As the value of the dollar continues to erode — and with inflation raging almost everywhere you look — price distortions have become so large that it’s getting harder with each passing day to know the actual value of anything anymore.
The best way to identify the true value of wages, goods and commodities is to look into the past and compare their historical prices in terms of gold and silver because, unlike fiat currencies, they can’t created out of thin air; as such, the purchasing power of gold and silver are remarkably stable.
Of course, such a methodology isn’t perfect. For example, productivity gains due to technological improvements may reduce the prices of certain goods and other commodities today — but it does provide us with an extremely reliable approximation nevertheless.
Goods and Commodities
The Romans minted a popular silver coin called the denarius, which contained roughly 0.12 troy ounces of the white metal. The Book of Revelation notes that one denarius could purchase a quart of wheat (1.7 pounds), or three quarts of barley (3.8 pounds). And historical evidence shows that a denarius would also buy three kilos (100 fluid ounces) of olive oil.
The fiorino d’oro, or gold florin, was minted in 1252 at Florence and contains 0.1125 troy ounces of the yellow metal. In terms of purchasing power, we know that in the 15th century 1000 gold florins could buy a “handsome palazzo” (113 troy ounces). We also know that the Medici Palace was worth about 5000 florins — that’s 563 troy ounces of gold.
In 1850, a pound of beef or bacon could be had for ten cents; this is when gold was $20.67 per troy ounce. Not surprisingly, this lines up with the historical narrative that one ounce of gold has always been able to buy approximately 225 pounds of beef or bacon.
More recently, an acre of farmland in Kansas could be had for $20 US dollars in 1900. Keep in mind that the $20 gold double eagle coins that were in circulation at the time contained 0.9675 troy ounces of the yellow metal.
Meanwhile, at the end of World War II, a loaf of bread in the US could be purchased for as little as a silver dime (0.07 troy ounces), and a gallon of gasoline cost a silver quarter (0.18 troy ounces).
Financial analyst Rob Kirby notes that for 3000 years an upper-middle class annual wage was between 40 and 60 troy ounces of silver. We know this because the Greeks and Romans were meticulous record keepers — which provides a nice starting point for translating yesterday’s wages into the estimated equivalent paychecks for today’s laborers.
There are numerous historical examples that show the average pay for a full day’s worth of unskilled labor has been 0.1 troy ounces of silver. Yes, one-tenth of an ounce!
It is generally accepted that lower-tiered Roman solders were paid a single silver denarius (0.12 troy ounces) per day. Likewise, Matthew 20:2 in the New Testament refers to the denarius as being the daily wage for a common vineyard laborer. So, assuming a six-day work week, that equates to 312 denarii per year — or an annual income of 37.5 troy ounces of silver for common laborers and soldiers.
But what about skilled labor and military officers? Well, we know that a talent of silver would pay a skilled craftsman’s wages in Greece for nine years; a Greek talent is approximately 836 troy ounces. Therefore, one can grossly estimate that the annual wage for a skilled craftsman back then was in the neighborhood of 93 troy ounces of silver. As for the military, the lowest-tiered Roman Centurions received 3750 denarii per year, while the highest ranking officers earned 15,000 denarii (between 450 and 1800 troy ounces).
Richard Goldthwaite, in The Economy of Renaissance Florence notes that the supervisor and architect of the Florence cathedral was paid a salary of 100 florins per year in the late 13th century, or 11.25 troy ounces of gold. In fact, a man could live very comfortably back then with an income of 150 gold florins (17 troy ounces).
We also know that, in the 15th century:
- A maidservant could be hired for 10 gold florins a year. (1.1 troy ounces)
- The annual salary for a “cashier” in the Medici bank was 40 gold florins (4.5 troy ounces)
- An “apprentice” in the Medici bank earned 20 gold florins annually (2.25 troy ounces)
In Charles Dickens’ 1843 novella, A Christmas Story, Scrooge paid Bob Cratchit 15 silver shillings per week. A silver shilling at that time had a silver content of about 5.2 grams — which means Cratchit received 133 troy ounces of silver annually as an accounting clerk.
By the early 20th century, Henry Ford was paying his Model T line workers $5 per day. However most people don’t realize that approximately half of that $5 rate was bonus pay over and above their regular rate of $2.25 per day. But even at $2.25 per day, those early auto workers were earning the daily equivalent of 1.6 troy ounces of silver per day — or about 416 troy ounces of silver annually.
Historical data from Europe also shows that in the last half of the 19th century, common laborers were paid an average daily wage of 0.44 troy ounces of silver, while building craftsmen were paid 0.77 troy ounces of silver. During the Great Depression, an American carpenter could earn $2 per day — that’s the equivalent of 1.4 troy ounces of silver coins at the time — to install a hardwood floor in a Sears-type bungalow.
In 1964, a US Army private earned $78 per month. Based upon the silver content of US currency at the time, that’s equivalent to 724 troy ounces of silver annually — roughly 19 times the pay of his Roman Empire counterpart.
The Bottom Line
Today a worker making the minimum wage averages, at best, $120 a day. With that in mind, in order for silver to reach the historical valuations it enjoyed two millennia ago, the humble denarius — roughly 0.1 troy ounces of silver — would need to have a melt value of $120.
This implies that silver is currently 40 times cheaper on a historical basis than it should be. Think about that.
Photos Credit: Heritage Auctions