Lessons About Inflation From the NFL Draft
For those of you who follow the NFL draft - and apparently it does garner a bit of attention from the ever-growing fan base of the incredibly successful National Football League - we present a simple lesson in inflation.
This from the Wall Street Journal's 1965 edition:
Here's what they meant by "richest":
That's $2 million total bonuses for all draftees. How times have changed.
I'm guessing that inflation of NFL salaries and bonuses has increased more than the general rate of inflation, but the point here is that this number - $2 million - astounded people back in 1965. And while all those inflation calculators you can find on the internet - the ones that tell you what a dollar in, for example 1965 is worth today, and vice-verse - are useful, they don't always communicate the reality of inflation for you and me.
For example, using the Bureau of Labor Statistics inflation calculator, we find that $2 million in 1965 would be worth $15 million today. In 2013, the #1 pick in the draft was given a signing bonus by the Kansas City Chiefs of $14.5 million - in today's dollars, almost as much as all the bonuses paid out in 1965. So we see that increases in CPI from 1965 to the present don't account for the increased dollars paid out to players today by any stretch of the imagination. The NFL has simply become so attractive to fans willing to fork over enormous sums of money for tickets, merchandise, etc., that it has grown exponentially richer, leading to much larger payouts to the players, never mind the riches garnered by the owners.
You and I, on the other hand, probably haven't increased in value to the same degree in recent decades. And unless you work in a banking or trading capacity on Wall Street, or are one of their top executives, or a top executive at a major corporation making salary, bonus and stock options, or were lucky enough to work for a start-up, received a chunk of stock options, and subsequently watched the value of the stock explode when the company was taken public, your value to our economy - translated as your compensation - has not matched the rise in value of the NFL or the compensation of those indicated in the above examples. As a result, inflation has been a real drag not only on your ability to build wealth, but also to provide for your family in recent decades. That's what all the chatter about wages not keeping up with cost of living for at least the last 30-40 years or so is all about.
The way I've become aware of the ravages of inflation - besides using those inflation calculators - goes like this:
For at least 20 years, when shopping at the supermarket for our family of two adults, five children, we never spent over 100 dollars per week. There were other costs, like shopping at the local produce store, but the same applies there. I could count on the fingers of one hand the times I needed more than a $20 bill to leave the produce store with two or more bulging bags of vegetables and fruit - usually receiving more than a few dollars of change, by the way. Never mind the fact that for those same 20 years, that same $20 bill would fill our car's gas tank. In fact, I remember the first time I had to fumble in my pocket for more money when my usual $20 wasn't enough. I thought there was some sort of mistake until I remembered that gas prices had begun what turned out to be an inexorable rise. Since then, I've just switched to using a plastic card to pay for gas. In fact, it would be tough to keep enough cash in my pocket if I were to gas up, go to the supermarket and stop by the produce store in the same trip: we'd be talking hundreds of dollars at this point.
What all this means I leave up to you. I suspect many of you know just what I'm talking about. What's to be done about it? The only thing I wonder now is why I quit the football team in grammar school after I got the you-know-what kicked out of me one particular hot humid day in August, as I tried out for the first time. It wasn't for me. Ah, had I only known what could have been.
This from the Wall Street Journal's 1965 edition:
Saturday's Pro Draft Will Be Richest Ever
Bonuses Will Top $2 Million
That's $2 million total bonuses for all draftees. How times have changed.
I'm guessing that inflation of NFL salaries and bonuses has increased more than the general rate of inflation, but the point here is that this number - $2 million - astounded people back in 1965. And while all those inflation calculators you can find on the internet - the ones that tell you what a dollar in, for example 1965 is worth today, and vice-verse - are useful, they don't always communicate the reality of inflation for you and me.
For example, using the Bureau of Labor Statistics inflation calculator, we find that $2 million in 1965 would be worth $15 million today. In 2013, the #1 pick in the draft was given a signing bonus by the Kansas City Chiefs of $14.5 million - in today's dollars, almost as much as all the bonuses paid out in 1965. So we see that increases in CPI from 1965 to the present don't account for the increased dollars paid out to players today by any stretch of the imagination. The NFL has simply become so attractive to fans willing to fork over enormous sums of money for tickets, merchandise, etc., that it has grown exponentially richer, leading to much larger payouts to the players, never mind the riches garnered by the owners.
You and I, on the other hand, probably haven't increased in value to the same degree in recent decades. And unless you work in a banking or trading capacity on Wall Street, or are one of their top executives, or a top executive at a major corporation making salary, bonus and stock options, or were lucky enough to work for a start-up, received a chunk of stock options, and subsequently watched the value of the stock explode when the company was taken public, your value to our economy - translated as your compensation - has not matched the rise in value of the NFL or the compensation of those indicated in the above examples. As a result, inflation has been a real drag not only on your ability to build wealth, but also to provide for your family in recent decades. That's what all the chatter about wages not keeping up with cost of living for at least the last 30-40 years or so is all about.
The way I've become aware of the ravages of inflation - besides using those inflation calculators - goes like this:
For at least 20 years, when shopping at the supermarket for our family of two adults, five children, we never spent over 100 dollars per week. There were other costs, like shopping at the local produce store, but the same applies there. I could count on the fingers of one hand the times I needed more than a $20 bill to leave the produce store with two or more bulging bags of vegetables and fruit - usually receiving more than a few dollars of change, by the way. Never mind the fact that for those same 20 years, that same $20 bill would fill our car's gas tank. In fact, I remember the first time I had to fumble in my pocket for more money when my usual $20 wasn't enough. I thought there was some sort of mistake until I remembered that gas prices had begun what turned out to be an inexorable rise. Since then, I've just switched to using a plastic card to pay for gas. In fact, it would be tough to keep enough cash in my pocket if I were to gas up, go to the supermarket and stop by the produce store in the same trip: we'd be talking hundreds of dollars at this point.
What all this means I leave up to you. I suspect many of you know just what I'm talking about. What's to be done about it? The only thing I wonder now is why I quit the football team in grammar school after I got the you-know-what kicked out of me one particular hot humid day in August, as I tried out for the first time. It wasn't for me. Ah, had I only known what could have been.
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