Many people—though not all—saw wage increases that kept pace with the pandemic’s rapid price hikes, but the psychological toll remains
By Jon Kamp, Joe Pinsker and Aaron Zitner of The WSJ.
I have done several posts on how people have been dealing with the
inflation of the last few years as well as how they have been affected.
Those are listed after some excerpts from the article.
"Americans are grappling with dramatic price hikes that, for most, are
unprecedented. In the latest surge, inflation peaked in mid-2022, with
prices up more than 9% from a year earlier. In the years prior to the
pandemic, inflation was unusually cool, and the last time it was a real
problem was the 1970s and early ’80s."
"Inflation has slowed dramatically in the past two years, and it was down to 2.4% in September"
"At the same time, employment and consumer spending have stayed strong, and wages have on average grown faster than prices."
"people continue to face painfully high and sometimes rising prices for
big-ticket items, including housing, cars, child care and insurance,
which contributes to their sense of unease."
"a Fed report Wednesday noted some signs of Americans shifting toward cheaper purchases."
"Others are simply irritated by having to pay much more for groceries, a
deli sandwich or their morning coffee—even if their own pay hikes have
made such items even more affordable than they were before the pandemic.
Some in this camp feel the higher prices have devalued raises they
worked hard to get."
"The latest Wall Street Journal national survey, released Wednesday,
shows about three-quarters of respondents believe costs for everyday
goods and services outpaced household income in the past year."
"38% of voters said the cost of living was still rising and creating major financial strains for their families."
"if there were five stages of inflation grief, Americans have yet to reach acceptance."
"The University of Michigan’s Surveys of Consumers from late September
and early October show Americans have significantly lowered their
expectations for continued inflation. At the same time, 44% of those
surveyed said high prices were worsening their personal finances. This
is near the 47% who said the same thing just after the 2022 inflation
peak."
"Survey data show consumer sentiment has improved from its mid-2022
trough, but it remains well under where it was before the pandemic took
off."
"Ulrike
Malmendier, an economics and finance professor at the University of
California, Berkeley’s Haas School of Business, has studied the way
living through inflation and other economic turbulence affects people
long afterward. This is even true for members of the Federal Reserve, whose views on inflation often appear linked to the times they lived through.
Most
models say that once problems like high inflation subside, people are
expected to resume their prior behavior, Malmendier said. But her
research shows people actually carry scars that can long influence how
they spend and save."
"A key
question is how long those scars last, and there are limited examples to
draw on for answers. During the 1970s and early ’80s bout, as Volcker
described, people became somewhat conditioned to high inflation because
it went on for so many years. The phase also ended with the U.S.
plunging into a recession that led to high unemployment.
This
time, high inflation was intense but relatively brief, and came under
control much faster than many people expected, Malmendier said. But the
calm that preceded it meant the sudden surge upended peoples’
expectations.
“There was this long period of stability before, people were totally anchored on that,” she said. “Their world was shaken.”"
"what many voters seem to want is prices to go back to where they were.
That is deflation, the opposite of inflation, and economists say it
generally only happens when the economy is deeply depressed."
"Peoples’
sour views of inflation are fed in part by a belief that their wages
aren’t keeping pace, according to Stefanie Stantcheva, an economics
professor at Harvard University. She surveyed people early this year to
explore the public’s inflation views.
She
also found that even when people receive wage increases during times of
inflation, they tend to peg increases to their job performance or
career advancement, and not a cost-of-living increase. “This contributes
to the dislike of inflation and the feeling that it erodes your living
standards,” Stantcheva said."
"Inflation
also raises feelings of inequity, Stantcheva has found, due to a
perception that high-income people see faster wage increases to offset
the high prices. Since the start of the pandemic, wages for lower-income
earners have actually tended to grow faster, and are outpacing inflation by more than wages for higher-income earners, economic analyses of Labor Department employment data have found.
Stantcheva
emphasized these findings don’t mean people’s feelings are off base,
and she said inflation is measured in a broad way that can miss many
subtleties. Different people buy different things, exposing them to
different price changes. Her survey work shows news reports of inflation
are especially likely to set off despair, stress or fear among
low-income people.
Her
surveys also found people estimated inflation in the prior 12 months to
be higher than it actually was, while also finding people predicted
higher inflation than the U.S. has seen this year."
This graph shows the annual percentage change in the Consumer Price Index from 1960-2023. It shows how much the monthly average of the CPI increased year over year. It is from Federal Reserve Bank of St. Louis.
Related posts:
Child Care, Rent, Insurance: Where Inflation Hits Hardest Now (2024)
Why do workers dislike inflation? (2024)
Inflation
Usually Hits Harder for Poor Families. For a Couple of Years, It
Didn’t. New research on how inflation varies between the poor, middle
class and rich paints a different picture of poverty and inequality (2024)
The
Haves and Have-Nots at the Center of America’s Inflation Fight: There’s
a growing gap between Americans who are battered by high inflation and
interest rates and those who are actually benefiting (2024)
An Increase in Uninsured Drivers Is Pushing Up Costs for Everyone Else (2024)
Inflation has caused consumers to choose what they need to cut back on (insurance)
Costco and Sam’s Club Aisles Are Full of Gen Z Shoppers (2024)
Consumers are buying in bulk to save money by getting a lower per unit price
Inflation is mentally taxing (2024)
Inflation is mentally taxing. Dealing with a straitened budget exacts a psychological toll as well as a financial one
Store Brands Are Filling Up More of Your Shopping Cart (2024)
People are on the look out for cheaper alternatives due to inflation
Consumers Fed Up With Food Costs Are Ditching Big Brands (2024)
After
years of price increases, food companies say more consumers pull back;
fast-food chains and snack makers plan new deals and flavors
Are Americans Worrying Too Much About Inflation? Two opposing views (2024)
The Era of One-Stop Grocery Shopping Is Over (2024)
One
thing that I always talked about with inflation was that one of its
costs was all the things we had to do to avoid it. Consumers are making
8% more trips to different retailers as inflation continues to upend
household budgets. They are going to more stores to find lower prices.
But it costs time to do that and probably more money on gas.
When workers were paid twice a day and given half-hour shopping breaks (Germany, 1923)
By
mid-1923 workers were being paid as often as three times a day. Their
wives would meet them, take the money and rush to the shops to exchange
it for goods. However, by this time, more and more often, shops were
empty. Storekeepers could not obtain goods or could not do business fast
enough to protect their cash receipts. Farmers refused to bring produce
into the city in return for worthless paper. The requirements to
calculate and recalculate commercial transactions in the billions and
trillions made it practically impossible to do business in paper Marks.
