Calculating the Worth of a Dollar…in 1774
by Damon Huss
Today I came across the site called MeasuringWorth.com while researching how much it actually cost the government of Great Britain to fight the Seven Years’ War. (All in a day’s work, as the saying goes.) Two economics professors from the University of Illinois at Chicago created the site “to make available to the public the highest quality and most reliable historical data on important economic aggregates, with particular emphasis on nominal measures.”
In more layperson-friendly terms, the site provides different calculators that allow you to measure “what a monetary value in the past is worth today” (including U.S. dollars, British pounds, Japanese yen, and Chinese yuan). For dollars, they provide ways to compare the value of dollars between any two years from 1774 up to 2009.
The site draws you in with these questions: “Was Andrew Carnegie richer than Bill Gates? Did Babe Ruth make more than David Beckham? Was the cost of a loaf of bread more then than now?” It then provides fascinating illustrations like this:
George Washington was paid a salary of $25,000 a year from 1789 to 1797 as the first president of the United States. The current salary of the president has recently been doubled to $400,000, to go with a $50,000 expense account, a generous pension and several other benefits. Has the remuneration improved?
Making a comparison using the CPI for 1790 shows that $25,000 corresponds to over $585,000 today, so the recent raise means current presidents have an equal command over consumer goods as the Father of the Country.
When comparing Washington’s salary to an unskilled worker, or the measure of average income, GDP per capita, then the comparable numbers are $11 and $24 million. Granted that would not put him in the ranks of the top 25 executives today that make over $200 million. It would, however, be many times more than any elected official in this country is paid today. Finally, to show the “economic power” of his wage, we see that his salary as a share of GDP would rank him equivalent to $1.8 billion.