US consumers remain unimpressed with this progress, however, because they remember what they were paying for things pre-pandemic. Used car prices are 34% higher, food prices are 26% higher and rent prices are 22% higher than in January 2020, according to our calculations using PCE data.
While these are some of the more extreme examples of recent price increases, the average basket of goods and services that most Americans buy in any given month is 17% more expensive than four years ago.
Disclaimer: I don’t have a degree in economics. I read your post and I think I have countering points to make, but if you can rebut my points below specifically I’ll try to listen. (Also just want you to know I’m not the one who down-voted you since you seem to be arguing in good faith and I’m all about that. Sometimes I’m wrong.)
You talk about making things more cheaply and that resulting in a cheaper product. If companies agree to all charge the maximum they can get away with, it kills industry price competition (a foundational necessity of functional capitalism) and renders price elasticity a falsehood. If Coke and Pepsi both charge 1.50 for a can of cola, it doesn’t matter if increased productivity means Coke can make a can for 20 cents instead of 30 cents - the savings are just converted into extra profit. You can see this in record profits for many sectors as productivity has increased - the savings of needing fewer people to do the same work isn’t passed on to customers. As proof, here’s an article about how much more things cost today than in the 1970’s (adjusted for inflation). Yet we know that people are over 3x as productive per person over the same period, so clearly companies are not passing along savings in the form of cheaper goods. I know more than productivity affects price, but those factors would have to be overwhelmingly more costly to justify the increase and I don’t think things like shipping are that much more expensive.
Inelastic demand for necessary products like fuel, utilities, food, health care, etc also means that in many industries increased productivity does not need to translate to savings. Pharmaceutical companies, either as an industry of multiple providers or where they hold exclusive patents, will raise prices of products to whatever they can get away with because people will either pay or die. So again cheaper products and competition is a myth.
Speaking of getting fewer people to do the same work, companies lay off people all the time when individual productivity or automation goes up. You talk about employing 1/5th the Bobcat workers and net lost 4 workers being forced to find other work. This may make economic sense but it’s terrible societal sense. It results in financial insecurity and homelessness among educated, capable people with all the associated national problems like mental health, crime, drug addiction, etc.
As US economics function now, companies do not pass along the value of increased productivity to their customers in savings, nor to their employees in increased wages, shorter work weeks, or stable employment (re: layoffs). Instead they maintain or raise prices depending on what they can get away with and employ as few people as possible to maximize profit. This has the societal consequences we’re seeing now, such as in OP’s article.
This long explanation supporting capitalism and ‘the market’ fails to take something crucial into account that all these market promoters forget:
Labor cannot have an undistorted market so long as the option to not sell your labor isn’t a valid one.
For any market to be relatively undistorted, a seller must be free to choose not to sell at all if none of the offers are equal or greater than her assessment of the value of her product.
However, as long as labor is needed in order to procure food, shelter, and adequate living conditions, this cannot be the case - people are coerced into selling their labor at values lower than their assessment of its value because to not do so means being denied adequate living conditions.
If people were free to choose not to sell their labor without this coercion, then those seeking to purchase people’s labor would find they likely cannot find anywhere near as many people willing to sell at the price they are offering.
Basically, you are making excuses for the fact that due to this market distortion coercing people to sell their labor, the divide between productivity and wages has grown. It is not necessary to lock wages to productivity - if people have the option, and they see massive profits being pocketed off their work with increasingly minimal compensation, they would choose not to sell…except there comes the coercion to ensure they don’t do that.
I wonder if the same excuses would be made if we turned it around and told companies they must sell their products, no matter how little the customers are offering…
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