Economists will spend hours poring over US inflation data released on Tuesday. But their calculations mostly obscure the experience of American families trying to make ends meet.
In 1985, an American man working the typical full-time job could support a family of four on 40 weeks of income, and be able to afford a range of nutritious foods, a three-bedroom house, a comprehensive health insurance plan, a family car, even saving to put both kids through the state university. In 2022, paying for all that would require 62 weeks of his income, which is a problem, there being only 52 weeks in a year.
These figures come from the Cost-of-Thriving Index (Coti), which compares the rate at which wages are rising to the rate of cost increases for middle-class staples. They show starkly the effect on household budgets of a decades-long stretch in which housing prices, health insurance premiums, college tuition, and more skyrocketed much faster than wages.
Traditional measures of inflation miss this fact. When inflation-adjusted figures report that a 2022 earner could afford roughly what a 1985 earner could, that assumes the 2022 earner still wants to drive a 1985 car, live in a 1985 house, watch a 1985 television, and receive 1985 medical care — and that we would call that “middle class”.
Think about healthcare, where economists (rightly) celebrate extraordinary but costly breakthroughs in medical technology while families (also rightly) notice that insurance premiums keep eating a larger share of their salary.
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US inflation data is out today and economists will be poring over it. But their calculations hide the real experience of ordinary Americans trying to make ends meet, says Oren Cass https://t.co/01hAdmzLAo
— FT Opinion (@ftopinion) February 14, 2023