The Economics of Death: The High Cost of Dying?

by M-Gillies

The funeral of Alexander the Great as depicted in this painting by Andre Bauchant would have cost over $600 million in today's dollars.

“In keeping with our high standard of living there should be an equally high standard of dying. The cost of a funeral varies according to individual taste and the niceties of living the family has been accustomed to.” - Warren J Ringen, San Francisco Funeral Director (From the 1961 article The High Cost of Dying by Ruth Harmer)

Nothing could have prepared funeral directors for what had happened to them in 1963. It didn’t matter that the industry was barely half a century old – public scrutiny, scorning and scepticism had already painted an image of the industry as a black sheep to ostracize, but with the publication of Jessica Mitford’s The American Way of Death, public backlash was even less merciless.

It was in this expose that Mitford put her acid pen down and created an acerbic look into the world of the funeral industry. Part combination of social criticism,  part witty satire and the rest scandalous exploitation formed a recipe that marked the end of the publics already tepid views of the funeral industry.

As Warren Buffett once said, “It takes 20 years to build a reputation and five minutes to ruin it.”

And that is what The American Way of Death did.

For an industry that people tend to cringe at and consider morbid, what The American Way of Death did to the funeral industry is what the Berlin Wall did to Germany. It acted as a watchdog against a notion that funeral directors were  surreptitious and harbingers of deception, eager to empty out the pockets of the grieving. And it worked. Years had passed and to this day articles, television broadcasts, newspaper exposes have reinforced a false belief that the funerary industry is a profit-driven empire.

Just as the proverb goes, “One bad apple spoils the batch” so has the exposure of the American funerary industry affected general perceptions of what actually happens behind the closed doors.

Death, in America is considered to be a $15 billion industry, encompassing funeral homes, crematoriums and cemeteries (excluding the additional costs of headstones and crypts). Its been expounded in our minds that funerals and the cost of dying is expensive. Particularly, with today’s current average cost of funerals being roughly $7,323 for a basic funeral service.

As TopStockAnalysts.com wrote, “The death industry is a tale of two economies. A relatively few large companies, most of them publicly traded, control most of the businesses that sell caskets and granite for memorials. The rest of the death industry is made up of many modest businesses.”

These are the local independent family-owned funeral homes and they make up roughly 19,500. An additional 1,600 are owned by Service Corporation International. In retrospect, it’s comparing one business to another as the mom and pop owner to the corporate Goliath. Politics aside, when comparing the cost of funerals to those of major purchases made in our daily lives, the number really is lower than what most people would expect.

According to Consumer Expenditures report of 2010, and released by the U.S. Department of Labor’s U.S. Bureau of Labor Statistics the average cost of owning and operating a vehicle per year was $7,658. Meanwhile, U.S. consumers will spend an average of $6,372 on food, $16,895 on housing, $3,126 on healthcare and $5,471 on insurance – per year.

With the average cost of vehicles in the U.S. edging toward $30,000, and the average sales price of a new residential property soaring to $226,000, it seems that the price of funerals is still under intense scrutiny, so the question is why is the cost of funerals raising so many red flags?

Centuries ago, Egyptians built elaborate funeral entombments for pharaohs – enormous pyramids meant to forever encapsulate these iconic figures. But to create a burial mound such as a pyramid would cost millions by today’s standard. In fact, Alexander the Great is still reported as having the most expensive funeral. By today’s standard, the cost of Alexander’s funeral would be over $600 million dollars, all because his body, placed in a gold sarcophagus, which was placed within a gold coffin and transported in a gold carriage across a road built at his expense from Babylon to Alexandria more than sky-rocketed his funerary expenses.

But if modernizing the funeral service seems less justifiable then expenses put toward practices of the Egyptians and Alexander the Great, below is a breakdown of the cost of an average funeral in accordance to the change of the average annual salary.

A break down of the cost of funerals vs. the average annual salary over 50 years:

1960: The Average funeral cost $708 while the average annual salary was $4,007.12

1965: The Average funeral cost $790 while the average annual salary was $4,658.72

1971: The Average funeral cost $983 while the average annual salary was $6,497.08

1975: The Average funeral cost $1,285 while the average annual salary was $8,630.92

1980: The Average funeral cost $1,809 while the average annual salary was $12,513.46

1985: The Average funeral cost $2,737 while the average annual salary was $16,822.51

1991: The Average funeral cost $3,743 while the average annual salary was $21,811.60

1995: The Average funeral cost $4,626 while the average annual salary was $24,658.72

2000: The Average funeral cost $5,180 while the average annual salary was $32,154.82

2004: The Average funeral cost $5,582 while the average annual salary was $36,764.00

2006: The Average funeral cost $6,195 while the average annual salary was $38.651.41

2009: The Average funeral cost $6,560 while the average annual salary was $50,599.00

When comparing the cost of funerals to the increase of the average annual salary, the difference, in half a century is a price increase of $119.42 a funeral per year. To simplify matters, in a five year period between 2004 and 2009, funeral costs increased by $978 while the average annual salary saw an increase of $13,835. In comparing the numbers, funerals have increased in cost by 1.93% relative to the increase of average annual salaries.

When comparing the funeral industry to that of car manufacturers, real estate purchases or annual insurance payments, the price of a single funeral and the cost of death has only increased marginally when compared to the costs associated to living – particularly when comparing the largest payments a person will ever make in their lifetime.

But perhaps the reason the funeral industry takes so much brute criticism over the price of funerals is because it’s a large payment in a short period of time for a service that is only used once per person. On the other hand, vehicles and houses are paid off over a period of years. The funeral industry, meanwhile, does offer pre-need payment plans, which acts as an insurance alternative for funeral services. Nevertheless, the options are there, the myth debunked: why are funerals so expensive?

Truth is, in the wide comparison of things, funerals realistically are not as expensive as people have been led to believe. Like basic economics, funeral homes follow the fundamentals of business, adjusting their competitive prices to reflect inflation. Though people die, a funeral home is not recession proof. They too are a business that has to adapt and alter to the changes of family expectations and needs.

Where some families may not want casket liners or cremain-filled jewellery, others may. For a business to offer a wide range of options and selections, is a business that is willing to accommodate every need of a client – but there’s a juggling act involved when it comes to finding a happy medium. The funeral industry is about providing a professional service and assisting the bereaved through a process to find closure, and like many, the process of closure is different for everyone.

Links to the sources:

http://www.census.gov/construction/nrs/pdf/newressales.pdf

http://www.census.gov/prod/2005pubs/acs-01.pdf

http://www.bls.gov/

http://yourfuneralguy.wordpress.com/2010/10/11/nfda-issues-new-numbers-on-the-average-cost-of-a-funeral-your-funeral-guy/

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