As the incomes grow, so do the prices of goods and services. The latest statistics on consumer prices showed inflation growing by 1.9 percent. Though growth in wages help Kansans’ purchasing power remain on top of the growth in prices, it won’t last forever. This begs the question, what is driving inflation, and can it provide any insight on how to lessen the pressure on our wallets?
Leapfrogging off work done by the American Enterprise Institute on national prices, the chart below breaks down the changes in Midwest prices for certain goods and services. As we move forward in time from 1998, some goods and services become more expensive while others become affordable. This trend can mirror our own daily perspectives. Look at the red lines. It is common knowledge that medical care costs are accelerating. Stopping at our local gas station we groan at how much a full tank of gas costs. The price growth behind elementary and high school education and fees is one of the biggest points of debate in Kansas policy, biting an extra 7% a year from Kansas families since 2005. This means in 2005 a family of four with two school age children must prepare to pay an extra $1,359 by next year. By 2018, that same family must be ready to shell out an extra $3,262. Those are serious effects on Kansas families.
But do our personal experiences also match the trends seen in cheaper goods (blue lines)? Clothing is 9 percent cheaper than in 1998, while vehicles are on average 4 percent cheaper. Prices for durable goods including household furniture range from 9 to 19 percent lower than they were 20 years ago. When we take a trip to our local electronics store, how often are we surprised about new tech that can process more tasks at a faster rate for the same price or have some brand new technological feature at a higher price we are comfortable paying?
What do those cheaper goods have in common? They are in relatively more competitive industries, offering goods and services with falling prices due to more consumer choice. As a counter example, medical care is a highly regulated industry with little transparency in prices and little competition across state lines. Electricity rates in Kansas are in the top half highest rates in the country, controlled by a few companies, keeping out new entrants and restricting supply based on where you live and do business. K-12 education is run by local governments with growth in spending driven by administrative costs and few options that transfer any decision-making power to parents and families. Included in K-12 prices are also the costs of textbooks, highly regulated by copyright protections.
Americans, including Kansans, grumble to no end on the high prices of healthcare, housing, and education. However, we also ignore the fact that these same industries are monopolized and/or heavily regulated by the government. If we as consumers want lower prices for goods and services while providing the same, if not better quality, then we must allow more consumer choice. Time has shown the more you attempt to control an industry’s output, the higher the price will be.