BUSINESS + ECONOMY

Is inflation, cost of living really worse than the 1980s?

Jun 28, 2023, 1:00 PM

Inflation, cost of living has been driven, in part, by the prices of groceries and other daily nece...

(Scott G. Winterton/Deseret News)

SALT LAKE CITY — Despite a low unemployment rate, Americans are still feeling the pinch of inflation, cost of living and general fiscal pain. It leads to the question: “Are you better off now than you were four years ago?” That’s what former President Ronald Reagan famously asked during a presidential debate in 1980.

Let’s broaden that question beyond one presidency. In light of the inflationary struggles the world has experienced in the last year, are we better off now than we were 40 years ago? In the 1980s?

“Yes, as a society, I believe we are,” said Shane Stewart, a certified financial planner with DMBA. “When you take all things into consideration and look at what an average family could afford in 1985, that family is better off today than they would have been back then.”

 

Inflation, cost of living is changing our lives

In the 1980s, a family having two cars was not as common as it is today. A family having two jobs was more of a rarity. Now for many people, as Stewart explained, it feels like a necessity.

“The lifestyle perception has jumped because now we’re saying, ‘Well, I need two jobs in order to keep that thriving lifestyle rather than a surviving lifestyle’.”

Difference between inflation, cost of living and cost of thriving

The cost of living is just covering the bases. It’s the cost of rent, food and transportation. Stewart said that the so-called “cost of thriving” is more about luxuries, like travel.

“I see the younger generation, young families today, traveling,” Stewart said. “I’m thinking, when I was their age, I didn’t really travel much. I didn’t have the money.”

So, the concept of thriving today requires more money to do more things than it did two generations ago.

Everybody says ‘I’m worse off’

When you ask people if they’re doing better today than they were four years or forty years ago, most of them will say, “No.”

“Generation after generation will always believe they’re not doing better than they were even a year ago,” Stewart explained. “That’s why Ronald Reagan’s question was such a brilliant political question. The gut answer for everyone is, ‘No. I’m not’.”

But perception does not always match reality.

“Statistically, you are probably better off,” Stewart said, “but you just don’t feel like you’re better off.”

He called it the law of scarcity. 

“Where you always feel like you don’t quite have everything you want or need, when, in fact, you might,” Stewart said. 

Stewart says he tries to get people to focus on the “law of sufficiency”. In this law, the question you ask is, “Do you have enough?”

“The human brain just doesn’t work that way,” said Stewart. “It says, ‘Well, I have some good things, but I don’t have enough’.”

Every generation complains about inflation, cost of living

One of the most common complaints people voice today is about inflation. They can’t afford eggs, gas or a car. Is this a unique challenge for us in 2023?

“No,” said Stewart. “Every generation faces the fear of inflation. . . This isn’t much different than we’ve seen in other years.”

There is a basic misconception about inflation.

“A healthy economy is inflated, meaning it grows,” said Stewart. “It’s just like the tire on your car. It needs to be properly inflated.”

If the economy is underinflated, like your tire, it’s hard on the system. If it’s properly inflated, it runs beautifully. “The problem is hyperinflation or overinflation,” Stewart said. “If it grows too quickly, it’s hard to stop, and then everything becomes very expensive.”

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Is inflation, cost of living really worse than the 1980s?