Inflation and wages: not everything is getting more expensive

Status: 14.09.2021 12:00 p.m.

Rising prices are unsettling many consumers. If you look at purchasing power, some goods and services have actually become much more affordable in recent years.

Rising consumer prices? This does not apply to all product groups or services. The currently reported inflation rate, which the Federal Statistical Office publishes every month, excludes an important factor. In fact, various products have even become significantly more affordable over the past few years and decades.

More purchasing power

This is especially true if you take the purchasing power of German citizens as a basis, which has increased almost every year over the past few years. A study by the employer-related Institute of the German Economy (IW) shows that purchasing power in relation to hourly wages has developed very differently in different areas of daily consumption.

According to the institute, hourly earnings have increased more than fifteenfold since 1960. In the past two decades it has doubled again. According to the Federal Statistical Office, the average hourly wage in 2020 was 19.38 euros. In many cases, you can currently buy significantly more for this than ten, twenty or even 60 years ago.

Work less for a liter of gasoline

What is striking, for example, is the relationship between wages and fuel prices. In 2020, consumers had to work an average of four minutes for a liter of super petrol, ten years ago it was 50 percent longer. In 1960, one liter of gasoline had to work for a good quarter of an hour.

The bottle of beer has also become cheaper in relation to the income of German citizens. On average, you can currently pay for 25 bottled beers with earnings from one hour of work. In 1990, for example, there were 19 bottles of beer per hour worked. In relative terms, branded ice cream has become more expensive in recent years, whereas butter, which only requires five minutes of work per package, is cheaper – only half as long as ten years ago.

Electricity more expensive, TVs cheaper

The kilowatt hour of electricity has become significantly more expensive in relation to the wage level: within 20 years, the financial burden has roughly doubled here. Many electronic products or electrical appliances such as televisions or smartphones have become significantly cheaper – in some cases even in absolute prices and not just in relation to hourly wages.

However, many consumers compare current prices with the level of the past few months; just like the Federal Statistical Office, which last determined a year-on-year increase in consumer prices in August of 3.9 percent compared to the same month last year. The energy sector, i.e. fuels such as heating oil and gasoline, became almost 13 percent more expensive. However, this is partly due to a so-called “base effect” – in the same month of 2020, energy prices had fallen significantly as a result of the corona pandemic.

Compared to previous years, Corona has also meant that average wages have not increased. In fact, the gross hourly wages actually fell slightly compared to the previous year. In previous years, wage increases had always been between three and four percent a year. As a result, the “perceived” inflation for consumers is likely to have worsened.

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