Tuesday's Tip: Inflation Calculations & Genealogy

I was looking at some 1905 divorce records the other day and noticed that my great-grandfather owed $2.50 per week in child support. Since he worked as a day laborer, timekeeper, and as a machinist, I suspect that the $2.50 represented a significant amount for him. To find a more precise answer to questions like this, I used to use NASA's inflation calculator, but recently I found a set of calculators that I think are very impressive.

The site is called www.measuringworth.com. 

One of the things I like best about it is that it uses data sets for currencies from the UK, US, Japan, and China.

It also provides several calculators:

Annualized Growth Rates
Relative Values - US $
Relative Values - UK £
Relative Values - China ¥
Relative Values - Japan ¥
Conversion ($ and £)
Purchasing Power - US $
Purchasing Power - UK £
Savings Growth - US $
Inflation Rates
Stock Growth Rates (DJIA, SP500 & NASDAQ)

The answer to my question about 1905 child support?

In 2010, the relative value of $2.50 from 1905 ranges from $49.90 to $1,260.00.

A simple Purchasing Power Calculator would say the relative value is $63.90. This answer is obtained by multiplying $2.5 by the percentage increase in the CPI from 1905 to 2010.

This may not be the best answer.

The best measure of the relative value over time depends on if you are interested in comparing the cost or value of a Commodity , Income or Wealth , or a Project . For more discussion on how to pick the best measure, read the essay "Explaining the Measures of Worth."

I decided Income or Wealth is the best fit and the results are:  

If you want to compare the value of a $2.50 in Income or Wealth , in 1905 there are four choices. In 2010 the relative:

historic standard of living value of that income or wealth is $63.90
contemporary standard of living value of that income or wealth is $135.00
economic status value of that income or wealth is $341.00
economic power value of that income or wealth is $1,260.00.

Pretty nifty, eh? Try it on your family's economic records and see what you get.