Big Mac Index: Americans are over 30% poorer than in they were in 1999.
It's no secret that Americans are worse off than they were in 1999, but somehow the Federal Government feels that if it lies long and hard enough, people will start to believe that times are getting better. Amidst a web of lies, how do you find the truth? My methods aren't traditional, but they paint a much more believable picture than the Bureau of Labor Statistics (BLS).
How? If the proof is in the pudding, the truth is in the sandwiches.
Say hello to the Big Mac Index (BMI). I didn't invent it, but I did repurpose it. Instead of using the price of a Big Mac to measure the value of foreign currencies, I use the price of a Big Mac over time to determine the real rate of inflation, which is quite different from US Government statistics (real inflation is a factor of two to three higher).
Why the Big Mac?
The Big Mac is a constant good (two all beef patties, special sauce, lettuce, cheese, pickles, onions on a sesame seed bun), and unlike gold or oil, the Big Mac is resistant to speculation and the wild gyrations of financial markets. The Big Mac represents labor, advertising, commodities, electricity, transportation and management, all wrapped into one small, universally identical package. With this true measure of the cost of goods and services, I figured that I could discover a lot about rising prices, wages and the state of the US economy as a whole.
The sandwich shall set you free. Check it out.
1. The Dow Jones Industrial Average
This benchmark for stock market performance is referenced constantly as a temperature check for the economy at large. In terms of dollars, the market is up. Measured by the BMI, though, the Dow Jones is off its 1999 peak of 4712 Big Macs to 3120 at the end of 2012. That's a 34% drop, and if you were planning on eating during your retirement, you may have to cut back.
2. Gas Prices
The price of a gallon of gasoline is where most people feel the effects of inflation first. If inflation were the only reason for rising gas prices, then the price of gas should be flat as measured by the BMI. Not so fast! Even in terms of Big Macs, the price of gas has more than doubled since 1998. So, it's not just your imagination, gas is actually much more expensive.
3. Minimum Wage
In terms of dollars, people are making an extra $2 an hour over their 1999 wages. But what about the BMI? People are making almost 20% less. Now instead of 2.12 Big Macs per hour, people are only earning 1.73. Fortunately, the folks actually making the Big Macs probably get them at a discount.
4. Median Income
I've gotten a lot of flak for using minimum wage in the past, since people can claim not a lot of people actually make minimum wage. How about median income? In 1999, people earned a whopping 16,118 big macs per year. Now, the average Joe makes 11,636 big macs a year. That's a 27% drop in purchasing power. This confirms that the "Good Old Days" occurred sometime right around 1999.
5. Social Security Benefits
Retirees aren't safe either. While Grandma could purchase 362 Big Macs with her monthly check in 1999 (and 385 in 2002), she could only purchase 292 Big Macs in 2012. That's 20% less buying power.
If you didn't already suspect that your government was lying to you about the recovery, employment statistics and generally everything, this is one more nail in the coffin. Dollars, in general, are a bad way of measuring wealth, wages and prices because they are constantly losing their value relative to everything real. With their $618 million budget, it seems that the BLS ought to be replaced by a BLT.