On March 4, 1913, the last day of his presidency, President William Howard Taft signed a bill promoting the Department of Labor to a Cabinet-level Department. That same year they began tracking consumer prices. This is also the same year that the Federal Reserve was formed to manage the money supply. Perhaps Taft worried that putting a bunch of bankers in charge of the money supply was like putting the fox in charge of the hen house and so the country needed a cabinet level department to keep an eye on them?
Whatever the reason, that the Consumer Price Index was formed, a gauge, or measuring stick now exists to compare prices across the ages. Although some people believe that the numbers on the stick may have been adjusted a bit, none-the-less it is all that we have (other than the price of gold).
So I thought on this 100th anniversary of the Consumer Price Index that I would take this opportunity to compare the price of food items then and now.
Food Price Inflation
If you were to imagine the typical shopping list of basic foods in 1913 there of course would be no frozen dinners, pizza, potato chips, yogurt, ice cream or other processed foods. The typical shopping list from the “grocer” would be more like bread, milk and eggs. Even coffee was not the ground type we have today, but rather whole coffee beans.
In 1913 bread cost an average of 5.6 cents per pound. Today according to the Bureau of Labor Statistics the average loaf costs $1.422 per pound. Milk went from 35.6 cents a gallon in 1913 to $3.53 in 2013 a roughly 10 fold increase. Eggs were 37.3 cents per dozen in 1913 and now average $1.93 per dozen. The following table from the BLS shows a variety of food items and how the prices have changed. Interestingly, not everything (even in the food category) increased by the same percentage, for instance eggs “only” increased 418% while potatoes increased a whopping 3819%.
In 1913 potatoes were considered a staple of everyday life and were the cheapest item on a per pound basis (costing less than 2 cents per pound) followed in close second by flour at just over 3 cents a pound and sugar at 5.8 cents a pound. Today flour is the cheapest on a per pound basis followed by potatoes (despite the massive percentage increase) and sugar.
|Item||Average price (dollars)|
|January 1913||January 2013||% Increase|
|Bread||$ 0.056||$ 1.422||2439%|
|Fresh milk, per gallon(1)||$0.089/quart (or $0.356/gallon)||$3.526||890%|
|Eggs, per dozen||$0.373||$1.933||418%|
Footnotes: (1) Milk average prices were recorded per quart in 1913 and per gallon in 2013; the 1913 average prices have been converted to gallon equivalents. Milk was further characterized as “whole, fortified” in 2013.
|Note: All average prices are per pound, unless otherwise noted. Source: U.S. Bureau of Labor Statistics.|
Standard of Living vs. Food Prices
Despite the massive increases in food prices we really don’t know how much better or worse off the average family is unless we look at household income compared to how much we spend on food. In other words, percentage of income spent on food. We look at this more in depth in the article Cost of Living: How Much of Your Budget Goes to Food? and Lynn Carpenter’s Cost of Living- Real Basket of Goods but basically the BLS estimates that U.S. citizens spend approximately 14% of their household income on food (8.3% at home and 5.8% at restaurants). But it is difficult to compare that directly with 1913 because many modern households have two incomes while in 1913 the majority of households had one fulltime income, plus the wife may have only had “egg money” from selling home grown produce and eggs. The average annual income in 1913 was only $800/yr. In 2012, the median household income was $44,389. and had 1.35 wage earners so if we divide $44,389 by 1.35 we get an average annual income of $32,880. Thus the average annual income increased by 4010% so even potatoes have become relatively cheaper i.e. our standard of living has increased.
As we said in the differences between 1913 and today, another sign that our standard of living has increased, we can look at the differences technology has made… rather than eating potatoes, bread, milk and eggs you will find much more processed foods in today’s shopping cart. Typically you will find packaged and frozen foods and families eating out more. Although we consider this a sign of an increased standard of living it is probably also leading to a less healthy lifestyle and higher healthcare costs.
- Cost of Living: How Much of Your Budget Goes to Food?
- Cost of Living- Real Basket of Goods
- Its Weight in Gold: The Real Prices of Things
- Cost of Living
- Cost of Living- Fish and Chips
- Housing Prices and Inflation
Recommended by Amazon:
- Frugal Food
- The Better Days Books Frugal Food Bible: Practical Advice for Feeding Your Family During Hard Economic Times From Americans Who Survived and Thrived In Tougher Times Than These
- Frugal Raw!: Raw On The Cheap At Its Finest!
