Comment by darth_avocado
9 hours ago
Meanwhile household basics increased faster than wages. In other words people don’t have more money.
9 hours ago
Meanwhile household basics increased faster than wages. In other words people don’t have more money.
The term “real” means the values are adjusted for inflation
...which is notorious for using a dogshit basket and basket-update methodology to make the number look good.
The basket is dogshit, but not for the reason you probably think. Our lives improved tremendously by technology: internet, smartphone, videogames, netflix & co, medical progress, online shopping of any goods you can possible imagine, ability to travel the world for cheap.
The problem with the CPI basket is, it needs to be constant of products to be comparable, so NO technological advancement is considered in that basket. Instead, they use the price of butter and tomatoes. Well, a fictious 1950s person wouldn't care that is can buy more butter or tomatoes than we can, but would want smartphone and a plane ticket to thailand.
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Yup. The St. Louis Fed is a joke. Inflation of owners' equivalent rent alone blows the whole argument up..
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This is research from a labor advocacy group, with the explicit aim of the organization to advocate for this sort of thing. This doesn't mean the research is is automatically invalid, but it is bias worth mentioning.
Looking at an article from the CATO institute, over the last 30 years wages have climbed 169 percent, while food prices 111 percent.
But an even better measure is PCE, or personal consumption index. Rather than CPI, or any other "household basics" measure, which subjectively categorize goods and then tracks those, PCE measures the total dollar amount spent by the entire U.S. consumer sector on goods and services. This is what is used by the FRED database referenced in the reply above.
https://www.cato.org/commentary/why-dire-pronouncements-abou...
I feel like people complain about “food” but it’s a stand-in and that the cumulative increase in rent, transportation and food probably rose faster than wages. So Cato reply “but food hasn’t grown as fast as wages” is a myopic retort (admittedly one they acknowledge) that tries to fight the narrow factual argument ignoring the broader one where the emotional narrative probably remains true.
Also we can probably simplify this bucket even more and just talk about the elephant in the room which is rent/mortgage.
It’s 30 to 50% of most peoples paycheck, it’s really the piece that matters and the one that is most complicated to solve.
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1. PCE tracks spending by and on behalf of households, including employer-paid health insurance and government-funded medical programs like Medicare. Arguably this does not reflect out-of-pocket costs or the immediate cash-flow reality experienced by a regular household.
2. Shelter accounts for roughly 34% of the CPI, whereas it makes up only about 16% to 17% of the PCE which underplays the pressures of housing people face. Housing arguably is one of the most basic necessity and people will spend on it. For majority of the people in the country housing as a % of income is the biggest expense, so weighing it at 16% sounds almost ridiculous.
3. PCE also famously isn’t based on household surveys like CPI which means it doesn’t accurately represent the actual inflation either.
4. PCE also doesn’t accurately represent lifestyle downgrades even though it tracks them. PCE will capture if you swap chicken for beef (like people are doing right now) but the conclusion you’ll come to is that people have the same amount of spending power as before.
Hey thanks for posting this perspective w/ the link. Fun rabbit hole to go down stuck in a hotel tonight. I wonder if you think something explanatory is missing in _all_ of these different indices, in the "where there's smoke, there's fire" sense of economic anxiety on display today
The sense of economic anxiety is due to increasing economic efficiency and sorting. It's not that the cost of living somewhere has gone up as much as people think. It's that the market is efficiently allocating housing in the place you grew up, near your parents, family, and friends, to Google and Facebook engineers. But you can still get a house twice as big as what your parents had at your age in a new subdivision in Tennessee.
I’m not necessarily disputing your point, but it’s very odd to downplay one source for potential bias, and then follow up with a study from the CATO Institute. Like, the CATO institute is openly a libertarian think tank founded by one of the Koch brothers.
I also think it’s unfair to look at just food prices. Housing and healthcare have bloomed massively.
Of course you’re right. Food isn’t the whole picture, and no think tank is perfect.
We should evaluate research by the research itself, rather than by the author’s subjectivity credibility alone. The is the point I was trying to make by providing alternative research and adding a little bit of nuance to the reply, but perhaps I should’ve been more forthright in addressing my own bias as well.
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Yeah, CATO is … not what I would reach for to make a point on neutrality.
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> calls a labor advocacy group biased
> Links the fucking CATO institute
Pot, meet kettle
They do have more money, less spending power.
> Meanwhile household basics increased faster than wages
Not what real means!
People lack money, but a Netflix (or some other streaming) subscription is a very cheap way to buy a lot of entertainment, and just about everyone has at least one.
I first saw the claim everything is hunky dory because workers are working fewer hours from a economist probably ten years ago. The idea is workers are choosing to work fewer hours and instead enjoy more leisure.
So to point out how inanely out of touch economists are.
The problem with that is the worker economic base unit is a family not one person. Now compare 1960-70s where one person in the household works 40 hours a week. Compare with a modern family where both parents are working a combined 70-80 hours a week.
So yeah workers are working slightly less hours and families as a unit substantially more.