If you are asking what a monetary value is "worth", there is no single correct answer. A
price, an income or a project can be valued in different ways by different people, under
different contexts and at different times. One index does not fit all.
At MeasuringWorth we use three different types of indexes to compare relative worth. They
are price indexes; indexes of wages, incomes or average expenditures; and an index of the
economy’s output.
The Price Measures
$5 in 1905 has a relative price worth of $185.03 today using the Consumer Price Index (CPI)
$5 in 1905 has a relative price worth of $135.04 today using the GDP Deflator.
The Wage, Income, Household Expenditure Measures
$5 in 1905 has a relative wage of $882.90 paid to an Unskilled Worker today.
$5 in 1905 has a relative wage of $1,156.73 paid to a Production Worker today.
$5 in 1905 has a relative Per Capita GDP of $1,235.68 today.
$5 in 1905 would be the same proportion of what the average household spent on Consumer
Goods and Services as $432.21 is today.
The Output Measure
$5 in 1905 would be the same proportion of output as measured by GDP that $4,970.68 is today.
We present here specific "Definitions of Relative Worth" for the combinations of each of the seven indexes applied to each of the three types of items.
Item Measure
Commodity
Income or Wealth
Project
Price Index
real price
$185.03
real wage or real wealth $185.03
real cost $135.04
Compensation
labor value
$882.90
or
$1,156.73 income value $1,235.68
relative labor earnings
$882.90
or
$1,156.73 relative income $1,235.68
The numbers presented here change often during the year and will not be available at a later date. For scholarly publications it is recommended the results from Seven Ways Compute the Relative Value of a U.S. Dollar Amount be used as they can be reproduced at a later time.
We would be happy to receive your feedback on this comparator. The link above will take you to a form where you can tell us the context of your question, what answer you are going to use and for what purpose. Please do not ask us what the best answer is as that is for you to choose based on what is the context of your question.
Citation
"What was a Dollar from the Past Worth Today?," MeasuringWorth,
.
A Project is either an investment, such as construction of a canal or installation of a cable network; or a government expenditure, such as the financing of Medicare or a war. Also within this category are such items as the size of a government budget deficit, and the total assets or net worth of a company.
Income is a flow of earnings, while Wealth is a stock of assets. Earnings might be of a specific type of labor, such as a plumber or professional athlete, or the (average) earnings of a broad group of labor, such as unskilled workers. Wealth can be a financial asset such as bank deposits or a stock portfolio, or can involve a physical asset, such as real estate.
Commodities are (usually consumer) goods and services. Examples are bread, attending a rock concert, buying hamburgers, a visit to the dentist, and personal computers.
Economy Cost of a project is measured as the cost of the project as a percent of the output of the economy. This measure indicates the opportunity cost in terms of the total output of the economy. It can be interpreted as the importance of the item to society as a whole. This measure uses the share of GDP.
Labor Cost of a project is measured as a multiple of the average wage of the workers that might be used to build the project. This measure uses one of the wage indexes.
Real Cost of a project is measured by comparing its cost to the cost index of all output in the economy. This measure uses the GDP Deflator.
Household Cost is the cost of a project relative to the amount the average household spends annually on consumer goods and services. The project may pertain either to business/government, a person/household,
or to a nonprofit institution. This measure uses the Value of the Consumer Bundle, which is only available after 1900.
Relative Output The ratio of income, compensation or wealth to GDP provides a sense of the share of the economy it represents, the amount of what we call the relative output it commands. Many believe that the rich have access to political favors that are denied to the average person. In that sense, their income and wealth relative to the output of the economy is a measure of their economic power.
Relative Income measures an amount of income or wealth relative to per capita GDP. When compared to other incomes or wealth, it shows the economic status or relative "prestige value" the owners
of this income or wealth because of their rank in the income distribution. This measure uses GDP per capita.
Real Wage or Real Wealth measures the purchasing power of an income or wealth by its relative ability to buy a (fixed over time) bundle of goods and services such as food, shelter, clothing, etc. This bundle does (in theory) not change over time. This measure uses the CPI.
Household Purchasing Power is measured as the relative cost of a bundle of goods and services such as food, shelter, clothing, etc., that an average household would buy. This bundle has become larger
as households have bought more over time. This measure uses the Value of the Consumer Bundle, which is only available after 1900.
Relative Labor Earnings measures an amount of income or wealth relative to the wage of the average worker. This measure uses one of the wage indexes.
Income Value is measured as the multiple of average income that would be needed to buy a commodity. This measure uses the index of GDP per capita.
Labor Value is measured as the multiple of the average wage that a worker would need to use to buy the commodity. This measure uses one of the wage indexes.
Relative Value in Consumption is measured as the relative cost of the amount of goods and services such as food, shelter, clothing, etc., that an average household would buy. Historically this bundle has become larger as households
have bought more over time. This measure uses the Value of the Consumer Bundle, which is only available after 1900.
Real Price is measured as the relative cost of a (fixed over time) bundle of goods and services such as food, shelter, clothing, etc., that an average household would buy. In theory the size of this bundle does not change over time, but in practice adjustments are made to its composition. This measure uses the CPI.
Economic Share is the worth of a commodity in a particular time period divided by GDP; it is its share of total output. This is helpful in measuring the relative value of aggregate consumption items such as all the cars made in a year.
