Price changes 1996-2016

An interesting comparison of US price changes over the past twenty years shows that education, health care and child care has risen markedly, food and housing is on a par with inflation and consumer goods are cheaper, some much cheaper.

Economic Forum: The things we really need are getting more expensive. Other stuff is getting cheaper. Why?

Sociologist Joseph Cohen of Queens University is fond of saying that “America is a place where luxuries are cheap and necessities costly.”

A recent chart from economist Mark Perry of the American Enterprise Institute, using data from the Bureau of Labor Statistics, illustrates this well.

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The one absolute essential – food, is at least staying about the same.

What’s going on here? Perry points out that most of the things falling in price are manufactured goods, and that prices of those goods have been falling for decades as a result of technological improvements and productivity gains.

On the flip side, things like education and medical care can’t be produced in a factory, so those pressures do not apply. Compounding it, many Americans are insulated from the full costs of these services. Private and public insurance companies pay most medical costs, so there tends to be little incentive for individuals to shop around for cheaper medical care.

In the case of higher education, the nation’s massive student loan industry bears much of the upfront burden of rising prices.

“Prices rise when [health care and college] markets are not competitive and not exposed to global competition,” Perry said, “and prices rise when easy credit is available.”

Hence, our current predicament. We can afford the things we don’t need, but we need the things we can’t afford. Whether the 20-year trajectory in the chart above is sustainable is another question entirely.

Education may be similar in New Zealand, but while health care has significant cost pressures it isn’t in the same overpriced mess as in the US.

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67 Comments

  1. Alan Wilkinson

     /  3rd September 2016

    Imports are cheaper. Local services are dearer. Lefty solution: make imports dearer too with tariffs.

    Reply
  2. Blazer

     /  3rd September 2016

    Support local industry,and apply tariffs to goods we already produce here as other countries do.Importing’ labour to do the jobs mentioned by recent published data,only helps employers keep wages down and allow foreigners to control the value chain and profits.i.e ,foreign tourists flown here on foreign airline,stay at hotels,eat at restaurants owned offshore,be shown around by foreign guides,in foreign owned transporters,shop at foreign owned souvenir shops and return to their homeland.Thanks for coming.

    Reply
    • Alan Wilkinson

       /  3rd September 2016

      That drivel and direct route to economic catastrophe got an uptick. Says it all about the Left.

      Reply
      • Gezza

         /  3rd September 2016

        This is El Trumpo’s plan to make Amerika grate again, isn’t it?

        Reply
        • Blazer

           /  3rd September 2016

          don’t try too hard to stalk posts and be a wiseguy gezza,stick to what you know.

          Reply
      • Gezza

         /  3rd September 2016

        Trump may has said in speeches that he will tax companies that produce goods overseas more. His whole economic strategy is to bring jobs back from overseas by making it uneconomic for companies to continue manufacturing overseas. But you still support him for President, Al. Why?

        Reply
        • Blazer

           /  3rd September 2016

          who cares ,neither you or Al will be voting.

          Reply
        • Alan Wilkinson

           /  3rd September 2016

          I’m surprised that question took so long to be asked, Gezza. I expected it when I wrote the first comment to this post.

          I said before that I hoped Trump would win because I thought the US needed a disruptive politician instead of business as usual which has massively destabilised the world and caused immense human misery. I see that as more significant than Trump’s protectionism rhetoric of which I doubt much will ensue given the internal and external political pressures that will be applied.

          Reply
          • Blazer

             /  3rd September 2016

            its a rare occasion where I agree with you Al… touche!

            Reply
          • Gezza

             /  3rd September 2016

            Clinton is making more jobs for Americans her pitch as well though I haven’t seen so many of her speeches & dunno how she plans to achieve that. Either way, tarriffs or tax, if America adopts protectionist measures in enough industries it may well cause a rejection of neo-liberalism & globalism as more workers earn enough to spend more on Us manufactured goods & begin to get more patriotic about that than consumerist. I wouldn’t be so quick to expect this approach to die.

