The Cost of Christmas Continues to Increase

While Christmas gifts are exchanged between people of all ages, let’s face it… it’s all about the children. We go to elaborate lengths to create a mystical atmosphere of goodwill and anticipation, all for the benefit of the kids. And then comes the most discouraging phrase ever heard: “Assembly Required.” The vast majority of money spent on Christmas goes toward toys for the little ones.

Children have been playing with toys for thousands of years, and they’re quite capable of using their imaginations to create toys from almost anything. In the past, children were not so hard to please and were usually happy just to get anything. In my youth, we could make toys from fallen tree branches (swords), trees (Tarzan’s home), old PVC pipes (blowguns, swords, clubs, medical instruments…), and rubber bands (toy gun ammo, once we made the gun from an old 2×4). Any store-bought toy was considered a real treasure. Our most prized possession was usually our bicycles, which allowed us to expand our adventurous territories. Most toys back then were modest, compared to today’s offerings. But with the increase in technology comes an increase in price as well.

Just as an example, we can examine some of the average toys of Christmas past.

• 1920s – Technology hadn’t really taken off yet, and most popular toys were re-makes of old classics. The Teddy Bear was introduced at a cost of 98 cents, crayons debuted at 5 cents for a box of 8 colors, and the much-loved Raggedy Ann doll was born, at 95 cents each. And of course, the Yo-Yo, popular with young and old since the days of the Romans, was still a best-seller. Pedro Flores brought the Yo-Yo with him to America from the Philippines and started the Flores Yo-Yo Company (‘yo-yo’ means ‘come-come’ in Tagalog). The company was purchased in 1929 by Phillip Duncan, and the King of Yo-Yos, the ‘Duncan,’ was born. The rest is history.

• 1930s – The 30s were plagued by the Great Depression, and toy companies shelved most innovations in favor of keeping prices as low as possible. However, the toy of the decade was the 3D Viewmaster, which could be had for around $1.50. Technology was beginning to make its presence known in the toy world. The other big boom in children’s goods was the invention of the comic book, and superheroes like Superman were common fare. The cost of a comic book in 1935: 15 cents. Board games like Scrabble and Monopoly ruled the market for much of the decade, costing around $2.00 per unit.

• 1940s – The world was once again at war, and technology ruled. An engineering accident led to the creation of one of the most enduring toys ever made: Silly Putty. In 1943, James Wright, a Scottish engineer working for General Electric, attempted to create a synthetic rubber by adding boric acid to silicon oil. The resulting gooey, bouncy polymer was a failure in terms of rubber, but someone recognized its potential as a toy, and it was marketed as Silly Putty. Also in 1943, another accident in the War Industry led to the creation of the beloved Slinky. A naval engineer, Richard James, was trying to invent a spring to cushion sensitive equipment on ships. When one of his experimental coils fell off a shelf, it “walked” across several shelves and down some stairs before coming to rest. His wife, Betty, named it the Slinky, referring to the sound it made. With a $500 loan, James made 400 Slinkys, and Gimbels Department Store allowed him to sell them for $1.00 each. They sold all 400 in less than 90 minutes, and a legend was born. Another classic, the virtually indestructible Tonka Truck, was also created in this decade.

• 1950s – The booming economy and abundance of consumer technology created a Golden Age for toys. The new medium of television gave the toy industry a powerful ally. Mr. Potato Head, introduced in 1952 at 98 cents each, was the first toy ever marketed on TV and became an outstanding success. Wham-O, a company that previously only marketed cheap plastic slingshots, introduced the Hula Hoop in 1958 and the Frisbee. Students at Yale University used to throw pie plates from the local Frisbie Bakery to each other starting in the early 1800s. When the UFO craze began in 1946, a former Yale student partnered with a friend from the war to create a plastic version of the pie tins, which flew even better. They marketed them as the Pluto Platter until 1955, when they caught the attention of Wham-O Toys, who bought the rights. They rebranded the discs as Frisbees, and over 10 million were sold before Wham-O was sold to Mattel in 1994.

• 1960s – Innovation was king in the 1960s, and the decade saw the birth of both Barbie Dolls and GI Joe. You could get a Barbie for a mere $7.97, and a GI Joe, complete with gear, for a little more. Matchbox cars were popular, and their main rival, Hot Wheels, created small die-cast cars that could top 300 mph. Popular games like Operation, at $2.50 each, and Twister, at around the same price, were also all the rage.

• 1970s – The decade before the major technology explosion, the toy of the decade was the brain-buster Rubik’s Cube, which became an addiction for many. The first commercially-made skateboards hit the market, creating a new sport. By the late 70s, toys were equal parts technology and nostalgia. The late 70s also saw the birth of the internet and personal computers, which became (barely) affordable for the general public.

• 1980s – The birth of the electronics age for toys. The 80s witnessed the rise of Pop Culture, including the 1983 Cabbage Patch Doll craze, one of the biggest toy crazes of all time. The shortages increased prices exponentially. At the same time, primitive electronic games like Pong were replaced by fully computerized games from Atari and Nintendo. They were very expensive, with a Nintendo console selling for $130 or more, plus $30 for each game cartridge. Christmas became incredibly more expensive, and toy companies learned just how far they could push consumers.

• 1990s – The age of the internet and computers had arrived, making Christmas more expensive than ever. While low-tech items like Roller Blades captured a share of the market, portable gaming consoles like Nintendo’s Gameboy were hugely popular. Each year had a “must-have” toy, thanks to massive TV marketing aimed at children, leading to shortages and high prices. Items like Tickle Me Elmo and Beanie Babies became permanent fixtures in American culture. For the first time in history, children spent less time playing outdoors than indoors with computers and other devices.

• 2000s – The undisputed hit of this decade was Nintendo’s Wii Gaming Console. By 2010, over 75 million units had been sold at several hundred dollars each, outpacing competitors like Xbox and PlayStation 3. The demand was so great that Wii consoles were purchased on eBay for as much as $2,500. Video games dominated the market, and merchandise based on the wildly popular Harry Potter films was also a major hit.

• 2011 – Toy prices seemed to level off, possibly due to the world economic situation, but technology still ruled. The ‘hot’ toy for 2011 was the Hexbug series of nano-robot bugs and larvae, costing around $30 each. Accessories, including various habitats, were modestly priced. Video games, computers, iPods, smartphones, and computers still dominated the market.

Most of us over 50 would probably agree that people spend a lot more money on Christmas gifts now than when we were young. To many of us, the price of many toys today seems the equivalent of the Gross National Product of a small Third-World country. But is it really true, or just subjective?

In 1960, the average U.S. household had about 32% of their income available for discretionary spending (U.S. Bureau of Labor Statistics, Consumer Expenditure Survey for 1960, and U.S. Census Bureau, Statistical Abstract of the United States, 1960). The average annual income in 1960 was $6,691.00. 32% of that would be $2,241.00. Assuming at least 20% of that was spent on Christmas gifts, that would be $428.22.

In 2010, the median family income was $49,445.00 (US Census Bureau Report “Income, Poverty, and Health Insurance Coverage in the United States: 2010” September, 2011). Average family expenditures for necessities were $33,289.00, leaving $16,156.00 for discretionary spending, or 32%. 20% of that would be $3,231.00 to spend on Christmas gifts. However, toys and gas are much more expensive now. According to the US Credit Bureau, the average family spends $935.00 in cash on gifts and incurs $8,562.00 in credit card debt for Christmas gifts. So, we are actually spending less than half as much for presents as we would have in 1960, adjusted for inflation.