[bluefirebrand]

> Assuming you're in a major developed economy, inflation is falling

It is really important that people understand that inflation isn't "falling" in the sense that things are getting cheaper

A lower inflation rate just means that stuff is getting more expensive more slowly, but it is still getting more expensive

Unless we see actual negative inflation, the damage of high inflation rates has already basically been done. Salaries have not kept up and will likely just continue to fall further behind

[sanderjd]

> It is really important that people understand that inflation isn't "falling" in the sense that things are getting cheaper

"Inflation falling" does not mean "things are getting cheaper" in exactly the same way that "driving backwards" does not mean "reducing speed".

Where did this meme even come from, that this is confusing? Did they stop teaching what the definition of the word "inflation" is? Or did they stop teaching about the relationship between measuring values over time and measuring rates of change in those values?

Inflation isn't a confusing concept! Are people really confused by it, or is there just a lot of noise about this?

> Unless we see actual negative inflation, the damage of high inflation rates has already basically been done.

"Negative inflation" is called deflation. That's what happens during a depression. Deflation would be a very bad thing, you do not want deflation.

> Salaries have not kept up and will likely just continue to fall further behind

This one is just simply not supported by economic data. If you're just talking about the tech industry, then, yeah, maybe. But it's not true of the workforce as a whole.

[bluefirebrand]

> Where did this meme even come from, that this is confusing

It's a fairly straightforward misunderstanding of terminology being used in public discussions

"Why are things getting more expensive?" "Inflation"

"Inflation is falling" "Oh so that means things are getting cheaper right?"

People make this mistake constantly. One could argue that discussions about inflation is framed specifically to lead people to make this mistake

> This one is just simply not supported by economic data

Look at any graph of cost of living versus incomes and it's absolutely plain to see that it's true. Not sure what other economic data you're referring to, but I suspect it's misleading at best

[sanderjd]

> Look at any graph of cost of living versus incomes and it's absolutely plain to see that it's true.

So I've been trying to put together graphs to share with you, but I think it's sort of hopeless without knowing what data series you mean when you say "cost of living" and "incomes", or what time period you're thinking of.

I think "cost of living" is usually a city or region specific concept. To get a sense of that nationally, are you thinking of one of the inflation measures, like consumer price index (either "headline" or "core")?

For "incomes", FRED has both "personal income" and "disposable personal income" measures, both from the Bureau of Economic Analysis. Is that what you're thinking of?

Probably more interestingly, what time period are you thinking of when you say "have not kept up"? I was thinking of "since the pandemic started", so I was looking at what's been going on since 2020, but I realized it's quite sensitive to this starting point, and you might be thinking of a different one.

I should have asked these questions before I replied originally :) Sorry about that!

Edit to add:

I guess you did say "look at any graph of cost of living versus incomes and it's absolutely plain to see that it's true", so I can at least give one counterexample before you answer my questions:

Here is CPI (both headline and core) against personal income (and disposable personal income also), with the value of each index set to 100 on 2020-01-01: [0]. The income lines are up ~25% since then, while the CPI lines are up ~20% from then until February 2024. That's 49 months, so normalized by the number of months, that's ~0.5 for income and ~0.4 for CPI.

0: https://fred.stlouisfed.org/graph/?g=1kiu7

But here is the same thing, starting one year later: [1]. This is a very different story! In this case, income is only up ~8% while CPI is up ~17%! This is 37 months, so normalizing the same way gives ~0.2 for income and ~0.45 for CPI each month on average.

1: https://fred.stlouisfed.org/graph/?g=1kiv5

But then the story since 2023 is better again: [2].

2: https://fred.stlouisfed.org/graph/?g=1kivz

So I guess, if you accept the series I've chosen to analyze this, and the time period you're thinking of is the beginning of 2021 to now, then I accept your premise.

But I still don't see any evidence for "will likely just continue to fall further behind"; the trend is flat to closing (albeit slowly).

[bluefirebrand]

I suppose if you're only thinking about since 2020, fine. But the problem has been around much longer

https://www.epi.org/publication/charting-wage-stagnation/

https://www.pewresearch.org/short-reads/2018/08/07/for-most-...

[sanderjd]

FWIW, if you go back further on the charts I linked, the income measures outstrip the inflation measures by even more. I think the starting point of January 2021 is pretty much the worst you can make that particular comparison look, if the end date is today. (Which is definitely convenient for the "it's all Biden's fault narrative!)

That first article is focused on making the case that inequality is a big problem. And on that, I certainly agree! But the amazing thing about the pandemic recovery in the US is that inequality has actually improved. The recovery has been better for lower wage workers and worse for higher wage workers. This is not unrelated to the bleak feeling in "tech" at the moment; we are among those higher wage workers for whom the recovery has been relatively less robust.

And again, the starting and ending points matter a lot. That article from 2015 showing how bad the financial crisis and "great recession" were just aren't very relevant to this discussion of "is the economy good right now?". It's true that the great recession was incredibly awful! But since them we've had a period where the economy was good again, and global upheaval due to a pandemic, and a complicated recovery from that upheaval. So that's the period that is more relevant, IMO.

I think the second article is more interesting though. I'd certainly be interested to see a fresh analysis of that same thing.

But I honestly really wonder what people use to anchor their expectations for real wage growth. I think it's pretty clear why it's super bad for it to be negative (that is for nominal wage growth to be less than inflation), but how high "should" it be?

I guess, to me, all else equal - that is, for the same work at the same company, without getting promoted or taking on new responsibilities or switching into a new role at a new company (or a different organization within the same big company) - I don't expect my income to grow much if at all above the rate of inflation. And I don't think the aggregate wage data captures this kind of income growth through career progression (nor is it intended to).

So I dunno, I'm unsure about it, but when I see "real wages haven't grown much", I kind of think, ok, but should they even be expected to grow much?

Again, I'm specifically talking about real (that is, inflation adjusted) wages here. Of course everyone expects nominal wages to increase over time, but I think that's mostly because we also expect inflation to be nonzero.

[bluefirebrand]

> I guess, to me, all else equal - that is, for the same work at the same company, without getting promoted or taking on new responsibilities or switching into a new role at a new company (or a different organization within the same big company)

Seems a bit of a strawman to me, because I don't think you can realistically stay in one place this way without taking on anything new or extra over time

Some new tool is built or purchased that makes you 5x more productive, so half your team is cut and now you're doing the work of multiple people. Or maybe they just downsize and toss extra responsibility onto you. Or you get promoted just because of seniority. Or frankly, because of seniority you now have knowledge few people do so you are responsible for mentoring

The "static, never done anything extra, no new responsibilities" is not realistic

And the productivity thing is massive too. Computers mean that one person can do the work that entire teams used to, in a lot of industries. But they aren't earning as much as entire teams. Workers have captured basically none of the value of our increased productivity

So, yeah. I think it's actually just plainly obvious that our real money incomes should have grown faster than they have

[rsynnott]

Yup, but 'ever increasing pace' means that inflation is rising, not falling.