            Reply
            • Blazer

               /  3rd September 2016

              so many words that said so little of any …substance.

            • Gezza

               /  3rd September 2016

              Ya too hard on yaself.

            • Blazer

               /  3rd September 2016

              actually gezza I am in Welly next week ,come in to the the Olde Bailey in town on Tuesday /quiz nite and I’ll shout you a beer or a pimms.

            • Gezza

               /  3rd September 2016

              Yeah righto. Sounds good. See ya there.

            • Blazer

               /  3rd September 2016

              I’M serious gezza ,like to put a face to the name..what time are you showing up.

            • Gezza

               /  3rd September 2016

              Not sure now. Checked my diary. I might be doing anything else that night. Can’t make any promises. What time will you be leaving?

            • Blazer

               /  3rd September 2016

              @ gezza..pity you are tied up that night..c’est la vie!

          • Let me see if I can get this straight … “business as usual”, meaning free-market globalisation – an example being moving manufacturing offshore – resulting in the loss of American jobs “has massively destabilised the world and caused immense human misery”?

            I’m with you so far Alan …

            But now a “disruptive politician” spouting “protectionist rhetoric” – policies which may or may not be enacted – is the right thing for America, it’s “what the US needs” …?

            Go figure …

            Reply
            • Alan Wilkinson

               /  4th September 2016

              Just read some nonsense from Obama at the G20 re Brexit. Honestly, that man is clueless. His foreign policy has been an unprecedented disaster. His Obamacare is collapsing under the weight of its misconceptions. His economic policies have continued money printing while embracing fantasy climate change policies and objectives, leaving only the success of the fracking revolution keeping the US afloat.

              That is business as usual and that is what Clinton represents.

  3. Zedd

     /  3rd September 2016

    .. ‘righty’ solution.. slash (their) costs, attack workers & maximise (their) profits… enuf sed 😦

    Reply
  4. Joe Bloggs

     /  3rd September 2016

    Sad to see that the costs of health and education have outstripped other costs – these are fundamental to the long-term socio-economic health of any society

    Reply
  5. David

     /  3rd September 2016

    “The things we really need are getting more expensive. Other stuff is getting cheaper. Why?”

    This was answered way back in the 60’s; it’s caused by Baumol’s cost disease. Productivity in the manufacturing sector increases at a rate much higher than in education and health care, yet wages rise at the same rate in both.

    https://en.wikipedia.org/wiki/Baumol%27s_cost_disease

    Reply
  6. David

     /  3rd September 2016

    ““On the one hand, $90,000 sounds like a lot to most middle-class Americans, because most Americans don’t earn that,” said Joseph Cohen, a sociologist at Queens College in New York City. “But the fact is, the median-income American does not do well in a lot of respects. One $5,000 home repair can wipe out their surplus for a year. A medical event, an auto repair or a temporary job loss can exert a large shock.

    “America is a place where luxuries are cheap and necessities costly. A big-screen TV costs much less than it does in Europe, but health care will sink you.””

    I have to chuckle at this bit from Cohen. The only reason that a TV costs much more in Europe is because it has 25% tax on it to pay for health care…..

    Reply
    • Blazer

       /  3rd September 2016

      where can we verify this chuckles?…’The only reason that a TV costs much more in Europe is because it has 25% tax on it to pay for health care…’

      Reply
      • David

         /  3rd September 2016

        Other than taxes, why would a TV cost more in Europe?

        Reply
        • Blazer

           /  3rd September 2016

          There are a number of reasons why prices differ in different regions.Critical mass,freight,forex rates,distribution channels,competition to name some.

          Reply
          • David

             /  3rd September 2016

            None of these things make more than a percent or two difference. Europe’s VAT at 25% is the vast majority of it.

            Reply
            • Blazer

               /  3rd September 2016

              It does not seem to be the case that Europe has a flat 25% VAT,therefore your proposition that it does and is used for health care is flawed.

