An article in the April edition of The Atlantic, compares how consumer spending has shifted between two time periods, 1967 and 2007. Some differences are pretty easy to guess such as health care costs going from 8.1% to 18.0% of disposable income.  It is also not surprising that food and drink decreased from 17.8% of disposable income to 10.6%.  What is surprising is that of those percentages 14% went to farmers in 1967 but by 2007 the portion of processed food so increased that 5% went to farmers while the portion that went to advertisers, lawyers and business services (read processed food) jumped from 6% to 15%.  Also not surprising, is that the amount that goes to restaurants increased from 8% to 14%.     There appears to be rather high correlation to spending less on quality foods and more on health care to overcome the diseases that appearing due to our consumption of processed foods.

We were not surprised that recreation in 1967 consumed a modest 6.1% of disposable income while that amount jumped to 11% in 2007.  Nor were we shocked that clothing cost decrease from 8.2% to 5.0%.  An area that produced curiosity was how transportation costs broke out.  In 1967, 8.9% of disposable income went to transportation that amount barely dropped to 8.5% in 2007.  But that difference does not tell the whole story.  Cars are better made today which helps to explain why people are driving them for more years.  In 1967, 7% of the transportation budget was spent on repairs.  By 2007 that percentage dropped to less than 2% as cars needed fewer repairs.  However, costs related to legal fees and insurance jumped from 9% in 1967 to 21% in 2007.  The cost of manufacturing a car has dropped from 7% in 1967 to 3% in 2007.  Retailers such as gas stations and dealers also receive a smaller portion of our transportation dollars going from 41% to 26%.  We were not surprised to see that imports of autos and oil rose from 7% in 1967 to 24% in 2007.

Disposable income going to the government dropped from 18.1% in 1967 to 13.2% in 2007, which makes sense giving the US’s tax history.  A great deal of the decrease is related to the various tax cuts that have occurred in recent times, such as the Bush tax cuts (which are scheduled to expire at the end of this year).  Given the escalating cost of post secondary education, we did not expect education costs to basically stay the same going from 7.7% in 1967 to 7.3% in 2007.  The only conclusion we draw from this is the sharp decrease in costs associated with schooling in the lower grades (mostly books and school supplies).  Another surprise was the sharp rise in business services; the category more than doubled from 4.1% to 8.3% in 2007.  Overall, these shifts illustrate the evolutionary nature of how we allocate our resources as a society.  It will be interesting to see how these trends continue over the next several decades because some of the trajectories are clearly unsustainable.