- Deaf Smith Country Cookbook
Photo by Bob Mical
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Joe White says
I’m curious if there’s an overall comparison chart, we can view, i.e. actual households from different years, preferably in a similar field, with the household income versus bills and also the costs of items such as groceries, gas, entertainment, utilities, car payments, etc. I would like to see the uninflated income and prices and the inflated separated but side by side.
Because I would like to do my accounting techniques in comparison to each, because I’m a stickler for detail and balance and I bet I could show an actual increase or decrease, the reason I would like this is because, I’m an educated man, I have an extensive background in technology, yet, my ability to attain anything over $9.75/hour has become the norm in recent years, one would think that education as it was beat into our heads growing up would actually increase your income but it’s wowqu the reverse, I started at over $50/hour and something had gone terribly wrong. Thank you
Tim McMahon says
Unfortunately in modern society “education” is so watered down that education doesn’t count for much. That combined with the fact that technology changes so fast that us older folks have a difficult time keeping up with the changes. With the competition from overseas for manufacturing jobs Unions no longer have a monopoly on labor. All of these factors affect the wage that you earn but have no effect on the cost of goods (i.e. inflation) other than foreign competition does help to keep the cost of some products down.
Can I ask if the average income figure that you’re using is before or after tax?
Tim McMahon says
The figures used are before tax but remember income taxes were created in 1913 via the 16th Amendment. In 1913, the top tax rate was 7% on incomes above $500,000 (equivalent to $12.1 million in 2016 dollars) and a total of $28.3 million was collected. So the vast majority of Americans were taxed at 0%. Today the average American pays 10.1% in income taxes and 7.5% in payroll taxes plus a gazillion other taxes like Sales Tax, Personal Property Taxes, Capital Gains Taxes, State and Local Taxes etc. etc.
Average Income Taxes
This article is terrible. You did not account for the inflation of the dollar. Most of these prices are consistent with inflation, with some (like flour) actually being CHEAPER by todays standards.
If nothing else, this article goes to show the importance of data manipulation and the general spirit of statistical inaccuracies when all the relative data has not been accounted for.
I get that later on you try and show that percentage wise, Americans spend relatively similar amounts on food now as they did back then , but why even include a chart if it is so misrepresentative of the data set? Was it for hits on the cite? Was it for the sake of just throwing together a chart displaying disparity by thousands of percent? The chart serves no purpose, it only clouds the issue, and arguably was thrown in to mislead your readers.
TL;DR: The chart does not account for inflation of the dollar, in reality, after some research (research I would have thought the author would have included in his piece), the chart in actuality should read as a 1 to 1 price change, meaning any actual value change is inconsequential.
Poor use of data tables.
Tim McMahon says
Cameron, You seem to have a fuzzy understanding of what inflation is and how it works. This is understandable because the term inflation is used in two ways. The first is the cause and the second is the effect. The cause of inflation is an increase in the money supply (monetary inflation). The effect is an increase in prices (price inflation) and wages (wage inflation).
Both cause and effect are often referred to as inflation (perhaps out of laziness or ignorance). But to make matters more complicated prices do not all increase equally or even consistently in the same direction. Some of the effects of price inflation are not the result of monetary inflation but rather the result of increases in demand or temporary restrictions in supply. A good example of this was when hurricane Katrina temporarily drove up the price of gasoline because some refineries had to be shut down. But the price of gasoline did not stay up and as a matter of fact the Saudis (in an effort to bankrupt alternative energy companies) increased supply and actually drove the price down to historical lows based on an inflation adjusted basis.
So supply and technology also affect prices. Computers are a good example of this. Computers are consistently getting cheaper even though the value of the money is getting less through monetary inflation. So at all times some items are getting more expensive and some are getting less expensive but the money supply is still increasing. What we call price inflation is actually a composite of all of the changes in prices of all the goods we buy.
One way of measuring it is through the Consumer Price index (CPI-U). This gives a weighting to 10,000 individual components that the average Urban consumer buys to estimate the overall increase they might feel. But even this does not accurately indicate any one individual since everyone’s purchasing habits are slightly different. And so a rural consumer might be radically different from an Urban consumer and even two urban consumers will allocate their purchasing dollars differently.
