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Paul Little
Why does it seem everything I spend money on is more expensive than it was last year, last month or yesterday? Partly, that’s just the way things are.
But maybe the real questions is this:
What contributes to the rising costs I am experiencing in every aspect of my life?
Understanding that may not ease the pain of rising costs but may al least shed some light on what is driving up costs for most goods and services.
Here, not in order of importance as some impacts vary, are some (not nearly all) of the factors to consider.
RENT
The vast majority of business owners rent their space. Generally, those rents rise by about the cost of living each year. During the pandemic, many landlords realized their tenants were suffering, losing customers and income, many barely able to hang on. Thinking about the future, those property owners chose not to evict tenants or raise rents.
Now that they pandemic seems past us and the economy as whole is recovering, those landlords are raising rents for their existing and new tenants. (Remember, those landlords often have properties encumbered by debt requiring regular monthly payments. Also remember, many commercial property owners are small business people themselves, with one or two properties.
National, and even regional chains, are more able to absorb costs over dozens or even hundreds of stores. (Though some, like Bed Bath & Beyond and 99 Cents Stores have called it quits.)
For the locally owned stores (that do not own their properties) those increased costs costs can be significant, especially when faced with shifting buying habits and spending priorities of customers.
WAGES
Rising wages, in general, are a good thing, especially for those whose take home pay goes up.
When workers’ wages go up, the cost to purchase the goods and services those workers are responsible for also go up.
When I was a teenager, I had a minimum wage job pumping gas after school and on weekends. It was not enough to pay rent or sustain a family but that $1.65 per hour it provided me with spending money to purchase what my teenaged self needed.
I did not have to pay rent or buy basic family needs with that minimum wage. It was a teenager’s spending money that allowed me to buy records, a used car (and gas and insurance) and have fun with my friends.
That is a big difference from now. The job I had (that does not exist any longer, except in two states that mandate gas station attendants pump gas) was not expected to sustain a family, or even the single teenager who earned the money.
Now, many of those people we see working at jobs in shops, restaurants, car washes, senior care and other minimum wages jobs are the family breadwinner, or, more likely, one of two minimum wage earners sustaining a family.
So when fast food workers win a significant wage increase as a result of legislation, how are those costs mitigated by employers? They raise costs to consumers.
When fast food workers are guaranteed a higher minimum wage, that makes those jobs more attractive to all minimum wage workers. Employers who rely on minimum wage workers are suddenly faced with one industry that is more attractive to their workers. To compensate and keep those workers, that business, whether mandated or not, may have to raise hourly wages also. In turn, they also will have to raise costs.
INSURANCE
At a meeting recently with local restaurant owners and operators, I heard a lot about rising costs.
It is true restauranteurs blame rising minimum wages for increased costs. They expect and can anticipate those costs. What is catching the proprietors by surprise are unanticipated significant increases in food costs
The cots of worker’s compensation and general liability insurance have risen 40% in one year for many of our businesses.
There are four employees in our office. In the past 17 years (and probably much more) there has not been a claim for workers compensation. Yet our bill for worker comp insurance has tripled.
For an office of four, that is frustrating but manageable. When you are a business with 100 full and part-time employees that cost increase is tremendous. Add in the 40% increase in liability insurance and that pushes prices higher for consumers.
FUEL
When the cost of fuel increases, the cost to move goods increases as well. So the roll of toilet paper, frying pan, pound of chicken, electric vehicle, loaf of bread or lawnmower (and anything else that is shipped by truck or rail) is priced to offset that additional cost.
It really does not matter why fuel is costing more (global demand, regulations, taxes, market manipulations, etc.) what we feel is the rising costs. We feel it when we put gas in our car. We feel it when we pay our electric bills, we see it when we pay for natural gas and everything else (pretty much everything) that is not manufactured locally.
SOME OTHER THINGS
Climate change is costing us all money. As the earth gets warmer, it is more difficult to grow crops, raise livestock and more costly to repair damage caused by hurricanes, tornadoes, wildfires, extreme heat and cold and more. Regardless of the cause, climate change is hitting every one of our pocketbooks.
Chaos worldwide, in Ukraine and Gaza and Asia and Africa and South and Central America result in unease everywhere. Unease generates fear. Fear creates uncertainty about the future. Instability pushes costs higher as prodders of goods and services seek to insulate themselves from future economic harm. How do they ado that? Of course, they raise prices. As gasoline prices today are determined by the anticipated cost of crude oil in the future, so do large corporations and small producers of goods and services anticipate the future as they determine pricing today.
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