The following is a re-print of a past column by former Advertiser columnist Stephen Thorning, who passed away on Feb. 23, 2015.
Some text has been updated to reflect changes since the original publication and any images used may not be the same as those that accompanied the original publication.
One of the problems I have with this column is conveying some sense of what historical prices and costs mean in the context of current values.
The overall trend of the past 150 years has been one of rising prices and wage rates, but the relationship between the two have been not been constant. As well, there have been significant periods of deflation and price decreases.
Obtaining reliable data for the 19th century is the greatest difficulty. The federal government began gathering information in 1868, and there is information in the census returns done at 10-year intervals, but there are inconsistencies and gaps in these figures.
Another problem is that local conditions did not always reflect national trends. This fact remained significant until after the Second World War, when more workers purchased automobiles and were able to commute significant distances to their employment.
Government figures are more reliable after 1900, and statisticians began calculating cost-of-living indexes in 1913. Using the available information, I have been trying to calculate such an index for earlier years.
The first period of inflation occurred locally during the mid-1850s. This was the result of a worldwide shortage in commodities, triggered in large part by the Crimean War. After the war prices and wages declined, probably in the range of 30%, but in some cases much more. In 1855 wheat hit $2.50 per bushel; three years later the price was 50 cents. Locally, farm land sold for about $40 per acre in 1857, and dropped to less than $20 in 1863.
The American Civil War of 1861-65 caused major disruptions to the Canadian economy. Increased exports raised the prices of agricultural commodities, and American monetary policies caused a general inflationary increase.
Following the Civil War, there was a 30-year period of mild deflation. If we place the cost-of-living index at 100 at Confederation in 1867, the figure would be in the range of 80 to 85 in 1896.
In 1869 and 1870 railway contractors had no difficulty finding labourers at $1 per day. Through the 1870s unskilled labourers earned 12 to 15 cents per hour, skilled labourers from 17 to 25 cents. Young girls, mostly in the textile trade, could earn as little as 5 cents per hour. The normal work week consisted of six days of 10 hours.
Few workers were able to find year-round employment. Layoffs of two to three months were typical. There was no unemployment insurance in the 19th century. For security it was wise to have more than one wage-earner in the household, usually an unmarried son or other relative.
A bushel of wheat, at $1.40 to $1.55 in 1870, was worth more than a day’s wages for a working man. An hour’s wages in the 1870s would buy a pound and a half of beef, eight pounds of potatoes, three quarts of milk, or a dozen eggs.
A basic frame house sold in the 1870s in the $700 range, equal to three or four years’ earnings for the typical worker. A two-storey brick house could cost up to $1,200.
It is difficult to compare these prices with modern prices. The 1870s house had little if any insulation, probably no plumbing, no electrical system, and no central heating.
Prices rose significantly after 1896. The cost-of-living index rose from the low 80s in 1896 to 130 at the outbreak of the First World War. Much of the increase occurred in the late 1890s, with increases above 10% in some of those years.
Agricultural prices fell behind other sectors of the economy. Wellington County farm land hit $50 per acre in 1875, but dropped below $38 in 1900, and recovered to the $60 range in 1914. Successful farmers had to increase their productivity to remain in business.
To finance World War I, the Canadian government used inflationary monetary policies.
The real impact was not felt until 1917 and lasted until 1920. A spiral of strikes, wage raises, and price increases pushed the cost-of-living index from 130 in 1914 to 265 in 1918 and 330 in 1920.
There were shortages of many commodities in this period. Eggs briefly rose to $1.20 per dozen. Prices fell rapidly in 1921 and 1922. Wages never caught up to the peak of inflation in 1920, but on the other hand did not decline afterward. Consequently, most people were better off in the 1920s than they had been before the war.
Wage rates in Elora and Fergus generally were lower than those in cities, reflecting a lower cost of living locally, particularly in housing. In the 1920s wages at the T.E. Bissell Company in Elora ranged between $3 and $4 per day, with an average of $18 per week. This was for a 55-hour week with a half day on Saturdays.
The 1920s are often characterized as a boom period, and the 1930s as a dismal depression. This is a generalization that is misleading. Throughout the 1920s farmers faced decreasing market prices. Wage rates had not kept pace with increases in productivity. As a result, there were frequent layoffs in industry as unsold inventories swelled.
Elora and Fergus suffered much less than other communities in the depression of the 1930s. There were no plant closures or even major layoffs in local industry, although employers lowered the wage rates.
From the peak of 330 in 1920, the cost-of-living index dropped to 190 in 1929 and to 125 in 1933 before recovering to 175 in 1937. The average industrial wage in Canada was $830 in 1933, and probably at least $200 less in Elora and Fergus. Farm land fluctuated as well: from a peak of $75 per acre in 1922 to $40 in 1935.
During World War II the federal government feared a repeat of the economic turmoil of the previous war. Price controls and rationing dampened inflationary pressure on the one side. With virtually full employment and much overtime, incomes rose quickly, and the government pushed Victory Bonds to soak up as much disposable income as possible.
In large measure, the policies were successful. The cost-of-living index only rose to 205 in 1945. Modest post-war inflation pushed it to 285 in 1950. Wages, meanwhile, had risen more dramatically. The average industrial wage topped the $1,500 mark in 1945.
Wages continued to outstrip price increases through the 1950s and 1960s. The average income exceeded $6,700 in 1970, but the cost-of-living index only rose to the 470 range. Locally, the appearance of unions helped to push up wage rates, but the automobile was a more significant factor.
By the 1950s workers living in Elora and Fergus had to be considered part of the same labour pool as those in Guelph and Kitchener.
Since 1970, prices and wage rates have increased four- or five-fold, particularly as a result of the inflationary period in the 1970s. Gains for the average worker, though, have been more modest over the past quarter century.
If we compare 1997 figures with those of 1867, the cost-of-living index has increased about 25 times. However, this is a very rough comparison, since few of the exact products and services of 1867 are still on the market today, and the components of the government’s cost-of-living index change from year to year.
Wage comparisons are even more difficult to make. The worker of 1867 had no benefit deductions, and there was no income tax for anyone. Municipal and school taxes were very modest by modern standards.
On the other hand, there are now services that are paid for from tax revenue that formerly were individual responsibilities. Gross incomes have increased by more than 100 times since 1867, but disposable income has risen by less than this factor.
I frequently advise that dollar figures for the mid-19th century should be multiplied by 100 for a 1997 equivalent. This is a very rough guide, but it is a calculation that is easy to make mentally. [Update to 2021: $100 in 1997 is the equivalent to $151.99 in 2021].
Two things are certain. Although there were periods of setback, the average worker enjoyed major gains in real income in the century between 1870 and 1970, while the average work week declined from 60 to about 40 hours. It is obvious the gains since 1970 have been much less.
The other trend is the gradual erosion of a truly local economy. Workers now commute whatever distance they can stomach, and cheap transportation has integrated our communities with the larger economy.
*This column was originally published in the Fergus-Elora News Express on June 4, 1997.
