I'd like to express the cost of items in a document that can help with spending decisions in the long term. For instance, an item costs $30, with the minimum wage being $15/hr. in the present year.

If I express the cost of the item as a ratio of the minimum wage, i.e.: 30 / 15 = 2, it would indicate one would have to work for 2 hours at a minimum wage to obtain the item at the present time.

Would it then be reasonable to use this information and compare it at a future time, where if one has to work less time at minimum wage to obtain the same item, then the cost of the item has actually decreased, even if the item's dollar value had increased?

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    This adds an unnecessary layer of complexity for everyday budgeting. – Bob Baerker Jul 5 '19 at 21:51
  • This could be anywhere from useful to useless depending on your clients. Do most of them actually work minimum wage? If your clients are earning many times minimum wage they wont care what it is. – Vality Jul 5 '19 at 22:16
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    You should use "your" actual income, not minimum wage. – RonJohn Jul 5 '19 at 22:28
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    You might find the concept of "purchasing power parity" and The Economist magazine's "Big Mac Index" of interest. – user662852 Jul 6 '19 at 2:45
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    The minimum wage is set by a political process not an economic process, there's no reason why it should be an accurate basis to express the cost of goods, or compare the costs of a good across time. – JB Chouinard Jul 6 '19 at 4:21

Minimum wage? No. Your actual wage? Perhaps.

What you seem to seek is the idea that “time is money” and that some of us instinctively think about how much time we would work to buy an item, or pay for a service. For example, the big TV, say it’s $1000. That money is 138 hours to a minimum wage worker, but only 40 hours to those making $50,000, etc.

The process isn’t so much accurate as it might help you decide on large purchases.

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  • Okay, I can extend that idea to help with future financial management and determine where costs of goods or services are rising the most relative to actual wage at the time. – plu Jul 6 '19 at 1:10
  • @plu it's particularly good with young people when getting their first allowance or first job. – RonJohn Jul 6 '19 at 2:52
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    In this case, is it better written "money is time", as in "time worked"? – RonJohn Jul 6 '19 at 2:53
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    @RonJohn exactly, hours one needs to work to buy an item. – JTP - Apologise to Monica Jul 6 '19 at 3:04
  • Though the utility of looking at prices this way does decrease when you reach a point where a significant fraction of your income isn't coming from an hourly wage :-) – jamesqf Jul 6 '19 at 17:08

It only makes sense to think of the cost of an item as the amount of time at minimum wage it would take to purchase the item if your marginal rate is the same as the minimum wage. If you make more than the minimum wage now or expect to make more than the minimum wage in the future, you should base your numbers on that instead.

The minimum wage is rather disjunct from the amount of time it would take to earn an item. For example, the minimum wage at the federal level of the US was $5.15 for ten years. Yet for most people, wages increased during that span of time.

If you live someplace where the minimum wage is indexed to inflation, you might be better off just using the CPI for this purpose. Although again, that leaves off any increase that you might get from experience, etc.

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