            • David

               /  3rd September 2016

              VAT varies between 19% and 27%, It’s the only significant difference in prices for consumer goods between the US and Europe.

            • Blazer

               /  3rd September 2016

              ‘VAT varies between 19% and 27%, It’s the only significant difference in prices for consumer goods between the US and Europe.’…so you admit your original premise was wrong.

  7. Growing your own food shouldn’t have got much if any more expensive.

    Reply
    • David

       /  3rd September 2016

      Growing your own food has got a lot more expensive. For the simple reason that the value of your labour has gone up, yet the time required for you plant your spuds has remained the same.

      Reply
      • Blazer

         /  3rd September 2016

        you could offset the time factor by not mashing your spuds.

        Reply
        • Kitty Catkin

           /  3rd September 2016

          As I am not paying myself, that would only work if I was using t

          Reply
        • Kitty Catkin

           /  3rd September 2016

          ime taken from something that I would have been paid for, David, not my time off.

          Reply
          • David

             /  3rd September 2016

            If you put no value on your time, why should your employer?

            Reply
            • Kitty Catkin

               /  3rd September 2016

              They don’t pay people for what they do in their own time, of course ! Most people are only paid for the time they spend at work and don’t expect to be paid for the hours that they DON’T work. Ergo. it’s not costing the person anything, as they are doing it in their time off.

              If someone paid themselves for this time, they would simply be moving the money sideways. When I put some money from one account into another, I wasn’t gaining $X, as the money that made one account fatter made the one it was taken from thinner.

            • Blazer

               /  3rd September 2016

              why work,buy a house and sit on it…it makes more every week than a person working.Working ,and producing things is for mugs..right?

      • @ David – “Growing your own food has got a lot more expensive … the value of your labour has gone up, yet the time required for you plant your spuds has remained the same.”

        I don’t think I’ve ever seen the neoliberal ethos expressed more clearly.

        You’ve got it in a nutshell. Neo-work-life balance. Transactional society. The commodification of all things.

        Imagine the productivity and efficiency wasted by people going to the toilet …

        There must be openings in the pharmacuetical and workplace surveillance markets to remedy this?

        Reply
        • The financialisation of home gardening FFS …

          … many ways to starve …

          “Very similar to the onrush of fascist movements taking power in Europe from the 1920s, both these national “protofascist” movements of the 1980s in the UK and USA [Thatcherism and Reaganism] trumpeting “the victory of markets” were bathed in political euphoria.

          Financial fascism, however, only has positive, appreciative and advantageous synonyms­ because “there is no alternative”. These synonyms for example include “financial engineering”, “market mindedness”, “opportunity seeking”, but never shift to pejorative, because of the all-out total power taken by the financial fascists.

          … the absolute victory of “the markets” has relegated the need for extreme right political parties to take power themselves. Financial fascism is therefore the surrogate for the extreme right, enabling it to amuse and bemuse the mob with the childlike, absurd politics of for example Sarah Palin in the US or Marine Le Pen in France.”

          http://www.rense.com/general96/finan.html

          Reply
  8. Blazer

     /  3rd September 2016

    ‘The one absolute essential – food, is at least staying about the same.’….growing your own food,requires land to grow it on,which is definately more expensive.

    Reply
    • Corky

       /  3rd September 2016

      Land is an advantage, but not essential for growing your own food.

      Reply
      • Blazer

         /  3rd September 2016

        what are you going to grow it in…your shoes!!Hydroponics etc still has to be set up somewhere….seafood like mussels and prawns can be farmed if you have the water.Or are you out shooting birds as they fly over your house?

        Reply
        • Corky

           /  3rd September 2016

          Crikey. I will let you off because you obviously know nothing about gardening. Maybe Alan could inform you better than I.

          Reply
  9. Kitty Catkin

     /  3rd September 2016

    This would be better if it was an NZ price comparison, not a US one.

    Reply
  10. Kitty Catkin

     /  3rd September 2016

    I remember when someone bought a computer in the early 90s for $6000. It was then a marvel with what it could do, but I bet that this little notebook can do more and it cost $400.

