Monday, September 22, 2008

Long-ago tax return proves a dollar really does buy less now

published Sept. 19, 2008

I’ve recently been reunited with my “hope chest” from a long-past marriage, and cracked open the lid this summer for the first time in nearly 30 years.
Tucked in between the baby clothes and the wedding memorabilia were four years of my ex-husband’s tax returns. I find those returns coming to mind a lot these days amid the torrent of grim news about the economic meltdown in the U.S.
For those too young to know, a hope chest is a relic from a time when teenage girls were given cedar chests for accumulating the household goods and treasures that they’d need to set up their house once they became somebody’s wife. After marriage, the wife was free to fill the chest with whatever she chose, which in my case turned out to be a random collection of keepsakes, photo albums, greeting cards, and my ex’s 1976-80 income tax returns.
We were a typical young Courtenay couple of our day. My ex worked at the Campbell River mill. I taught piano for a few hours a week, but was primarily a stay-at-home mom with two small children.
In 1980, I was 24 and he was 28, and we’d been married for six years. I never would have imagined at that time that we were leading lives of privilege, but by today’s standards I guess we were. We owned our own home, had two vehicles, took a vacation somewhere nice every year, and generally didn’t want for much.
Looking back on those years, I’ve long suspected that my ex and I - and all the young Island families we knew in those years with jobs in forestry and fishing - enjoyed a much more comfortable life than most young couples raising children these days can count on.
But economic analysis isn’t my forte, so I never got around to nailing my hunch down. I was also wary of the possibility of turning into one of those old coots prone to remembering the past in rosier terms than was actually the case.
Then I took a look at that 1980 tax return. My ex earned almost $28,000 that year, a sum that even three decades later is still what 20 per cent of Canadian families are living on.
The median income in Canada nowadays for a family like ours - one wage earner, kids still at home - is more than double what our household was getting by on in 1980. But prices have done a lot more than doubled over that same period.
A small example: I found an old diary among my hope-chest treasures that I’d used to track our gas costs on a road trip to Disneyland in the late 1970s.
Back then, gas was about 30 cents a litre. It’s almost five times that much now. But what’s even more telling in terms of purchasing power is how gas prices then and now compare as a percentage of household earnings.
If in 1980 you were earning $28,000 and filling up your tank twice a month, your gas costs for the year amounted to less than three days’ pay. For argument’s sake, let’s presume an equivalent modern-day income of $75,000. Filling up at the same twice-a-month rate now eats up eight days’ wages.
In terms of housing, the change is even more dramatic.
We bought a little cabin on the beach in Royston in 1974 for $10,000. We sold it two years later to buy an unfinished two-bedroom house on a much bigger property. By the time we’d borrowed the money to finish it off, we had a $20,000 mortgage and monthly payments of just over $140.
So for starters, the cost of the house was less than what my ex made in a year. Only the wealthiest home buyers can say that anymore. We spent roughly six per cent of our annual household income on mortgage payments. Fast-forward to modern times and a household income of $75,000, and that would translate to a mortgage payment of about $375 a month.
If only. The truth is you can’t even find a rooming-house bed for that price anymore. The average Canadian currently spends more than 20 per cent of their total income on mortgage payments or rent. In constant dollars, median earnings in fact fell more than 11 per cent in B.C. between 1980 and 2005.
Is this “progress,” then? Not by a long shot. And we’d best brace for worse to come, what with America’s impossibly wealthy capitalist kings now fleeing the scene of the disaster they’ve created in the mortgage and investment industries.
As always, the rich get richer. The rest of us just keep losing ground.

1 comment:

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