Holiday costs changes over 10 years: Making merry with less

Karen Woods pays around $100 a week more for groceries than she did a few years ago. While some of that increase can be attributed to buying healthier food for her family of four, she has also noticed a significant rise in grocery costs.

“We have to think twice before buying just to make sure we don’t overspend,” said Woods, a Los Osos mother of two who works in the billing office of a local pathology lab. “I pay attention to the ads a little bit more now, seeing what’s on sale.”

With the Christmas shopping season in full swing, you’ll probably notice that some things are considerably more expensive than they were 10 years ago — whether it be that pair of Ugg boots you plan on getting your wife or a pack of batteries for the kids’ toys. While the cost of goods is expected to rise, so too are salaries. But more recently, that hasn’t occurred.

“As a rule of thumb, prices go up by about 3 percent a year, and wages go up a little bit more than that — between 3 and 4,” said Stephen Hamilton, an economics professor at Cal Poly. “So in real terms, nothing ever gets any more expensive. But what has happened recently is that the prices have been going up, but the wages haven’t.”

For many economic experts, the past 10 years have proved to be a milestone for that undesirable change. While you can’t pin everything on 9/11, as business publication Kiplinger notes, the terrorist attacks from 2001 clearly mark the beginning of a downward trend.

Since 2001, the United States has gone from having a $128 billion budget surplus to a $1.3 trillion deficit, and unemployment rose from 4.9 percent in August 2001 to 9.1 percent in August 2011. (Both the deficit and unemployment have gone down slightly since this summer.) Meanwhile, the increase in total private-sector wages, adjusted for inflation since 2001, has fallen short of any 10-year period since World War II, according to the U.S. Department of Commerce.

Fortunately, however, overall inflation has not gone up too much. According to Dave Kong, a statistician at the Bureau of Labor Statistics, the price of goods — which includes things like food, housing, clothing, transportation, insurance, tuition and recreation — has gone up 27 percent since 2001. Salaries and wages in America have gone up 33 percent during that time.

In other words, that $9 case of Corona in 2001 should be around $11.51 today. And that $40,000 salary from a decade ago should now be $53,200.

In the San Luis Obispo area, salaries fared well for most of the 10-year span. But in the past four years the growth has stalled dramatically. In 2006, the average county salary only increased 1.4 percent from the year before. Last year, it only increased 0.6 percent, according to the Bureau of Labor Statistics.

Making matters even tougher, nationwide, the largest salary increases have gone to the high incomes. Adjusted for inflation, middle-class incomes in the United States have fallen 7 percent over the past decade. So, when food went up 4.7 percent from a year ago, it made buying holiday ham a lot more fiscally painful for most Americans.

“We need to start making jobs to get wages back up,” Hamilton said. “As long as there are people unemployed, there’s a lid on wages.”

When times are hard, people tend to notice dramatic rises in prices more, Hamilton said. Ten years ago, one could go to several grocery stores and find a 12-pack of Coke for $1.99. Today, it’s often $5.99.

A large container of coffee is nearly three times what it was a decade ago — and they’re giving you less coffee. The same has happened with bags of chips, which are more expensive and often include fewer actual chips.

“Ice cream containers, I noticed, went from a gallon to .75 gallons,” Hamilton said. “But they try to make the ice cream container look the same.”

Food prices are impacted by fuel prices because goods have to be trucked to grocery stores. And the days of $1.09-a-gallon gas — which we had in Morro Bay back in December 2001 — are long gone.

Commodities include other pricing factors as well. When the price of coffee shot up 21 percent this year, many said it was a demand issue.

“If demand goes up immediately and catches everybody by surprise, prices are going to go up because there’s not enough coffee out there,” Hamilton said. “Basically, it’s just something that has to happen if you’re rationing something amongst a bunch of consumers. So if you have a group of consumers that want something, and there’s not enough of it to go around, those consumers are going to bid up the prices.”

Even then, it can be more complicated. Coffee industry veterans — including Starbucks CEO Howard Schultz — blame financial speculators, saying they’re taking advantage of global supply hiccups to dramatically drive up coffee prices.

The rise in cost of Ugg boots is probably even more unpredictable. After Oprah Winfrey first included Uggs among her list of favorite things in 2000, the Australian-made boots soared in popularity, causing sellouts and price increases.

While everyone wishes their salaries had risen like the cost of Uggs and ham, not everything has seen such spikes in cost.

Today you can get an iPod significantly cheaper than you could in 2001 — and it’s a better product. And you can get a new Dell computer for $400, less than half of what you’d pay for a far inferior one when those “Dude, you’re getting a Dell” commercials aired in the early 2000s.

With computers, Hamilton said, research and development drives initial prices. But when other companies catch up to the technology, prices back down.

“With computers, six months later, everybody else has that, too,” he said.

So with nonfood goods, like TVs and appliances, your salary can actually go further than it did in 2001.

After buying holiday gifts for co-workers at Kohl’s, Woods said you just have to be more vigilant when you shop to keep costs down.

“If you watch the sales, you can get some really good deals,” she said.