The changing costs in our new economy

Posted by mmcmullan on 10/31/2013

Steve Hargreaves of CNN Money has written an interesting article that looks at long-term price trends for American consumers:

The average family now spends less than 20% of their income on food and manufactured goods, according to (Mark Perry, an economist at the University of Michigan Flint School of Business). That's down from over 40% in the late 1940s. …

What hasn't experienced a full on revolution is the services economy. As such, prices for services and specialty goods have soared.

And how. Hargreaves explains that while you can get a new television for pretty cheap these days, the costs associated with, you know, important things like your health and education have skyrocketed. It now costs 227 percent more to go to college than it did in 1983.

Some blockheads might ask: So what? This is the natural order of things in the economy. But there’s nothing natural about our economic order. Our economy looks this way because we’ve accepted policies that have shaped it thusly.

For instance, America normalized its trade relationship with the Chinese government in the year 2000 and we promptly started losing middle-class manufacturing jobs. In an opinion from way back, Alliance for American Manufacturing (AAM) President Scott Paul said it thusly:

What did we get in return for this deal? A trade deficit with that country that keeps shattering records (edit: $315 billion in 2012 alone), fueled by a glut of artificially cheap imports that are swamping stateside competition. But it's hard for working families to benefit from the modestly lower prices on the shelves of retail chains when household incomes have been drastically reduced by the loss of a steady paycheck.

Simultaneously, increased trade with low-cost competitors has weighed down the wages of workers without a college degree. So to get a decent job these days, you’ve got to go to college. But as Hargreaves’ article illustrates, you’re gonna pay through the nose to do so.

The moral of the story? We need to increase manufacturing employment in the United States and pump some more equity into an increasingly inequitable economy. Otherwise, all of the cheap stuff at big box stores won’t mean much.

Read the whole Hargreaves story right here.

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