What this article illustrates is the actual prices that people paid during two different time periods. These are actual prices paid and not subject to adjustment. When presented as such there is no such thing as adjusting for inflation because the price differential demonstrates the inflation in and of itself. It also demonstrates that monetary inflation does not affect all items equally. Sometimes technology overrides the effects of monetary inflation. The advent of advanced farming techniques has allowed grain to be grown more cheaply combined with mass produced milling techniques which has allowed the price of butter to actually decrease in comparison to the price of flour or bread. People no longer have to spend a major portion of their income on food but can instead spend an increased portion on things like Computers and X-Boxes.
But what you are referring to is the comparison of wage inflation to prices. In other words in addition to consumer prices increasing the average consumer has also experienced wage inflation. If wages had not increased no one would be able to afford to live. This results in our standard of living. If prices increase faster than wages then the standard of living goes down (which happened in the 1970’s and to a smaller extent in the period since 2000). On the other hand over much of the time since 1913 wages have increased more than the cost of commodities like flour so we can afford more than just food and clothes.
Remember in 1913 most people were farmers, farming was done with horses, there were no tractors, chemical fertilizers, cars or computers. The major activity of most people was producing enough food to support life. Taking your produce to the mill may have involved loading a horse-drawn wagon and driving it 20 miles (which would have taken you all day and even required an overnight stay so you could unload and return home the next day). People would take the money that they got for their produce and go to the store in town and buy many of their major purchases for the entire year (like a pair of shoes and a new set of clothes). This was one of the few paydays all year. Their annual income was likely a few hundred dollars (which by the way would have been paid in either gold coins or in I.O.U’s redeemable at local merchants. So assuming that their crops sold for $200 that would have been 10- $20 gold coins. Each coin contains roughly 1 oz of gold. So another way of calculating inflation is based on the price of gold. With gold currently at roughly $1100 per ounce… ten ounces would be the equivalent of $11,000. in today’s dollars. Since the average family today earns roughly four or five times that amount, technology has made us richer. But that does not negate the fact that prices have increased due to inflation. People would be much more than 4 or 5 times richer had inflation not occurred. Every round of inflation results in the government taking their cut from the top i.e. the government spends the money they print before the rest of the economy realizes that it is worth less. Thus they have cheated the people by giving them money that is worth less than what they expected. It is the equivalent of paying with a gold coin that you have shaved a small slice off of. Had the 1000% inflation not occurred the average worker would probably be 10 or 15 times richer rather than just 4 or 5 times richer.
Remember the title of the article was “Food Price Inflation Since 1913” the article was not structured to answer the question of wage inflation or standard of living but to simply cover the actual difference in prices between two time periods.
For more information see: Inflation and the Money Supply, Can we have Inflation and Deflation?, What is the Real Definition of Inflation?, The Real Basket of Goods (comparing Wages and Prices)
I came across this post while searching for price increases since 1913 and really enjoyed it. One other factor in the price of certain foods is agricultural subsidies, which have been around for a long time, but have ballooned since the days of Ag Secretary Earl Butts. The subsidies, besides resulting in tax increases, change the market price of certain commodities because of the way they incentivize production quantities. For instance, corn and soy prices are much lower than they ever have been. It’s interesting that the price of beef has increased over 2000%, but imagine how different that would be if they weren’t force-fed subsidized corn, which is in turn fertilized with subsidized petroleum-based fertilizers. Would they be even more expensive? Not necessarily, because the Fed’s inflationary manipulation of the money supply is still the driving force behind all of these factors. I wonder what our nation (and the world) would be like today if Woodrow Wilson had not succumbed to the, “Jedi Mind Tricks,” of international bankers?
Tim McMahon says
Good point. I often wonder what our world would be like without all the misallocation and “Jedi Mind Tricks”. What would the world look like without the U.S. wasting trillions in Iraq ? or Bailing out the Banksters? Maybe without the first the second wouldn’t have been an option? Or if there was no Freddie and Fannie the bailout wouldn’t have been necessary and our country would still have a healthy growing economy. But back to corn… first we have subsidies and then we have mandated ethanol, while the price of Natural gas is getting cheaper but the government won’t approve export facilities to improve our balance of trade.