EXAMPLE 3 Salaries of professional athletes

The mean salary of Major League Baseball players rose from $329,408 in 1984 to $3,386,212 in 2015. How big was the increase in real terms? Let’s convert the 1984 average into July 2015 dollars. Table 16.1 gives the annual average CPI for 1984, and previously we mentioned that the CPI was $238.7 in July 2015.

373

That is, it took $756,782 in July 2015 to buy what $329,408 would buy in 1984.

We can now compare the 1984 mean salary of $329,408 in July 2015 dollars with the actual 2015 mean salary, $3,386,212. Today’s athletes earn much more than 1984 athletes even after adjusting for the fact that the dollar buys less now. (Of course, the mean salary is pulled up by the very high salaries paid to a few star players. The 1984 median salary was $229,750, and the 2015 median salary was $1,650,000.)