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> inflation-adjustment is inherently naïve. It assumes that everything rises at the same rate of inflation It doesn't. "Real wages" are adjusted to changes in
by gottorf 3y ago
> inflation-adjustment is inherently naïve. It assumes that everything rises at the same rate of inflation
It doesn't. "Real wages" are adjusted to changes in CPI. It makes no assertions that everything inflates at the same pace, any more than the overall CPI figure does the same.
If your wages went up 20%, and the CPI went up by 10% (composed of, say, a 40% rise in rent and some commensurate declines in other goods and services), your real wages went up by 10%. Of course, how that impacts actual individuals is different based on their circumstances.
- VirusNewbie 3y agoThe problem is that CPI does not accurately reflect true inflation. If you chart wage growth to M2, you see it hasn't' kept up, and you also can see that assets have outpaced inflation quite a bit.
- mrguyorama 3y ago>and some commensurate declines in other goods and services Pray tell, what has declined in price the past 5 years?
- gottorf 3y agoI'm sorry, that was poorly worded. What I was trying to say is that if the CPI is 10% and one component of it is 40%, it implies the presence of other components that are under 10% (and of course, the possibility of some that might have been negative).
- andrewmutz 3y agoActually right now prices are falling on durable goods: https://www.cbsnews.com/amp/news/economy-inflation-deflation-cars-furniture-appliances-what-it-means/ https://www.cbsnews.com/amp/news/economy-inflation-deflation...
- mrguyorama 3y ago>These items are products such as used cars, furniture and appliances, which saw big run-ups in prices during the pandemic. So is this an actual reduction in price, or yet again just covid supply squeezes easing off? Does a 2.6% drop in price actually offset the price increases of the past 5 years?