Compound Inflation Is Probably Higher Than You Think


Atrios wants the older generation to get it through their heads that kids today don’t exactly lead cushy lives:

I increasingly do think nominal illusion is part of it, as, say, $50,000 sounds like A LOT OF MONEY for a starting job for the older generation, but in 2014 it isn’t that much money.

Yes, yes, yes. If you’re my age, that sounds like a pretty good income for someone a few years out of college. But it’s nothing special. It’s the equivalent of $18,000 in 1980 dollars. If you’re part of an even older generation, think of it as the equivalent of about $6,000 in 1960 dollars.

This isn’t a poverty-level income or anything. But it’s not nearly as much as it sounds like if you’re just vaguely comparing it to what you made in your first job. What’s more, it’s not as if every 20-something college grad makes $50,000 either. Plenty of them make $35,000 or so, and that’s the equivalent of $12,000 in 1980 bucks. That’s what I made in my first job out of college, and although I was never in danger of starving or anything, I wasn’t exactly living like a king in the room I rented out from some friends.

People don’t always have a good sense of just how much inflation compounds to. But as a quick rule of thumb, prices have gone up 3x since 1980 and about 10x since 1950. Keep that in mind whenever you’re mentally comparing current prices and incomes with those from your early adulthood.

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