Shrinkflation doesn’t fool consumers for long. People notice when their stuff runs out faster.
When a 22-pound bag of dog food bag replaces a 30-pound bag, Buddy’s appetite doesn’t shrink accordingly. If the 12-pack of K-cups becomes a 10-pack, coffee drinkers have to replenish supplies more often to keep the caffeine coming. When tomato cans go from 32 ounces to 28 ounces, sauces no longer match up with one-pound pasta boxes. Even inattentive shoppers quickly notice they’re getting less for their money.
Smaller packages don’t fool the folks who compile inflation statistics, either.
If a 16-ounce box contracts to 14 ounces and the price stays the same, I asked Bureau of Labor Statistics economist Jonathan Church, how is that recorded? “Price increase,” he said quickly. You just divide the price by 14 instead of 16 and get the price per ounce. Correcting for shrinkflation is straightforward.
New service charges for things that used to be included in the price, from rice at a Thai restaurant to delivery of topsoil, also rarely sneak past the inflation tallies any more than they fool consumers.
But a stealthier shrinkflation is plaguing today’s economy: declines in quality rather than quantity. Often intangible, the lost value is difficult to capture in price indexes.
Faced with labor shortages, for example, many hotels have eliminated daily housekeeping. For the same room price, guests get less service. It’s not conceptually different from shrinking a bag of potato chips. But would the consumer price index pick up the change?
Probably not, Church said.
Measuring inflation is hard. The goal is to capture changes in the overall price level — the numbers on every price tag — not swings in relative prices. You want to see how much the cost of living, represented by the price of a consistent basket of goods and services, has changed.
That’s different from how many hamburgers equal a gallon of gas or how many apples equal a movie ticket. Relative prices can and do shift all the time without constituting inflation. But for today’s cost-of-living basket to measure the same thing as yesterday’s, the goods and services themselves need to stay the same. And they, too, tend to change, especially when technology is involved.