patrick.net

Unlike unemployment, inflation does affect everyone. But what matters to working people is not the monthly or yearly price change taken alone. What matters is the effect on purchasing power and living standards over time. Whether these are rising or falling depends on the relationship of prices to wages. When wage growth exceeds price increases, times are generally good. When it doesn’t, they aren’t.

It is here that Biden has a problem. During his presidency, living standards have not risen. From early 2021 to mid-2023, prices have increased more than wages, implying that real (inflation-adjusted) hourly wages and real weekly earnings have fallen, on average. Not by much, but they have fallen. Worse, the average figure probably masks a larger fall, in real terms, for families that started out below the average. And given how income distributions work, there are always many more families earning less than the average than there are who earn more.

-- Kenneth Galbraith, liberal economist