And, as Virginia Postrel points out, “shrinkflation” does get noticed for economic statistics, unlike some of the other changes many companies are making:
Original image from www.marpat.co.uk
My latest Bloomberg Opinion column is explained well in an excellent subhead (contrary to popular assumptions, writers don’t craft the headlines or subheads that appear on their work): “Packaging less stuff for the same price doesn’t fool consumers or economists. But diminishing quality imposes equally maddening extra costs that are almost impossible to measure.” Excerpt:
If a 16-ounce box contracts to 14 ounces and the price stays the same, I asked Bureau of Labor Statistics economist Jonathan Church, how is that recorded? “Price increase”, he said quickly. You just divide the price by 14 instead of 16 and get the price per ounce. Correcting for shrinkflation is straightforward.
New service charges for things that used to be included in the price, from rice at a Thai restaurant to delivery of topsoil, also rarely sneak past the inflation tallies any more than they fool consumers.
But a stealthier shrinkflation is plaguing today’s economy: declines in quality rather than quantity. Often intangible, the lost value is difficult to capture in price indexes.
Faced with labor shortages, for example, many hotels have eliminated daily housekeeping. For the same room price, guests get less service. It’s not conceptually different from shrinking a bag of potato chips. But would the consumer price index pick up the change?
Probably not, Church said.
This phenomenon, which Doug Johnson aptly dubbed “disqualiflation” in a Facebook comment, is widespread. One example is the four-hour airport security line I chronicled in an earlier Substack post. Another is the barely trained newbie who screws up your sandwich order — a far more common experience today than four years ago. It’s the flip side of a phenomenon I wrote about in The Substance of Style and in economics columns in the early 2000s (see here and here).
During the 2000s and 2010s, inflation was probably overstated because of unmeasured quality increases. Now there’s the opposite phenomenon. Quality reductions have become so pervasive that even today’s scary inflation numbers are almost certainly understated.
If you can read the column at Bloomberg, please do. But if you run into the paywall, which allows a few articles a month, you can use this link to the WaPo version, which doesn’t have links.
