Making Money

The Cost of Living During the Cold War

In 1951, Steve Czekalinski posed with his wife and two boys in the midst of all of the food products that a “typical” family would have bought that year. All of that food weighed 2½ tons and cost the $1,300. The list included 699 bottles of milk, 578 pounds of meat, 131 dozen eggs, 1.190 pounds of vegetables and 440 pounds of fresh fruit, plus sugar flour, bread and cereal. You can see what some of the items from Czekalinski’s food cart cost in 1951 and today – as well as what the item would have cost if food had gone up by the same inflation rate as other products – by rolling your mouse over various parts of the picture below.

Czekalinski worked for Du Pont corporation, and he was probably earning more than the average family because his food bill was higher than the average family. Here’s why we assume that –

In 1951, the average family income was only $3,700.
That year, the average family spent 22 percent of their disposable income on food.
So, the “average” family would have spent a maximum of $814 on food ($3,700 x 22%).
If the Czekalinski family spent $1,300 on all of the food in the picture, and that represented 22 percent of their total income, his family would have been earning a total of $5,910 – much more than the $3,700 the “average” family earned.

Yet, the photograph is a good example of what food cost a family in the early 50s and today, and what those prices meant to farmers who were trying to make money.

For instance, round steak was one of the single most expensive items in the 1951 grocery basket at $1.09 per pound. Today (in January 2007) the average price for round steak was $4.16. However, if the price of steak had kept with the inflation as a whole – measured by the CPI or consumer price index – the price would be $8.61 per pound.

Pork chops in 1951 cost 79¢ per pound. Today they cost $3.17, but would cost $6.24 if pork prices had kept up with the inflation in other products.

Whole chickens cost 60¢ a pound. Now, they cost $1.03 – if you want a whole chicken instead of a boneless chicken breast. But whole chickens would have cost $4.74 if they followed inflation of other prices.

Some food prices are actually higher than CPI adjusted prices would have been. For instance, potatoes cost around 5¢ a pound in 1951. The CPI-adjusted price today would have been 39¢ a pound, but in fact the price is 52¢ a pound.

As mentioned above, roughly 22 percent of the average family’s disposable income was spent on food in 1951. Over the years, that proportion had come down to the point that the average family of today spends just 7 percent. By this rough measure, food is relatively cheaper now than then. However, some economists will argue that real wages for consumers have risen while agricultural technology has kept food production costs down.

If you chart the real prices – in dollars adjusted for inflation – paid by consumers for food for home consumption and the prices paid to farmers for their raw materials, you see that there were large fluctuations in farm prices and much smaller fluctuations in retail food prices (see chart at left). You can also see that there were drastic declines in food prices and farm prices beginning in 1950.

We should note that the chart might seem misleading in the sense that it shows an index where both price lines start at the same 100 percent mark in 1992. Retail food prices, of course, are 60 to 75 percent higher than the prices paid to farmers. But the chart shows how farmers have faced wide swings in prices for their products while consumers have been insulated from the worst swings.

One of the reasons for the smaller fluctuations in retail food prices is that prices paid to farmers make up only a fraction of that retail price.

During the last half of the 20th century, the cost to process, package, transport, advertise and sell food products – relative to the cost of the raw materials – has increased. For instance, consider the loaf of bread that cost 16¢ per pound in 1951. The farmer’s share of bread in 1967 – the oldest figures we were able to document – amounted to just 17 percent of the cost of that loaf for their part of the bread – farmers got less than 2.7¢ for their part of the bread. Today, bread averages $1.15 per pound and farmers get only 7 percent – 8¢ – of that.

The farmer’s share of meat products in 1967 was 56 percent and dropped to 36 percent today.
Dairy products went from 47 percent to 32 percent for the farmer’s share.
Eggs went from 59 percent to 46 percent.
Fresh Fruit went from 31 percent to 18 percent.
Poultry products went from 49 percent to 41 percent.
Overall, the farmer’s share of the food dollar for all products hovered around 40 percent from 1920 to 1970 and then declined rapidly to about 25 percent today.

With so little of the food dollar actually going into the pockets of farmers, it’s no surprise that the income of farmers lagged behind their urban colleagues in the past.
In 1960, average farm income was $3,228. City dwellers earned $5,940 and suburbanites earned $7,114. But, this is a very rough estimation of the relative standard of living for either group. In the 50s, for example, many farm families still ate mostly the food their grew and not food purchased at groceries.

According to the USDA, if all the factors affecting standards of living are figured in, farm families began to catch up with their urban brethren beginning in the 1960s. By the 1990s, farm house
holds equaled and in some years exceeded the average incomes of urban families.

Don Freeman (right) believes that farmers are an important part of the economy as a whole. “Every community is dependent upon agriculture,” he says, “because we all eat. We all use fiber that the farm produces… Anybody who says they aren’t affected by agriculture has got blinders on.”