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Americans’ Wages Are Higher Than They Have Ever Been, and Employment Is Near Its All-Time High
(www.americanprogress.org)
this post was submitted on 17 Oct 2024
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OK, so this is how my smooth brain thinks about it:
Housing is double when adjusted for inflation. Milk is obviously not. I think milk has stayed flat since they started tracking it in the '90s.
If I paid the same (adjusted for inflation) for my house and paid double (again, adjusted) for milk I would have a lot more money left over at the end of the month. I don't think CPI takes into account how much milk I drink compared to the one house I need.
CPI does weight items by based on spending patterns (although the details of how to determine this weight are complicated and the main reason there are multiple inflation indecises).
The 2022 CPI has a 0.178% contribution from the price of milk, and a 45.065% contribution from the price of Housing. Housing itself is subdived into several subcategories. Notably, neither the purchase price of a house nor the typical mortgage are included. Instead, homeowners cost of shelter is covered by "owner's equivelent rent" which attempts to answer what the owner would be paying if they had to rent the house they are living in.
https://www.bls.gov/cpi/tables/relative-importance/2023.htm
The market basket approach they use looks at the mix of goods and services people buy. So yes, it captures the fact that housing is more of a typical person's budget than milk.
I did a quick search and couldn't find an answer.
I wonder if part of the disconnect is that they are using just a general "dwelling" in CPI. As opposed to price per square foot. That is, is dwelling size shrinking, while costs are growing, this could cause housing costs to be understated in CPI
That's the whole point of CPI. It flattens a large aspect of capitalism into one magic number. It simplifies things for politicians and pals. But it's not an objective measurement for meaningful science, especially as used in these types of articles (OP).
It captures the fact that housing is some percentage of people's expenditures. But the measurement of housing and the percentage of expenditures are both subjective. It's a choice of measurement not a capturing of some objective "fact".