All quintiles of the income distribution have seen rising real wages in recent years, except that the lowest quintile briefly lost ground in COVID, since more than made up.
I call BS on the "affordability" propaganda. It is a frenzy induced by a political party, making rational discussion impossible, intentionally so. The use of that ambiguous word is clever, though. It allows everyone to repeat playing the "I want more" broken record. Can't do that with real wages. Everyone would have to calculate their own!
Present day politics is muchly about rewriting dictionaries.
Given people don't accept nominal wage cuts then in the aftermath of a negative supply shock which entailed several years worth of 0% inflation to get us back to long term 2% trend, how would relative prices be allowed to adjust in the labour market? This proposal would condemn talent and the young into unfair 0% wage rises. If we always allow 2% without catch up for previous price level rises, then always scope to give the slow, dull, & old 0% while the smart youngsters get 4%.
I'm not saying they won't cope. I'm saying that it seems like better policy to me to allow scope for relative price changes given the fact of resistance to nominal price falls. We're interested in what the optimal inflation target should be: people's visceral dislike of inflation and attachment to price levels over price changes is one thing to take into account when thinking about this, but there are other things that work in the other direction.
I would rather government just butted out entirely. The idea that government can actually control prices is silly to start with, but then you factor in the sketchy information, the lag between getting the information and formulating policy, and applying out of date information to changed conditions — it just seems such a pointless waste of resources. Bureaucracy for the sake of bureaucracy. Look at that stretch from 1800 to 1920 — much more stable prices without trying to control them than afterwards trying to control them. 120 of success without the bureaucracy, 100 years of failure with the bureaucracy — that ought to be a clear lesson in how counter-productive the Fed is when it comes to stable prices.
Inflation during wars, deflation afterwards, lots of little ups and downs, and very nearly 0% inflation overall until the Fed was created. Given my druthers, I'd pick 1800-1920 price stability over the rampant inflation instability we've had since.
I think this misses that inflation in specific sectors matters more to public perception of prices than 'CPI' or the metrics economists tend to use. Like Housing specifically has been well above CPI, and this makes many anxious because homeownership is a social step on the ladder to family formation. If housing prices had not spiked and never come down (not to mention the affordability impact of mortgages shooting to 6-8% from 4-5%) I suspect the public would have a reduced concern about inflation, even if some other area saw higher inflation. Groceries and fuel are a another specific subsector of inflation that have large consumer impact. If say, we had the same CPI and income to CPI matchup, I suspect there would be less popular backlash if that were say due to a rise in the cost of electronics, or the cost of home appliances, or maybe even the cost of automobiles. But inflation has been highest precisely in areas directly related to family formation, and that I think is a big part of why affordability is king until someone figures out how to actually reduce prices relative to wages in housing and other family formation related sectors.
Edited to say: this housing prices need to not just fall with respect to inflation, but specifically relative to wages, and wages specifically, not just income, as increasingly the housing market is dominated by upper quintile/quartile buyers who have substantial income from investment. Housing needs to be affordable to people who do not have investment income at places they can get work that can afford top pay them enough to afford the housing in the local market.
All quintiles of the income distribution have seen rising real wages in recent years, except that the lowest quintile briefly lost ground in COVID, since more than made up.
https://fred.stlouisfed.org/series/CXU900000LB0102M
I call BS on the "affordability" propaganda. It is a frenzy induced by a political party, making rational discussion impossible, intentionally so. The use of that ambiguous word is clever, though. It allows everyone to repeat playing the "I want more" broken record. Can't do that with real wages. Everyone would have to calculate their own!
Present day politics is muchly about rewriting dictionaries.
The long lasting debate over the demonitization of silver continuing up to FDR is a proof that there has always been a robust demand for “soft money”
we have no idea how manipulated we are
affordability my foot
hoax
100%
Given people don't accept nominal wage cuts then in the aftermath of a negative supply shock which entailed several years worth of 0% inflation to get us back to long term 2% trend, how would relative prices be allowed to adjust in the labour market? This proposal would condemn talent and the young into unfair 0% wage rises. If we always allow 2% without catch up for previous price level rises, then always scope to give the slow, dull, & old 0% while the smart youngsters get 4%.
There was slow steady deflation from (from memory!) roughly 1870-1900. People coped.
ETA: Looking at the graph I posted, prices were relatively stable throughout the 1800s and until after WW I when the Fed screwed things up.
I'm not saying they won't cope. I'm saying that it seems like better policy to me to allow scope for relative price changes given the fact of resistance to nominal price falls. We're interested in what the optimal inflation target should be: people's visceral dislike of inflation and attachment to price levels over price changes is one thing to take into account when thinking about this, but there are other things that work in the other direction.
I would rather government just butted out entirely. The idea that government can actually control prices is silly to start with, but then you factor in the sketchy information, the lag between getting the information and formulating policy, and applying out of date information to changed conditions — it just seems such a pointless waste of resources. Bureaucracy for the sake of bureaucracy. Look at that stretch from 1800 to 1920 — much more stable prices without trying to control them than afterwards trying to control them. 120 of success without the bureaucracy, 100 years of failure with the bureaucracy — that ought to be a clear lesson in how counter-productive the Fed is when it comes to stable prices.
Google for "inflation 1800 to present" and you get charts like this:
https://economics-charts.com/chart-of-consumer-price-index-1800-2005/
Inflation during wars, deflation afterwards, lots of little ups and downs, and very nearly 0% inflation overall until the Fed was created. Given my druthers, I'd pick 1800-1920 price stability over the rampant inflation instability we've had since.
I think this misses that inflation in specific sectors matters more to public perception of prices than 'CPI' or the metrics economists tend to use. Like Housing specifically has been well above CPI, and this makes many anxious because homeownership is a social step on the ladder to family formation. If housing prices had not spiked and never come down (not to mention the affordability impact of mortgages shooting to 6-8% from 4-5%) I suspect the public would have a reduced concern about inflation, even if some other area saw higher inflation. Groceries and fuel are a another specific subsector of inflation that have large consumer impact. If say, we had the same CPI and income to CPI matchup, I suspect there would be less popular backlash if that were say due to a rise in the cost of electronics, or the cost of home appliances, or maybe even the cost of automobiles. But inflation has been highest precisely in areas directly related to family formation, and that I think is a big part of why affordability is king until someone figures out how to actually reduce prices relative to wages in housing and other family formation related sectors.
Edited to say: this housing prices need to not just fall with respect to inflation, but specifically relative to wages, and wages specifically, not just income, as increasingly the housing market is dominated by upper quintile/quartile buyers who have substantial income from investment. Housing needs to be affordable to people who do not have investment income at places they can get work that can afford top pay them enough to afford the housing in the local market.
I came here to say this, but you beat me to it. The cost of housing relative to wages is the real issue, especially when adding in cost of money.