On average, grocery prices are actually lower compared than they were in 2019, compared to income. I post this more from a psychological POV, it’s interesting to me. Do people see the higher numbers and not do the math? Are the people really upset those that were left behind in the recent wage upticks? Are some brains still seeing the increases in the Covid years and expecting prices to retreat more? If I were to complain about it I think i would be in the third category, thinking they should have come down instead of allowing for a year or two’s worth of inflation with no additional prices increases being the offset. But interesting how reality and perception can be so different. https://www.marketwatch.com/story/g...are-people-still-so-mad-about-prices-74b5a6db
The problem is the entire country and economy are reduced to two averages: average wage increases and average price increases. The wages of millions of people go into that average while the inflation averages price increases of numerous products across the entire country. But few people experience the average. Those whose wages were below the national average increase who experience price increases above the national average, are feeling the crunch.
I also think it has to do with pressure from all angles vs one increase in an income stream. If a $10 to $20 an hour employee makes even 50% more they make $5 to $15 an hour more, meanwhile,health insurance is up, home insurance is up, car insurance is up, car prices are up, maintenance costs are up, services are up, leisure activities are up and when you go to buy food a $6 fast food meal is $10 to $13 and a box of cereal is often $7. Just guessing its not something that is felt in a vacuum.
Grocery prices don't seem crazy to me, especially relative to things like eating out at restaurants, housing, and insurance, which do seem higher to me at least where I am. I would think some of this might be explained by people using groceries as a metric instead of some other categories of expenses. For whatever reason, a lot of the political side of the discussion of income relative to prices has seemed very focused on groceries, in particular.
The problem with that though is that while individuals generally aren't "average," you only focused on one of four potential conditions. There could be people that experienced more wage gains and less price increases, more wage gains and more price increases, or less wage gains and less price increases. However, I suspect that people are not good at classifying themselves into those categories.
I’ve theorized people experiencing the highest food inflation must eat a lot of packaged food. Their “average grocery cart” must be slanted much more towards these items. Similiar to fast food and fast casual, a lot of pre-packaged food seems to have outpaced inflation. Everything from Coca-Cola 10 packs to Frozen and prepared meals definitely seems up quite a bit more than overall inflation. I wouldn’t say it’s entirely just “junk food” either as someone else pointed out boxes of cereal above. The increase in fast food prices is understandable as employee wages have shot up, the “packaged foods” seems less understandable as I doubt labor costs on a box of Cheerios translate anywhere near as much as in food service. That being said, in my experience food inflation is easily avoidable by buying fresh ingredients and as little of the “big food” products as possible.
Keep in mind wages are pretax $s while the vast majority of “living costs” are aftertax $s. Depending on you effective tax rate, it may take a 13-14% wage increase to cover an 10% COL increase.
I think this largely comes down to the concept that if people made $10 a week and food cost $3 and now they make $30 a week and food costs $10, people are mad about not being ahead $27 instead of $20. They want to feel that they are moving forward at warp speed when they make more money.
Much of this is just a version of Prospect Theory. Prospect theory - Wikipedia Essentially, the average customer gains money from a wage increase and loses money from a price increase. If we were to assume that a customer is going to buy the same basket of good regardless of their circumstances, let's say that an average customer gains $1,000 in wages and loses $900 in price increases. A rational person might say "I gained money." However, that isn't usually the reaction due to loss aversion. The average customer will weight the loss as being more important than the gain, even though that isn't really mathematically true.
