Out of curiosity the other day I decided to check the purchasing power of my annual income of my first job (in the 1970’s) with today.  My starting salary for a management training role for a university graduate was $9,800.   According to the purchasing power calculator at “buyupside” this would be about $41,000 in 2014 dollars.

A check of “payscale.com” shows a starting level income of $34,000 to $48,000  for a newly graduated BSc ( IT roles) .   The range quoted is based on 4 different role types.  (I have excluded Sr level and Mgmt roles and considered only the lowest end of the salary range for the other roles).

So, my first job’s measly $9,800 a year was right in the range of what a new BSc. might get in today’s dollars.  This is not an exact comparison as my first job was in Financial services not IT but it gives an indication of how things line up from 40 years ago to today, in terms of what things are worth.

This is just one example, but for me anyway the purchasing power of my annual income in my first job out of university maps to that of someone today with a similar degree.

So how is the worth of things determined.  I mean when I started work I bought my lunch at the pub next door to the bank branch where I worked for under $4.00 a day (including the beer).  Today an equivalent lunch (including the beer) would be $15.00.   Similar food and beer, very different assigned worth.  That is to say I am willing to pay $15 for the same thing I paid $4.00 for only yesterday (well 40 years ago but who is counting).

Why am I willing to pay the higher amount?  The most simple answer is because I can.  This is what purchasing power is about.   I have easily enough money to buy the lunch at today’s rate as I did back 40 years ago because I am paid so much more in today’s dollars.  This as we all know is inflation.

Whats the Point?

Fair question.  Today’s post is really just background for a series on the value of things, inflation, deflation and other economic calamities.

Check in  tomorrow more thoughts on these topics and deeper exploration of what the impact of changing buy power is.