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But that increase in wages does not seem to be keeping up with inflation, which translates to a net loss for the average person. http://www.inflation.eu/inflat

But that increase in wages does not seem to be keeping up with inflation, which translates to a net loss for the average person. http://www.inflation.eu/inflation-rates/united-states/historic-inflation/cpi-inflation-united-states.aspx http://www.inflation.eu/inflation-rates/united-states/histor...

JumpCrisscross 8y ago
> that increase in wages does not seem to be keeping up with inflation In economics, the "real value of a good or other entity has been adjusted for inflation" [1]. The statistic above is thus inflation adjusted. Nominal wages (i.e. those not adjusted for inflation) are up close to 30% between May 2007 and May 2018 [2], or 2.3% per year [3]. [1] https://en.wikipedia.org/wiki/Real_versus_nominal_value_(economics) https://en.wikipedia.org/wiki/Real_versus_nominal_value_(eco... [2] https://fred.stlouisfed.org/series/CES0500000003 https://fred.stlouisfed.org/series/CES0500000003 [3] (26.9 / 20.84) ^ (1 / 11) - 1
- lifty 8y ago
  Are housing, healthcare and education costs included in the inflation numbers?
  - JumpCrisscross 8y ago
    > Are housing, healthcare and education costs included in the inflation numbers? Yes, CPI includes housing, healthcare and education. The only measures commonly stripped out are food and energy, to exclude commodity volatility; that measure is presented as "core inflation" and is more useful when considering things like interest rates than real wages.
    - vivafrance 8y ago
      You’re wrong. House prices aren’t included anymore in CPI. Imputed rents are. These are very different things. Anyways, I’m sure all this falls on deaf ears. If you used the same calculation the Fed used in the 80s to measure inflation we’d currently be at 10%. You can pick and choose and weight whats in the cpi basket to get any number you want and the government is incentivized to make it appear lower.
      - JumpCrisscross 8y ago
        > House prices aren’t included anymore in CPI. Imputed rents are CPI calculates something called "owners’ equivalent rent of residences" [1]. This is reasonable as nobody purchases a new house every year; instead, one "uses" a portion of the home value over time. When house prices go up, this measure goes up by a similar measure. Housing was put into CPI in 1954, when it was included as a user-cost item. It was replaced in the early 1980s because user-cost methods include "ex ante expected gain" while usage pricing "includes actual ex post realized capital gains on the house" [1]. > If you used the same calculation the Fed used in the 80s to measure inflation we’d currently be at 10% Well, yes. You'd be excluding everything invented since 1980, e.g. all modern technology. We don't spend the same fraction of our budget on hams and eggs, as the 1980 definition measured, and most people have health insurance costs now. If someone insists on living like it's 1980, I suppose observing the old metric would be perfectly valid. [1] https://www.bls.gov/opub/hom/pdf/homch17.pdf https://www.bls.gov/opub/hom/pdf/homch17.pdf page 104 [2] https://www.brookings.edu/wp-content/uploads/1980/06/1980b_bpea_blinder_triplett_denison_pechman.pdf https://www.brookings.edu/wp-content/uploads/1980/06/1980b_b... page 558
        vivafrance 8y ago
        > When house prices go up, this measure goes up by a similar measure. That’s only true if you assume interest rates aren’t falling. Artificially low interest rates have inflated the actual price of housing while keeping monthly payments fairly steady. The Fed is then able to say “look, no inflation!” despite actual prices rising very rapidly.
        JumpCrisscross 8y ago
        > Artificially low interest rates have inflated the actual price of housing while keeping monthly payments fairly steady There's a case to be made for each approach. Given we have excellent ways of measuring house prices, but no great ones for cost of living, having CPI measure the latter and thus usage--instead of user costs--seems reasonable. (We don't include stock appreciations and declines in inflation, for example.)
deleted 8y ago
[deleted]

JumpCrisscross 8y ago

> that increase in wages does not seem to be keeping up with inflation In economics, the "real value of a good or other entity has been adjusted for inflation" [1]. The statistic above is thus inflation adjusted. Nominal wages (i.e. those not adjusted for inflation) are up close to 30% between May 2007 and May 2018 [2], or 2.3% per year [3]. [1] https://en.wikipedia.org/wiki/Real_versus_nominal_value_(economics) https://en.wikipedia.org/wiki/Real_versus_nominal_value_(eco... [2] https://fred.stlouisfed.org/series/CES0500000003 https://fred.stlouisfed.org/series/CES0500000003 [3] (26.9 / 20.84) ^ (1 / 11) - 1

lifty 8y ago
Are housing, healthcare and education costs included in the inflation numbers?
- JumpCrisscross 8y ago
  > Are housing, healthcare and education costs included in the inflation numbers? Yes, CPI includes housing, healthcare and education. The only measures commonly stripped out are food and energy, to exclude commodity volatility; that measure is presented as "core inflation" and is more useful when considering things like interest rates than real wages.
  - vivafrance 8y ago
    You’re wrong. House prices aren’t included anymore in CPI. Imputed rents are. These are very different things. Anyways, I’m sure all this falls on deaf ears. If you used the same calculation the Fed used in the 80s to measure inflation we’d currently be at 10%. You can pick and choose and weight whats in the cpi basket to get any number you want and the government is incentivized to make it appear lower.
    - JumpCrisscross 8y ago
      > House prices aren’t included anymore in CPI. Imputed rents are CPI calculates something called "owners’ equivalent rent of residences" [1]. This is reasonable as nobody purchases a new house every year; instead, one "uses" a portion of the home value over time. When house prices go up, this measure goes up by a similar measure. Housing was put into CPI in 1954, when it was included as a user-cost item. It was replaced in the early 1980s because user-cost methods include "ex ante expected gain" while usage pricing "includes actual ex post realized capital gains on the house" [1]. > If you used the same calculation the Fed used in the 80s to measure inflation we’d currently be at 10% Well, yes. You'd be excluding everything invented since 1980, e.g. all modern technology. We don't spend the same fraction of our budget on hams and eggs, as the 1980 definition measured, and most people have health insurance costs now. If someone insists on living like it's 1980, I suppose observing the old metric would be perfectly valid. [1] https://www.bls.gov/opub/hom/pdf/homch17.pdf https://www.bls.gov/opub/hom/pdf/homch17.pdf page 104 [2] https://www.brookings.edu/wp-content/uploads/1980/06/1980b_bpea_blinder_triplett_denison_pechman.pdf https://www.brookings.edu/wp-content/uploads/1980/06/1980b_b... page 558
      - vivafrance 8y ago
        > When house prices go up, this measure goes up by a similar measure. That’s only true if you assume interest rates aren’t falling. Artificially low interest rates have inflated the actual price of housing while keeping monthly payments fairly steady. The Fed is then able to say “look, no inflation!” despite actual prices rising very rapidly.
        JumpCrisscross 8y ago
        > Artificially low interest rates have inflated the actual price of housing while keeping monthly payments fairly steady There's a case to be made for each approach. Given we have excellent ways of measuring house prices, but no great ones for cost of living, having CPI measure the latter and thus usage--instead of user costs--seems reasonable. (We don't include stock appreciations and declines in inflation, for example.)

deleted 8y ago

[deleted]