America At Its Best: Technology, Education, Innovation & Art

Anthony Mancinelli,Inflation and haircut price in the US

The Twitter video of Anthony Mancinelli is very informative about Anthony’s achievements as well as how prices of services i.e. hair care services have changed over the last century in the US. Anthony Mancinelli according to the Guinness Book of World Records is the oldest barber in the world who charged 25 cents for in 1922.

First, congratulations to Anthony for his remarkable and world-beating achievement. Second, the video shares a great panorama on the inflation-adjusted return for Anthony’s services. He now charges $20 for his services, considering a lifespan of 97 years, amounting to annual (compounded) growth rate of 4.60%. Although he presently is working in a salon in New York, it’s not clear whether he worked all his life in New York.In the US prices usually vary across states and cities. The US has seen two decades of falling prices especially during the great depression with two decades of high inflation. The 70s is an interesting era of high inflation in the US due to oil price shock. To share a perspective, cumulative inflation growth between 1913 to 2013 is 2200% which means that something which cost $100 in 1914 would cost $2,375 now!

However, the calculation of inflation is not as simple as it sounds.  Inflation index, (the US uses consumer price index as compared to the wholesale price index in India), is calculated using a base year which is regularly revised over the years. Remember GDP calculation. Refer to tutorials on this blog.

Feel free to calculate any change in price in the US over the years using the link below.

http://www.in2013dollars.com/us/inflation/1922?amount=0.25

I used the CPI inflation calculator to equate the price of 25 cents in 1922 to the present. It amounts to $3.76 today which is an average annual inflation growth rate of $2.83% (compounded) since 1922 and a cumulative price change of 1404%. 1404% is lower than 2200% due to -6.15% inflation in 1922. The price comparison is important since it lists the price purchasing parity (PPP) of money over the years. e.g. 25 cents in 1922 would amount to $3.76 today but in the above example the pricing is distorted since inflation measures a basket of services and goods; read more than the CPI basket in the US. Hair care is a service-oriented industry and New York is the global cosmopolitan hub, the pricing for services would always be at a premium compared to commodities ignoring other parameters. An average haircut in the US would cost between $12-$20 from my experience in a decent salon. (Pricing from my experience; Midwest, Washington DC and Seattle and open to correction.) Going forward, Anthony’s case gives a very good perspective on price change for hair cutting services for men in the US over a century. Reason being, in this case, Anthony did not promote to an upmarket salon which marks a consistent trajectory of price growth over the years and serves as a benchmark for evaluating key aspects of hair care industry in the US. Food for thought.

In an emerging economy, one would be paying much more for similar service in terms of PPP and much higher in a frontier market. Developed economies always have lower inflation compared to emerging economies…

Coming back to PPP, for simplification, it also means what $1 would buy in New York compared to its worth in purchasing a similar service or good in Mumbai, Paris, Stockholm, Accra to cite an example. Inflation is low so I predict Anthony’s going to be charging pretty much the same price next year.

Coming Up: Primer on PPP. 

Graph and highlighted data Source: Inflation data