May 1, 2019
Its the list of workarounds - always growing, never shrinking - thats telling us the true story of inflation in America.
Today I'm publishing a guest post by writer Bill Rice, Jr., on "real inflation," which as everyone knows far exceeds the "official" inflation rate of 2%. Bill and I corresponded earlier this year when he was researching and writing his recent article What Does Your Toilet Paper Have to Do With Inflation? Manufacturers have been engaging in "shrinkflation," leaving consumers paying more for less, but stealthily. (The American Conservative magazine)
Bill's extensive list of links (50 Dots...) follows his essay. Thank you, Bill, for sharing your
insightful research with Of Two Minds readers.
Workarounds galore: How real Americans deal with real inflation By Bill Rice, Jr.
While working on a story on inflation and shrinkflation, I quickly zeroed in on the concept of workarounds as an alternative, perhaps superior, way to gauge the true state of our economy. I define workarounds as the changes individuals or families (or businesses) must make in their daily living to adapt to a world of rising prices. If nothing else, these examples, taken in the aggregate, challenge the conventional wisdom that inflation is low or contained, or that the economy is just fine, thank you.
As decades have passed, the list of workarounds families have utilized to deal with rising prices has rapidly grown.
Women and mothers entering the workforce in massive numbers - the disappearance of families where one income was sufficient to maintain a constant standard of living - might be the earliest and most important workaround on my list. Other trends from this expanding list include:
Shoppers switching to less expensive store or private-label brands, families substituting hamburger or chicken for steak, buying from value menus, couponing, shopping at discount or dollar stores more often, buying in bulk to get the lowest unit-cost (think Costco), buying more items at yard sales or from Internet swap meets, cutting the cord, cancelling the land line, getting fewer haircuts per year, taking clothes to the dry cleaners less often, cutting out the maid service or paying for it fewer times each month, attending sporting events less often (here, here, here and here), going to the movies less frequently, playing golf or hunting less frequently, dropping out of country clubs and civic clubs, going to the dentist less often, cancelling newspaper and magazine subscriptions
Cremation instead of burial, casual instead of (more expensive) business attire, eliminating or rationing prescription medications, moving from high cost-of-living states (or cities) to lower-cost-of-living communities, adult children moving back in with their parents (and aging adults moving in with their grown children), car-pooling and now car sharing," the growth of do-it-yourselfers, delaying or reversing retirement, taking on a part-time job the list of workarounds goes on and on.
Americans have always resorted to workarounds to counter rising prices or help make ends meet. However, the list of necessary workarounds has absolutely been increasing Ron Paul told me, a trend he said is going to continue to grow.
As it always has, the market place has rewarded businesses that helped families save money.
Then again, lower prices do not necessarily equal a higher standard of living, a point made by John Williams, the creator of ShadowStats, the best known alternative measure of inflation.
To illustrate the difference between simply compiling prices without taking into account reductions in the quality of goods (or of buying experiences), Williams cited the example of his long-time tailor, who eventually had to close his haberdashery as customers fled to the mall and more affordable prices.
Yes, Williams could still buy clothes (in fact for a lower price), but the quality had diminished; so too had the level of service. The experience of acquiring clothes was not as satisfying or memorable. His question: Had he in fact maintained a constant standard of living by substituting suits from, say, JC Penney for the finer suits and richer experiences he had grown accustomed to?
Walmart assuredly saves consumers money. However, it also helped kill the downtown merchant, and with it our Norman Rockwellish memories of downtown America. Self serve killed the neighborhood full-service filling station, saving customers 40 cents a gallon on a fill-up, but also taking away our grandmothers ability to get her tires and oil checked and her windshields cleaned on a regular basis (not to mention eliminating a popular first-time job for many males).
Netflix killed the neighborhood video store. Clothes that dont require pressing, as well as employers allowing casual attire in the workplace, thinned the ranks of dry cleaners. iTunes largely killed the record store. Craigslist helped kill the (more expensive) newspaper classified section, expediting the slow death of the journalism industry. Barnes & Noble placed the independent book store on the extinction list, before Amazon threatened this same retailer.
Today, Uber is killing the taxi driver. Hulu and streaming video services threaten cable and the TV networks. TD Ameritrade threatens the traditional stock broker. Aldi (with its more affordable private label brands) threatens Kroger. Walmart, once unchallengeable, is today threatened by Amazon and Dollar General. People choosing to make their own turkey sandwich probably contributed to Subway closing more than 1,100 of its stores.
Most of these innovations/trends/changes kept CPI lower than it would have been otherwise, but did they actually allow people to maintain the same standard of living they enjoyed in prior years? Some innovations probably did; others probably did the opposite.
And how exactly did families from prior periods of time (often with just one income) afford to pay those full-service gas prices, or trade with the downtown hardware store instead of Home Depot?
Today its uncomfortable to think about, but in working on this story, a question Id never thought about suddenly occurred to me. Namely, how did so many middle and upper-middle class families (families with just one income from the poor South) actually afford the full-time domestic help depicted in the movie and book of the same title?