How We Spend

And what that tells us about the economy
More

Even Americans who think they know where their money goes probably have no idea how their spending compares with that of their parents or grandparents. But such figures yield a surprising picture of how our economy works—and how it’s changing. We take for granted, for instance, our much-discussed drift away from manufacturing. Advances in technology and education have created massive productivity gains, which have made things cheaper and easier to obtain. Consider necessities like food and clothing, which gobbled up 42% of our spending in 1947. Six decades later—even in the face of exorbitant spending on frivolities like high-end coffee and designer clothes—food and clothing accounted for only 16% of spending. (In our research, we use 2007 as our end point because some economic relationships have been distorted by our current downturn.) But is spending less on the production of tangible goods such a bad thing? Not necessarily. After all, the shift frees up resources for areas like health care, education, and recreation, where spending has increased.

Article continues below infographics.

If we drill down further—to see not just the categories we spend on but where our dollars go within those categories—the picture is even more dramatic. Taking 1967 as our starting point, 30% of the cost of the things we consumed that year went to manufacturing them; by 2007, that figure had fallen to 16%. In contrast, what we spent on business services over the same period jumped from 12% to 26%. That’s because baked into the price of everything we buy is the rising cost of advertising, accounting, legal services, insurance, real estate, consulting, and the like—jobs performed by the high-wage workers of our modern economy. These days, 52% of all compensation goes to office workers. That includes the manufacturing sector: nearly a third of workers aren’t on the factory floor; they’re behind desks.

Graphics by Kiss Me, I'm Polish; Sources: Bureau of Economic Analysis; U.S. Census Bureau

Stephen J. Rose is a research professor at the Center on Education and the Workforce at Georgetown University. He is a co-author, with Anthony P. Carnevale and Ruy Teixeira, of the forthcoming monograph “Education for What,” from which this data was adapted.
Jump to comments
Presented by

Stephen J. Rose is a research professor at the Center on Education and the Workforce at Georgetown University. He is a co-author, with Anthony P. Carnevale and Ruy Teixeira, of the monograph “Education for What."

Get Today's Top Stories in Your Inbox (preview)

What Do You See When You Look in the Mirror?

In a series of candid video interviews, women talk about self-image, self-judgment, and what it means to love their bodies


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

Adventures in Legal Weed

Colorado is now well into its first year as the first state to legalize recreational marijuana. How's it going? James Hamblin visits Aspen.

Video

What Makes a Story Great?

The storytellers behind House of CardsandThis American Life reflect on the creative process.

Video

Tracing Sriracha's Origin to Thailand

Ever wonder how the wildly popular hot sauce got its name? It all started in Si Racha.

Video

Where Confiscated Wildlife Ends Up

A government facility outside of Denver houses more than a million products of the illegal wildlife trade, from tigers and bears to bald eagles.

Video

Is Wine Healthy?

James Hamblin prepares to impress his date with knowledge about the health benefits of wine.

Video

The World's Largest Balloon Festival

Nine days, more than 700 balloons, and a whole lot of hot air

Writers

Up
Down

More in Business

More back issues, Sept 1995 to present.

Just In