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A Cell Phone in Every Pot
When we measure by consumption, it’s clear people are better off today than they were 30 years ago.

iPhones for sale at the Apple Store in Manhattan.

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While the CEX provides a good overview of nondurables consumption, it is not a good source of data on the consumption of durable goods. We therefore worked with the RECS data as well. This survey has questions, for instance, on household use of appliances such as microwaves, dishwashers, computers, and printers. What we find is that the access of low-income Americans — those earning less than $20,000 in real 2009 dollars — to devices that are part of the “good life” has increased. The percentage of low-income households with a computer rose from 19.8 percent to 47.7 percenct in 2001. The percentage of low-income homes with six or more rooms (excluding bathrooms) rose from 21.9 percent to 30 percent over the same period.

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In terms of appliances, the percentage of low-income homes with air-conditioning equipment rose from 65.8 percent to 83.5 percent; with dishwashers from 17.6 percent to 30.8 percent; with a washing machine from 57.2 percent to 62.4 percent; and with a clothes dryer from 44.9 percent to 56.5 percent.

The percentage of low-income households with microwave ovens grew from 74.9 percent to 92.4 percent between 2001 and 2009. Fully 75.5 percent of low-income Americans now have a cell phone, and over a quarter of those have access to the Internet through their phones.

In general, we find that people at all income levels now have access to many more material possessions than they did in the 1980s. Moreover, there has been a narrowing of the gap between high- and low-income classes in terms of owning these items. It’s hard to argue that these trends do not represent an improvement in the standard of living. Yet, over a similar period, the standard income dataset for households, the Current Population Survey, shows that the ratio of pre-tax incomes at the top quintile to those in the bottom quintile rose from 11:1 to 15.4:1. Hence the rise in income inequality has coincided with the rise in consumption levels at the bottom.

Whether the explanation for improvement in living standards lies in redistributionist policies and the growth of the safety net, or in technological improvements that have allowed prices of electronics and other durable goods to drop enough so that lower-income households can afford them, or in real improvements in productivity and wages, the bottom line is this: People are better off today than they were 30 years ago. The typical low-income household today possesses many more appliances and gadgets — items that have traditionally been considered the preserve of the rich — than at any time in history.

Former president Carter seems to grasp the importance of this argument. In the same interview, he said, “The richest people in America would be better off if everybody lived in a decent home and had a chance to pay for it, and if everyone had enough income, even if they had a daily job, to be good buyers for the products that are produced.” Seems like we are on the right track, even if it is a long road ahead.

— Aparna Mathur is a resident scholar at American Enterprise Institute. 



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