So I am always interested in the true numbers of economics, politics, development...well basically life in general. I especially follow data that deals with me personally or with the communities I call home (usually New Orleans and Cenla).
Numbers aren't everything..they can be manipulated, read, misread, and smudged to give just about any outcome the gifted statistician desires. However, when you strip away the glitz and glamor of political rhetoric you can get to some hard truths very quickly. So in this year of big political changes and even bigger political decisions I thought it would be nice to take a look at what the past 3 decades has meant for the average Louisianian in terms of economic change.
I was born in 1976 and and the most recent data available is for 2006, so we get to look at my lifetime so far and see just how we've all fared.
A bit about the choice of data used:
I have relied on data provided by the US Census, the US Department of Labor's Bureau of Labor Statistics, and the US Department of Commerce's Bureau of Economic Analysis. These have been compared with the Louisiana State Census and coordinate departments of labor and economic development.
Finally, I have used two primary sets of information. The first deals with the Consumer Price Index. This data set compares the actual cost of goods and services (cost of living at any given time in a certain period) for the Southern US. I chose to use the Southern US averages because exact CPI numbers for Louisiana are not available for the entire spectrum of dates. That said, Louisiana is and has been since the 1970's among the 3 poorest states in the US and (as two of this dynamic impoverished trio - Louisiana and Mississippi - have always been in the south) that puts us in a much worse situation than the regional average. Our rates of inflation have been more than much of the south while our buying power has grown much less. So I have chosen to use the Southern Regional average because it is actually a much rosier picture than our true reality while being closer to local data than the national average. Likewise I have used the Louisiana data sets versus the Rapides or Alexandria sets for the same reason. If you want to do the math yourself, deduct 1/3 to 1/2 from the state average per capita income at any given time and you will have the Rapides and Alexandria median incomes (with Rapides as a whole doing marginally better than Alexandria alone).
1. Consumer Price Index (CPI).
I'm sure many of you have heard this term, but may not fully understand what it refers to or why it is important. The CPI is a measure used to show the changes in cost of goods and services that US households buy. It's one of the ways economists measure inflation. Basically how expensive are the things most people spent their money on this year compared to how expensive those same things were last year. It's a weighted average and also uses 'smart models' of advance computations that keep the data from being strongly skewed by one off number. It's the most realistic and neutral observation of how the individual fits in the economy or more specifically how the economy is affecting daily life for that person.
Many things can affect the CPI. The cost of fuel and energy has had very drastic effects on the CPI this year. As I hope the artificially high costs of petroleum products at the consumer level will come down considerably after the 2008 elections, I feel justified in going with 2006 numbers versus 2007. One factor that is not heavily included in the CPI is the cost of housing. This is another case where the numbers would paint a much worse picture for Louisiana. There are also some other factors involved in adding housing that I did not want to deal with as they change the meaning of these numbers from person to person. Not everyone owns a house, buys a house, rents a house, etc. But, everyone buys the basic necessities of life. That's what this is about the true cash register economics of the situation.
2. Average Per Capita Income.
I have compared the change in CPI over the past 30 years with the equivalent changes in average per capita income. This is simply the average income of someone living in Louisiana. It accounts for everything from hourly wages or salaries, to health and education benefits, retirements, housing allowances, all of it -- translated into dollars.
There are several ways to measure income. Usually this is given in household income, but this measurement is usually skewed as in a state as poor as Louisiana, there are sometimes many people living in the same household. This also excludes college students, transitory worker, and anyone else who isn't considered to have a separate permanent residence at the time of the US Census.
You may also hear numbers such as average, median and mean. in the hopes of giving the most balanced portrayal of true economic conditions I have chosen to use the average per capita. This number uses the following formula: [Total income of all Louisiana residents] divided by [Population above 16 years of age minus those unable to work (the very elderly, the infirmed, those in the penal system, etc)]. Mean per capita income would be a measure of absolute total income divided by absolute total population (a lower number) and median per capita income refers to the average income of the 50th percentile of our population ranked by wealth. So the average per capita ends up being the middle road both in numbers and in practical value.
Income numbers are given in both Dollars at the time (1976 and 2006) and converted into 2006 dollars accounting for pure inflation, changes in the value of currency, etc. The current values do not account for changes in CPI as that would eliminate the ability to compare change in cost of living with change in income.
A bit about the averages...
In Louisiana and even more so in Central Louisiana distribution of wealth is extremely skewed. If you look at the chart below you will see that in Alexandria alone the disparity between incomes is very wide with the vast majority of households making less than $50,000 per year while a small number make considerably more.
To translate these numbers, out of 2000 households roughly 1500 households make $30,000 or less each year while 500 households make above $30,000; only about 50 make over $100,000. For statistical purposes a household is general defined as 4.5 people with 3 of those working. So that means that for our area 75% of workers are making $10,000 per year or less (roughly minimum wage at 40 hours per week).
