Editor's note: Paul Krugman is a New York Times columnist and distinguished professor at the City University of New York Graduate Center. He won the Nobel Prize in Economics in 2008 for his work on international trade and economic geography.
Coincidentally, a few days ago I flew into Newark Liberty International Airport's new Terminal A and realized something that should be obvious to anyone who has been flying commercially for years. That said, American airports are actually getting much fancier. I'd rather fly to Newark, New Jersey than many European airports where you still have to take a bus from the plane to the terminal.
But this got me thinking. Why do US airports have more facilities than they used to? (The flying experience can still be miserable because of security lines, but that's another question.) Obvious The easy answer is that they are responding to customer needs, and certainly that has always been true.
Perhaps one of the main reasons is that while flying is no longer an exclusive experience for the elite as it was in the “jet set” era, the average person who flies frequently and spends a lot of time at airports Probably much richer than that. And over the past 40 years, high-income Americans (and I'm talking about the top 10 or 20 percent, not the super-elite who have no commercial activities at all) have earned far more than the middle class. are experiencing an increase in Below are estimates from the Congressional Budget Office (don't worry about the bottom quintile numbers, which are a source of considerable controversy but are not relevant to today's discussion).
Congressional Budget Office
So my guess is that the airport caters to this wealthy clientele. That means the same customer base that's driving the proliferation of gourmet supermarkets and the gentrification of some urban areas is also equipping airports with better food and stores than ever before. I'm not making a value judgment here. I myself belong to that class and am benefiting from the trend.
Rather, my point is that airports, like many other institutions, serve specific income groups. And it follows that wealthy people buy different things than less fortunate people. This means they care about different prices. There are countless posts on social media, like one from investor Kyle Bass, complaining about the price of food at airports and room service at luxury hotels.
But these aren't prices that matter to most Americans. And because people spend money differently, the useful abstraction we think of as the “consumer price level” is that different groups face at least some degree of different inflation rates, and therefore different slopes for different people. replaced by truth.
The truth is, while it's fun to make fun of wealthy people who complain about the price of fancy meals, there's good reason to believe that recent inflation has actually been worse for people at lower income levels. Body. why? This is mainly due to soaring food prices.
But what these precise BLS numbers show is that food prices are rising more than overall prices, reflecting a variety of factors, from climate change to the war in Ukraine.
Note that even though the Y-axis says “% change,” 0.1 actually means 10%.
This graph shows a noticeable process of equalization. That is, real wages for the highest quintile have fallen, everyone else has increased, and the lowest quintile has earned the most. However, real wages are calculated using the same consumer price index for everyone. But as we've said, recent inflation has probably been higher among low-income Americans, who spend more on groceries. Would taking that into account undermine the conclusion?
- Bottom 20%: 19.5
- Next 20%: 19.3
- Intermediate 20%: 19.1
- 4th 20%: 18.9
- Top 20%: 18.0
Yes, lower-income Americans had higher inflation rates. But the gap from bottom to top is 1.5 percentage points, much smaller than the gap implied by Dube's wage data. In other words, taking into account the relevant differences in inflation slightly alleviates the case of “unexpected compression”, but the basic result remains the same.
So does it matter that the rich spend differently than you and I, or indeed that those in the top quintile spend differently than Americans in the middle? Yes, in some important ways. However, this does not change the story of a significantly flattened economic recovery.
