The Six Indexes Used by Measuring Worth
Shown here for the Relative Worth of $50 in 1980 Today
If you are asking what a monetary value is "worth", there is no single correct answer. A purchase, a compensation, an amount of wealth, a construction project or historic event can be valued in different ways by different people, under different contexts and at different times. One index does not fit all.
At MeasuringWorth we use six indexes to compare relative worth. They are two price indexes; four indexes of wages, incomes or average expenditures; and one index of the economy’s output.
The Price Measures
The relative worth of $50 in 1980 is $189.57 today using the Consumer Price Index (CPI) The CPI is most often used to make comparisons partly because it is the series with which people are most familiar. This series tries to compare the cost of things the average household buys such as food, housing, transportation, medical services, etc. For earlier years, it is the most useful series for comparing the cost of consumer goods and services. It can be interpreted as how much money you would need today to buy an item in the year in question if its price had changed the same percentage as the average price change. .
The relative worth of $50 in 1980 is $156.56 today using the GDP Deflator The GDP Deflator is the price index used to measure changes in the overall level of prices for the goods and services that make up GDP. It is simply 100 times the ratio of nominal to real GDP. .
The Wage, Income, Household Expenditure Measures
The relative worth of $50 in 1980 is $195.61 today using the Production Workers Compensation Production Workers Compensation is an alternative way to determine the relative cost of something in terms of the amount of work by a specific group of workers. In this case it is manufacturing production workers, which would include blue-collar workers, hourly rated workers, or non-office workers. Unlike the unskilled wage, this series includes both money earnings and benefits. During the last third of the 20th century, benefits grew to be close to 25% of the compensation. .
The relative worth of $50 in 1980 is $331.65 today using the GDP per capita The GDP per capita is an index of the economy's average output per person and is closely correlated with the average income. It can be useful in comparing different incomes over time. .
The relative worth of $50 in 1980 is $225.43 today using the Consumer Bundle The Consumer Bundle is the average dollar value of the annual expenditures of a "consumer unit." The consumer unit could be a family or another type of household. The main point is that spending is a joint decision of the members of the unit. During the 20th century, this measure grew faster than per capita income because the average size of the consumer unit decreased during that time. The bundle increases over time as household income increases. Unlike the CPI, not only the cost, but also the amount of goods and services increases over time. .
The Output Measure
The relative worth of $50 in 1980 is $489.22 today using the GDP The GDP is the market value of all goods and services produced in a year. Comparing an expenditure using this measure tells you how much money in the comparable year would be the same percent of all output. .
Where the answers say “today”, it means that they are computed using the latest values for the measures. Those measures change often during the year. The CPI changes monthly, the two wage indexes, GDP, and the GDP Deflator change quarterly and the Consumer Bundle once a year. These observations will not be available at a later date. For scholarly publications it is recommended the results from Seven Ways Compute the Relative Value of a U.S. Dollar Amount be used, as it uses annual observations that can be reproduced at a later time.
This comparator was created by Samuel H. Williamson with assistance and advise from Louis Cain, Ben Hogewood, Tom Rooney, Mark Fry and many MeasuringWorth users who have sent comments over the years.
For additional assistance, see Choosing the Best Measure of Relative Worth, the Tutorials, or the essay Measures of Worth.
| Send us feedback
We would be happy to receive your feedback on this comparator. The link above will take you to a form where you can tell us the context of your question, what answer you are going to use and for what purpose. Please do not ask us what the best answer is as that is for you to choose based on what is the context of your question. |
Citation
"Purchasing Power Today of a US Dollar Transaction in the Past," MeasuringWorth,
.
