Forty Plus Years of Inflation

 So I'm looking at some inflation data between 1980 and 2023.

Let's start with houses. The average house price in 1980 $74,400. That sounds about right as I bought my first house for $45,000 in 1974 and the average was $38,600. I bought my second house in 1984 for $212,00 and the average was $99,200.

In 2023, the average price was $503,000.

If we calculate inflation from 1980 we get $275,119. If we calculate from 1984 we get $290,918. So there is clearly something wrong here.

If we roll back to 2011 the average house price was $267,600 while, based upon inflation, we would expect it to be $203,100 from 1980 and $214,763 from 1984.

So clearly something is wrong with house prices. I'm sure anyone trying to buy a house has figured this out but here are the numbers to back it up.

Now let's look at college costs. We'll consider yearly costs for four year colleges.

In 1980 the cost was $5,465. In 2021 it was $17,251. Based upon inflation we would expect it to be $17,971. So clearly, despite what a lot of people claim, college costs have not risen out of whack with inflation. They're about what we would expect.

Now let's look at real median income. Real is adjusted for inflation.

In 1980, the real median income in the US was $25,380. Given inflation, I would expect the real median income in 2022 to be around $64,795. It's actually only $40,480.

If my calculations are correct, and my degrees in mathematics and economics imply that they are, then Houston we have a problem.

Since 1980, the total inflation has been 255.3%. So, just to break even, the median salary would have to be $64,795. But it's not.

When we also consider that productivity of the American worker has risen 159.7% since 1980 but wages have only risen 113.7%, again I have to say that something is seriously wrong.