    Reply
    • Such ethical consumer responsibility and foresight Miss Kitty!!! Meanwhile dozens of Samsung workers in South Korea die or get cancer due to toxic chemicals used in their manufacturing processes. But it’s okay, it saved us money here in New Zeal Land, right?

      https://www.thestar.com/news/world/2016/08/16/2-words-keep-sick-samsung-workers-from-data-trade-secrets.html

      Reply
      • Kitty Catkin

         /  4th September 2016

        Don’t put words in my mouth. I said nothing like that. Whose was the ethical consumer responsibility nd foresight, anyway, mine or that of the person who bought the $6000 computer ? .

        Mine’s not a Samsung, as it happens. So your remarks are irrelevant. Had I bought a Samsung, believing that by so doing I was contributing to people suffering because of the toxic chemicals but not caring-and saying so-you might have a point.

        Putting words in someone’s mouth is not only rude, it’s silly.

        Reply
        • I do have difficulty speaking Literal Absolutism Miss Kitty, I must admit …

          It’s so …. Well …. ummm … NEVER !!!!

          Reply
          • Kitty Catkin

             /  4th September 2016

            In that case, your remarks make even less sense. The ethical consumer responsibilty and foresight apply to nobody in particular ! Why you answered my simple statement of fact with something totally irrelevant may be known to you, but not, I suspect, to anyone else.

            You made it sound as if I knew about the alleged Samsung things, which I didn’t. and thought that they were acceptable, which I wouldn’t if they were true.

            Reply
  11. patupaiarehe

     /  3rd September 2016

    Hmmm… Ok, just to make a fair comparison.
    In around 2000AD, a 90m2 ex state house on a quarter acre in Tga could be purchased for around $120k, and a tradesman earned $15 to $20 an hour.
    A few months ago, a similar house up the road sold for $420,000 , and an average tradesman earns between $25 and $30/hour…..
    He is also paying over 200% more for a pack of smokes….

    Reply
  12. If a similar graph of ‘Price Changes in Last 20 years’ was produced for Aotearoa-New Zealand, housing might be off the chart? Housing in Auckland certainly would be! Reserve Bank Inflation Calculator – Q1 1996 – Q1 2016 – whole of NZ

    Housing = 69.2%, Wages = 45.9%, Food = 37.5%, Transport = 20.5%

    General Inflation, from which Housing has been excluded = 32.8%

    The discrepancies may appear less-than-expected at first glance, but this must be tempered by the exaggeration of two important factors –
    1) Regional differences, especially in housing costs
    2) Growth of income inequality, or socio-economic ‘class’ differences

    http://www.rbnz.govt.nz/monetary-policy/inflation-calculator

    Reply
    • patupaiarehe

       /  3rd September 2016

      Great if you have a mortgage, suddenly you have a whole lot more equity to borrow on. Everyone else is fuct, poor them….

      Reply
      • Yep, that’s life in ‘the Bubble’ … FantasyLand, the happiest debtdom of them all …

        Reply
        • patupaiarehe

           /  3rd September 2016

          The ‘bubble’ is about to burst. Doesn’t concern me at all, since I have a debt that I can easily service. Many others, however, are not so fortunate…

          Reply
          • Gezza

             /  3rd September 2016

            Same with me, in fact even better – debt free. Probably couldn’t even buy a house in a desrable suburb if I was starting over again on the pittance I was earning when we got a 3% State Advances loan for our first home.

            Reply
            • Kitty Catkin

               /  4th September 2016

              Being mortgage free is a great feeling. I did think that it would be more dramatic-it was just like signing up for a credit card or something like that, very mundane. Not so much as a Crunchie bar handed over as a congratulatory celebration.

              It does seem odd to look back at one’s past wages. I remember going to a new job with Westpac-or the Bank of New South Wales as it was then-and having a nice wages hike from where I was before. It’s laughable now. I was in International Finance, which sounds impressive but wasn’t really.

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