BLS economists have numerous ways of correcting for those changes, but they err on the side of conservatism. They look for specific, quantifiable differences that customers can reasonably be expected to notice and care about — and that can be plugged into statistical models. A bigger TV screen with a higher-definition picture is probably more valuable to consumers. But what about a hotel room with nicer sheets? That’s trickier. The less measurable the change, the harder it is to correct for.
During the 2000s and 2010s, inflation was probably overstated because of unmeasured quality increases. Now there’s the opposite phenomenon. Quality reductions have become so pervasive that even today’s scary inflation numbers are almost certainly understated.
The paper napkins at a local smoothie shop, a friend points out, have gotten so thin and small that they are “almost useless.” But price trackers would look only at the smoothie itself without accounting for the lousy napkins.
A Starbucks latte may cost the same, but if the store now shuts at 4:00 p.m. instead of 6:00 p.m. — or varies its hours unpredictably depending on who’s available to work — customers are getting less for their money. Shorter, less predictable hours have become common in many service businesses.
Take my recent trip to Bank of America. Arriving around 3:15 to make an inquiry for my condo association, I found the metal security gate down and only the lobby ATMs available. A sign said the branch was open until 4:00 — already a reduction in hours from the old schedule — but it wasn’t. At a second branch, where I was turned away because closing time was approaching, I met a mother and adult daughter who were on their third branch visit, with no success. Coming back another day, they said, meant taking more time off from work. That cost wouldn’t make it into any official inflation measurements.
Similarly, airline ticket prices dropped slightly in June, but that doesn’t mean the cost of air travel is down. Bags are five times more likely to go astray than a year ago, and security lines are insanely long. On July 2, I spent four hours waiting with thousands of other passengers to get through security at Amsterdam’s Schiphol Airport. Whether or not the ticket price was greater than a year earlier, the intangible cost certainly was. While this example is extreme, longer waits for any kind of service, from doctors’ appointments to sandwich orders, are becoming common.
Even if incomes keep up with inflation, quality declines are aggravating and depressing. They make consumers feel powerless and taken for granted, which can lead to angry confrontations. They create a pervasive sense that the world is getting worse. They exact a toll that economic statistics can’t capture.
This article was provided by Bloomberg News.