So again, if you compare the numbers I'll give you to the reality of most people's situation, these are much rosier numbers than they should be.
The Cash Register Comparison:
So when I was born in 1976, quarters had a cool back side, the $2 bill was actual money, and you could ask the bank for a bicentennial silver dollar big enough to bring down an elk. Going to the Bank in Alexandria probably meant a visit to one of three local companies -- Rapides, Guarantee, or Security 1st. And most of those bank accounts probably only had a few hundred dollars in them. Things were cheaper. For instance a postage stamp cost 13 cents then whereas today that same cost is 42 cents.
Out of fairness to the US Postal Service, 42 cents just happens to be the exact value today of 13 cents in 1976. So although the numbers seem high, they have been quite thorough with their pricing throughout the years.
There are however some things that have not increased equitably in price. Education is by far one of the most extraordinary with the cost of a college education not even being the slightest bit comparable today with what it was in the 70's. I won't add even more numbers to this mess, but let's just say that, adjusting for inflation a year at LSUA in 2006 would have bought you a year at Harvard in 1976. Education costs much more, but is now considered much less optional than 30 years ago. Cars also cost much much more than they did and are basically a requirement of local existence today.
There are many examples and many reasons why things cost more now than they did. In all fairness certain things like some electronics cost less today than in 1976. That said, here's the chart:
This chart shows the change in the Consumer Price Index for the Southern US from 1976 to 2006. The CPI is given as a number -- a reference to itself. This number does not represent a dollar amount or anything like that, but rather it shows what the comparison between the cost of the same goods and services are from one year to the next.
The important thing to see here is that the CPI from 2006 is 4 times what it was in 1976. So basically the costs of daily living -- food, utilities, clothing, gas, etc today is 4 times what it was 30 years ago. That shouldn't be too much of a surprise.
The Surprise...
While the fact that things cost more now should come as no surprise, what should be of concern is that those same bank accounts today in Cenla...at those same banks (nor Chase, Capital One, and Regions) still for the most part only have a few hundred dollars in them. Now, part of this could be due to a culture of debt-based spending, or the fact that there are more accounts, or any number of reasons. But one reason should surprise you:
Even though the basic cost of living -- of buying the basic necessities of life -- is 4 times what it was in 1976, the average income is still basically the same!
Am I nuts? Well possibly, especially considering most anyone will tell you they make more now than they did in 1976. Minimum wage is even more today than the $3.80/hour it was when I worked my first high school job at McDonald's on Jackson back in the early 90's. However, when you see through the facade of pure numbers, there is a very dismal truth about the actual economic of life in Louisiana that shows through...
Income Then and Now.
So if you were an average Joe (or Jeaux) in Louisiana in 1976, you would have been nice and lucky to be making the average income of $5,555 per year. Working 40 hours per week at that $2.67 per hour would have put mighty $107 into your bank account (minus whatever your Uncle Sam may have needed to pay for his big upcoming birthday party).
In current dollars, that same amount is equivalent to $21,311 or a full-time hourly wage of $10.25 per hour and a weekly income of $410.
Compare that with the average per capita income for 2006. Our same average guy or gal earns $24,664. This gives him an hourly wage of $11.85 per hour and a weekly paycheck for $474.
OK -- first powerpoint table:
As you can see this shows that on average incomes in Louisiana are roughly 16% higher than they were in 1976 with the average worker bringing home $64 more dollars than he did 30 years ago.
The Catch...
Now here's the bad news. When you compare the differences in income between 1976 and 2006 and you stack that up against the difference in the CPI for the same years you get a massive (MASSIVE) disparity.
If you recall above, I pointed out that the current Consumer Price Index for our region is around 4 times what it was in 1976. For the sake of clarity and such allow me to use the actual numbers to demonstrate exactly where we stand (or rather where you stand when you're standing in line at Wal-Mart).
OK, chart number two:
So this is the big Whammy! It is true that on average we make 16% more money today than we did 30 years ago. However, with costs of the basic necessities being 354% higher than they were in 1976, the deal doesn't seem so sweet.
And...it's not. What these numbers tell us is that even with making more money, with all the improvements in technology, with 3 decades of politicians 'helping' the common man -- the average income in Louisiana today can buy only one third the goods and services it could in 1976.
That's right...in 1976 you could have bought 3 times as much food, used 3 times as much electricity, drank 3 times as much beer, had 3 times as nice a car, and sent your children to 3 times as nice a school for the same 9-5 you're working today.
So...with all the attention on politics, with the rethinking of what it means to be a Democrat or Republican, with the most important election in 10 years only 10 months away, perhaps we should think about what our government has really done for us...at least during my lifetime.
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