The increase is measured in "real terms" which means things like CPI are taken in to account. Further this number does decrease, for example during the last recession, so household median income is not directly correlated with inflation -- especially in this era of low inflation (compared to the mid-to-late 20th century inflation) that we've been in for a while.
" which means things like CPI are taken in to account."
Yes - but we should all be weary of this.
CPI is measured in funky ways, and it's tough one.
Problems with measures:
+ Both housing and Oil prices are usually left out of the numbers they use (included in others).
There are reasons for doing this, but it's bazonkers crazy to think of 'consumer prices' as not including their #1 item (housing) and a huge variable cost that consumers pay for directly (gas) but also that goes into everything (airline tickets, transport of stuff, taxi, etc. etc..)
And of course the hardest thing to measure is the real value increase of a product ... i.e. a tomato that is bigger, redder, juicier, healthier - is worth more than one that is not. So - if prices for tomatoes stay flat - but - their value has actually increased, well, that's deflation. That intangible is super hard to measure and quantify.
It's the later issue that is at the heart of so many economic arguments: some say we are 'poorer than ever' - and yet, every single bit of material consumable is way better than it ever was. The crappiest Peugot today drives better than the #1 Mercedes from 1985 ...
This is funky for another reason: people don't live in similar housing to what people lived in in the past. If you look at census data (American Housing Survey) from 40-50 years ago, you find the average American home was under 1500 square feet, 2-3 bedrooms, 1-2 bathrooms, no AC, no laundry machines, and so on. In fact, the average American home in the 1970s was smaller and had less amenities than the average current American home for people below the poverty line.
Any measure that just looks at the change in housing costs and doesn't adjust for the benefits of on-average larger homes with more amenities will end up overestimating that piece of monetary inflation (accidentally counting lifestyle inflation.) As you say, it's really hard to measure the "real value increase of a product", and that makes a lot of inflation measures... sketchy.
yeah, building and zoning are certainly relevant considerations. I'm not saying "this is all the fault of consumers". More like "when we measure inflation, we conflate monetary and lifestyle inflation, and our preferred policy ideas might not reflect that."
Are larger houses materially improving anyone’s lives? Over a certain amount of space, increases experience diminishing returns.
Meanwhile, the important things, such as percentage of income directed toward expenses and debt payment, and amount of leisure, may not have improved.
More households are composed of both prime-age adults working than 30 years ago. Are expenses simply rising to match this rate of increased employment?
Either way, it’s sketchy until those factors are quantified.
> "Over a certain amount of space, increases experience diminishing returns"
Indeed. And yet, that's what we buy. Or, that's what's being built and therefore that's what we can buy. I don't know whether buyers or builders/zoning are to blame, I just know that when we try to measure inflation, it's really hard to divide monetary inflation from lifestyle inflation -- how much is "money is worth less", and how much of it is "you're buying something better"?
Lol the house you described would go over a million in the Bay Area and it was built before the 70s too. No heating or ac gets installed too. So I wonder how that gets accounted for in inflation?
out of 118.29 million housing units, 80.8m (68%) have dishwashers, 97.6m (82%) have washing machines, and 95.7m (81%) have dryers. For the grandparent: 105m (89%) have AC, and 112m (94%) have a furnace or heat pump or water/steam heat or built-in electric heat of some sort. All of those numbers would qualify as "most".
Looking at the oldest stats I can find for each of those categories:
1970 -- out of ~75.3 million housing units, 35.3m (47%) have AC, and 62.6m (83%) have a furnace or heat pump or water/steam heat or built-in electric heat of some sort.
1985 -- out of 99.9 million units, 42m (42% heh) had dishwashers, 67m (67%) had washing machines, and 58m (58%) had clothes dryers.
So 26% more homes have dishwashers, 15% more have washing machines, 23% more have dryers, 42% more have AC, and 11% more have better heating systems compared to the earliest data I was able to find. Point being, there's been a significant increase in the availability of many important in-house amenities over the last 50 years. Not that everyone has every amenity, but a lot more people have them, and that definitely affects the way we should interpret stats relating to housing costs.
I'm also a layperson, so if a real economist posts something contradictory you'll probably want to listen to them. Of course economists are always contradicting each other so YMMV.
Does CPI decrease artificially based on subsidies to the indexed goods? For example with milk or any food with corn syrup, where the actual cost of production isn't reflected in the market price.
> How is "all time high" income surprising, given that inflation essentially guarantees perpetually increasing dollar amounts of everything?
Even when measuring real dollars, it's not a surprise. The great majority of the time, the aggregate national income, measured by GDP, grows in the U.S. and in any other advanced economy.
