Comment by dylan604
16 hours ago
These prices adjusted for today's value seem off though. I'm guessing you'd be hard pressed to find a diner burger for $5.14 anywhere. No, fast food joints are not the same here and not part of this discussion.
Where is the discrepancy? I've never really trusted these "adjusted for inflation" type numbers. I'm not an economist so I have no idea how they are calculated, but they've always just felt off to me. Usually, the numbers are for something esoteric to me, but these are about something I have some familiarity. In my experience, the adjusted burger price is about half the actual cost of today.
A good rule of thumb is to ask "are you paying mostly for human labor or for machine labor"? The former is likely to be more expensive now than it was in the past and the latter is likely to be less expensive, all relative to general inflation prices.
A hot dog / hamburger at a diner is mostly human labor, so you'd expect it to be cheaper in the past.
Labor is typically around 30% of the final cost of prepared food in a restaurant.
Remaining 70% is 30% food costs (which has dropped drastically since the 50s), then 20-30% operations. Profit is whatever is left.
So a diner burger is not mostly labor but I honestly have no idea what these costs were 70 years ago. I'd love to know, seems like something is missing.
Likely everything in the chain going up 1-10%.
Food cost hasn't dropped because you can't even get the food they used to have. You have something that costs less now, but is worth even less than what it costs. And now that Sysco has completed it's eradication of all variety and competition, it doesn't even cost less any more.
Much of the 30% food costs is labour further up the chain, and much of the 20-30% operations is also labour.
Things just don’t really convert neatly because the shape of what people spend money on in life hasn’t evolved uniformly.
Food appears somewhat cheaper, housing much cheaper; but clothing and tools/appliances were much more expensive. Things like student debt and healthcare costs are also interesting to compare and wildly differ over time & place.
Also common for the average middle class person to spend a sizable percentage of their income on travel/vacation today; as I understand it that was quite uncommon before the mid 20th century.
Travel and vacation were much rarer. Many jobs gave only 2 weeks a year of vacation. Many jobs didn't include travel. That's changed with the invention of cheap airlines. Alas, some like SWA have changed their business model.
I use "super-baskets" like say US GDP per capita
>The June 1940 photograph along Hwy 1 in Maryland had $0.05 hotdogs ($1.17) and $0.10 burgers ($2.34).
1940 $779 to today's $94K GDP per capita gives $6 for the 1940 $0.05 hotdog.
GDP is not distributed equally by any means, so meaningless as a per capita figure in this context
Well, the $5.14 figure is using the generalized inflation number derived by tracking the price of a specific basket of goods over time, across the entire country. This is a reasonable number to pick.
If you narrow down to Food for all Urban Consumers[1], it shifts to more like $5.24. If you look at "Food away from home in New York-Newark-Jersey City, NY-NJ-PA, urban wage earners and clerical workers, not seasonally adjusted" that number moves to $7.60. Which confirms your intuition: restaurant prices are way higher than the overall inflation rate predicts.
How do we explain the difference? A variety of ways. Maybe the burgers you get are "better" in some way. Bigger. Better cut of meat. More veggies and toppings. I wasn't around in 1959 and never ate at that specific diner, but it's a real possibility. In fact, this is explicitly called out in the FAQ[3]:
> Specifically, in constructing the "headline" CPI-U and CPI-W, the BLS is not assuming that consumers substitute hamburgers for steak. Substitution is only assumed to occur within basic CPI index categories, such as among types of ground beef in Chicago. Hamburger and steak are in different CPI item categories, so no substitution between them is built into the CPI-U or CPI-W.
There's also some other complicating factors to account for, like coupons and bundling. Like consider Applebee's Really Big Meal Deal deal. "NEW Big Bangin’ Burger with unlimited fries & soda, still just $9.99" Or you can order just the burger for... $15.99[4]. I don't even know how BLS copes with that and am sorta guessing they just take the a la carte prices for consistency, even though that likely overstates price levels consumers actually pay?
[1]: https://data.bls.gov/dataViewer/view;jsessionid=3A241A4C4F0A... [2]: CWURS12ASEFV [3]: https://www.bls.gov/cpi/factsheets/common-misconceptions-abo... [4]: https://www.applebees.com/en/menu/handcrafted-burgers/big-ba...
Dicks in Seattle is currently only 5.75 for the deluxe; everything else is less! And IMO, very good for the money.
https://ddir.com/menu
Basket goods, basically.
Price of good i x Quantity of good i. Quantity is fixed year to year. So a loaf of bread, a gallon of milk, a TV, etc.
Sum those up across a reasonably representative basket, then compare that sum to the same quantity and new prices in a future year.
sum(P_i_new year x Q_i) / sum(P_i base year x Q_i) - 1 --> change in CPI
Hamburgers might be more expensive, but TVs, toilet paper, and dog kibble might not be.
Agreed completely. Other examples: long-distance telephone minutes, shoes, clothing, air travel... probably all cheaper.
Dick's Drive in Seattle (IMHO an expensive city) charges $5.75 for their deluxe burger on Doordash.
https://www.doordash.com/store/dick's-drive-in-seattle-77050...
There are two diners near me (in NYC) where a burger is $5.25/$5.50 respectively.
(I don’t disagree with you directionally though; I think a nontrivial aspect of this is shifting expectations/norms around what passes for food service. Americans broadly want their food - even diner food - to be upclassed beyond a plain hamburger on a white bread bun.)
That's the point. Burgers are more expensive (relative to "all" other goods) compared to back then.
Counter service family joints absolutely in the $5 area for standard ol' boring 1/4/lb. Maybe your definition of diner is different? There's a place by me with diner in the name that has a burger for $4.99.
The Market Basket used to calculate the BLS CPI changes over time, which can make long range comparisons difficult.
I’ve read of political influence on the market basket to lower the reported rate of inflation by the incumbent party, but I’m not educated enough on the topic to give an opinion on if it happens.
That may be the point. Simple inflation adjustment gives us x but the real price is more or less than x. Why is that?
> Simple inflation adjustment gives us x but the real price is more or less than x. Why is that?
Restaurant economics are a function of ingredient costs and labour. I suspect ingredient costs are close to OP's estimated multiples. But real wages are way up since the 1950s. Anything with a large labour component of costs will have tended to rise faster than inflation, which is an average of goods and services.
(There are specialised metrics if you actually wanted to dig into this question.)
Are you saying the prices listed were just for the ingredients and not the actual cost to the person ordering? They mentioned they saw the price in a photo which suggest it is what the person would be charged. I get that labor costs would cause an increase of raw ingredient price comparisons for total prices. But if you could pay buy a burger for a nickel but now need $10, there is a definite issue in just a "simple" adjustment that suggests you'd only need $5. If the numbers are that far off because the simple needs to be more advanced, what's the point of the simple numbers? Bad data is worse than no data.
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Inflation is a measure of change in overall purchasing power.
What a specific purchase costs is highly dependant on the inputs, the cost of its labour (which might grow faster or slower than the average wage), and a lot of other factors.
Food is way more expensive today than it was 50 years ago. Airplane tickets are way cheaper. Everyone has a cellphone now, and middle class families have multiple cars, but a trip to the doctor will mean that ~15% of the population will be on the verge of not paying their bills. On the other hand, I have access to ~every major piece of music ever made for ~$15/month, so that's something.