.

Peter Y. Hong writes for the Los Angeles Times.

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