When you get a 10% raise, will you suddenly need to spend 10% more on food and clothing?

Most Americans spend about the same percent of their income on clothing regardless of how much they earn. For example, people who earn $5,000 per year might spend about $200 on clothing whereas Americans who earn $150,000 per year spend roughly $6,000 of it on clothing! It is a strangely steady percentage. Housing and food are also remarkably steady.

This remarkably constant relationship doesn’t hold for historical data. The average American is much richer today than in 1901, and yet we spend less than a third as much of our budget on clothing now. The main reason is that the real price of food and clothing has dropped over the past century, so even though we now spend a lot less, we are buying a lot more of these goods.

The visualizations come from Catherine Mulbrandon at Visualizing Economics

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Posted in Development, Globalization

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