In a Wall Street Journal article centered on why 3% inflation isn’t close enough to 2% inflation, even for government work, there was this bit:
Anticipating the public’s reaction is tricky, not least because economists still argue about why people hate inflation so much in the first place. In textbook models and in many real-world instances—including during the 2020s—wages tend to catch up to prices, so inflation doesn’t, over time, erode the purchasing power of the average worker’s paycheck.
Even so, inflation makes people feel that they are falling behind….
It’s not that complicated.
This is a case where opportunity costs become real and realized costs. Wages do catch up over time, but during that time, people keep right on aging. By the end of the inflationary period, the time behind them has in concrete terms eroded their purchasing power. The opportunities to do the things they’d wanted to do are lost forever. The abilities to do many things for themselves or with family and friends may no longer possible as they now may no longer be young enough to do them, depending on when in their lives the inflation struck them. The opportunities to acquire many of the things they wanted to acquire are permanently lost as they have less time left in which to enjoy those acquisitions, or in the case of a larger house to better accommodate a growing family, some if not all the children have left the nest and the larger house no longer is useful to them.
Over that time, too, and beyond it, wages don’t necessarily exceed the inflation, so catch-up, practical, useable catch-up—the ability, for instance, to expand savings to get back to where folks would have been had their savings regime not been interrupted by the inflationary period—does not exist.
Inflation makes people feel like they’re falling behind, because during the inflationary period they are falling behind. Then people remain behind because even with after the fact rises in wages, their opportunity to catch up is so heavily limited, and especially is the time available in which to catch up much more tightly constrained.
All of this especially is the case for folks on the lower rungs of our economic ladder. They start out with narrow margins for things like savings and acquisitions of highly useful things—that larger home, for instance, or a car to replace the increasingly expensive to maintain beater—much less to do or acquire things are fun to do or to have. In the best of times, they have trouble keeping up; with the losses from an inflationary period, they only fall farther behind, with no hope of recouping even that arrearage.
