Inflation is weighing on everyone. The Consumer Price Index was at 0.4% for the month of September and 5.4% year-over-year (CNBC). While many economists feel the current pressure we are feeling is transitory (not permanent) but largely a product of the pandemic-related bottlenecks in the supply and delivery chain which they feel will resolve at some point, it is very real to consumers who are paying more for just about everything. And just this week it was announced that Social Security recipients will get the largest cost of living adjustment (COLA) in 40 years—a whopping 5.9%!!! This increase will impact one in five Americans. (NPR)

Manufacturers and service providers are grappling on their end as to how best to absorb, pass on, or mask the increasing cost of providing products and services. For manufacturers, many have (some temporarily) decreased the size of their products but are charging the same price. This is referred to as “Shrinkflation.” For more on that, and to help your students learn about this trend, check out our NGPF Economics Activity on Shrinkflation.

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Couple rising prices with a shortage of labor, and service providers have much tougher choices to make to stay in business and keep customers. Many of the decisions result in a lesser customer experience, but these qualitative differences are not really captured in any inflationary measures.

In this Upshot article by Neil Irvin, these measures are referred to as “Shadow Inflation” and explained in more detail, with lots of examples. 

• Empty store shelves-fewer or no choices for products at stores
• Longer waits for service or delivery of products
• Limited menus at restaurants/ordering through apps/counter vs. table service
• No room cleaning during hotel stays unless requested

(This NYT article may require a subscription. It appeared in the Seattle Times also.)

Additional Assignment Idea:

Have students read the NYT/Seattle Times article and answer the following questions:

1. Where have you experienced a noticeably different customer experience in your lives?

2. Which of the following have you noticed in each case?

Increased prices?

Smaller package/serving size?

Longer wait times for service?

Limited hours of operation?

Empty shelves? Fewer/unavailable menu items?

3. Do you think these changes will be temporary, or will they linger?

>> Teachers, be sure to log into your NGPF Teacher Account or create your FREE Teacher Account Today for access to answer keys, teacher toolkit, and rewards from NGPF Teacher PDs. NGPF is 100% FREE, forever.

About the Author

Beth Tallman

Beth Tallman entered the working world armed with an MBA in finance and thoroughly enjoyed her first career working in manufacturing and telecommunications, including a stint overseas. She took advantage of an involuntary separation to try teaching high school math, something she had always dreamed of doing. When fate stepped in once again, Beth jumped on the opportunity to combine her passion for numbers, money, and education to develop curriculum and teach personal finance at Oberlin College. Beth now spends her time writing on personal finance and financial education, conducts student workshops, and develops finance curricula and educational content. She is also the Treasurer of Ohio Jump$tart Coalition for Personal Financial Literacy.