The Curiously Different Inflation Perspectives of Men and Women [pdf]

http://www.clevelandfed.org/research/commentary/2001/1101.pdf

by yummyfajitas • 14 years ago

37 37 14 years ago

People answer survey questions differently. Its cultural. Some want to not appear dumb, so give conservative and careful responses. Others want to provide an answer that will provoke further dialog, so may overstate the case.

redwood2• 14 years ago

"at this point, all we can say with any confidence is that it does not appear that women have a higher perception of inflation than men because of the things they buy, the frequency of their shopping, or their knowledge of officially reported"

Really? This is ridiculous. Men and women do buy very markedly different things in general, especially in family life. For example, men disproportionally buy technological items which contribute significantly to the stable CPI.

CPI isn't just bread and butter... if it were inflation rates would be higher. Since the government can point to easier access to quality-of-life-enriching items like computers, which fall in price for equivalent goods year over year, it can manipulate the stats and make inflation look very low. This is appropriate for an "ideal" household that buys exactly that the CPI index holds.

But on the other and someone who buys disproportionally the items that are rising faster than the CPI really does feel a higher inflation rate.

It certainly seems conceivable that women tend to buy items that are rising in price faster than the CPI more than men.

It's also possible that marketing gimmicks disproportionally target women, with clothing coming to mind for example: perhaps sticker prices rise much faster than inflation, but post-"SALE" prices don't. This is a gimmick designed to encourage buying of deep sale prices, that may play better in clothing than in other industries, and that thus women fall victim to more. But since the sticker prices rise, they're noticeable.

yummyfajitas6• 14 years ago

Because CPI measures a rate, explanations like this only work in the short run. As computers/etc become cheaper, they become a smaller and smaller fraction of CPI. In the long run, CPI will be completely dominated by whatever factor grows the fastest.

The article provides some evidence that this is not a short run phenomenon, nor a phenomenon limited to the US. A similar gap is present among Swedes in 1977, and persisted in the US from 1987-2000.

Roboprog• 14 years ago

As redwood alluded to, the content of the CPI is somewhat "gamed", though. It excludes "volatile" items such as food, housing and fuel. You know, the non-optional, inelastic purchases that people have to make.

msandford6• 14 years ago

It's because the CPI is actually gamed. You just have to change the basket of goods measured fast enough to keep the rate down. Like the substitution of hamburger for steak that Greenspan did. The website detailing how this "isn't shady" is laughable. http://www.bls.gov/cpi/cpiqa.htm

Check out http://www.shadowstats.com/: "One of my early clients was a large manufacturer of commercial airplanes, who had developed an econometric model for predicting revenue passenger miles. The level of revenue passenger miles was their primary sales forecasting tool, and the model was heavily dependent on the GNP (now GDP) as reported by the Department of Commerce. Suddenly, their model stopped working, and they asked me if I could fix it. I realized the GNP numbers were faulty, corrected them for my client (official reporting was similarly revised a couple of years later) and the model worked again, at least for a while, until GNP methodological changes eventually made the underlying data worthless. "

jhales2• 14 years ago

It would be interesting to see this same question asked for income brackets and ethnic groups.

yummyfajitas6• 14 years ago

If only the authors thought of looking at income brackets. If they did, they might have included the data on page 2, table 1.

jhales2• 14 years ago

lol, thank you for assisting the special needs HN readers like myself :)

wtvanhest• 14 years ago

The authors clearly state they used statistics to adjust for all the basic factors like what they buy (using single people instead of married couples) etc. so after you read the 3 pages there are not a lot of options left.

I do have an idea that they didn’t test however:

The women I have dated in the past seem to have selective memory about what they purchase. They seem to shop and talk about shopping like people who gamble. They will tell their friends all about the item they saved $50 on 8 months ago but rarely talk about the items they overpaid for. (gamblers like to talk about wins, but not losses) I can't speak to the shopping habits of most men, but I go to a store and quickly get what I need for a reasonable, but sometimes high price and exit as quickly as possible. I rarely remember what I paid for particular items I got on sale, but know that a shirt should cost about $50. Etc.

Is it possible that the sample of the women I have dated are similar to a statistically significant number of women who have selective memory about past purchases? I obviously don’t know the answer, but if it is true, I think that is a reasonable thing to test and is backed by the fact that women perceived clothing as a significant driver of the inflation above the men (page 3).

[Note] Some of what may be driving this is cultural like women not wanting the guys they are with to think they are wasting money and the desire to talk about the deal they got like shopping is a skill with their friends. This may be US/Swedish style cultures.

Researchers could test this by surveying other cultures which are less similar to US culture which couldn't prove this theory, but could disprove it.

svachalek• 14 years ago

It's interesting that they took this angle on the reporting, since the study also shows that men and women disagree much more with the CPI than they do with each other. Maybe that's common knowledge already?

sethg3• 14 years ago

If you asked me which major party was more likely to preside over a period of high inflation, I would say “Democrats” (even though I vote for them). Yet according to this commentary, the demographic groups that perceive and expect the highest inflation are women, singles, nonwhites, and lower-income groups—all of whom tend to vote for Democrats!

Perhaps people who are more likely to feel that the economy is sucking are also more likely to take pessimistic views of every economic indicator, even the ones that, in fact, are not sucking.

sridharvembu• 14 years ago

Look at Table 1 in the study, and another far more interesting thing jumps out: inflation perception varies enormously according to income. Low income people report much higher rate of inflation (across gender) than high income people. At the lowest level of income, people report 9+% inflation, while at the highest level of income, it is under 5%. In fact, the difference in inflation expectations based on income swamps the gender difference.

Austrian School economists have anticipated this, and would point out that this is the natural outcome of our monetary policy. Inflation perception is higher at the lowest income groups because inflation is higher for things they purchase. Over time, this effect increases inequality, another effect already observed.

Yet, conventional economic wisdom attributes the rise in inequality not to Fed policy but to technology change (on the "right"), tax-cuts-for-the-rich (on the "left") ...

sethg3• 14 years ago

Do the actual statistics bear out the theory that inflation is significantly higher for the things that low-income groups purchase? See, for example, this graph:

http://research.stlouisfed.org/fred2/graph/?id=CPIAUCSL,CWSR...,

pwg• 14 years ago

From an non-scientific back-of-the-envelope thought process, it would seem that at least the "perception" would be higher.

At lower income levels, a much higher percentage of one's total income is spent for life's basics (i.e., food and fuel being the big two). Therefore any increase in food or fuel costs (both of which have risen rather much the last few years) takes an ever bigger bite out of an already small income pie. Therefore making low income individuals very sensitive to price changes in these basics. Potentially leading to a perception of a higher overall inflation than what is actually happening in the market as as whole.

adrianhoward• 14 years ago

Inflation perception is higher at the lowest income groups because inflation is higher for things they purchase

True. It's also causes more impact because the delta comes out of a smaller pot in the first place.

frobozz• 14 years ago

This would have been my first thought. Another thought is the difference in the effect of wage inflation between higher and lower incomes.

I intuit that people on higher incomes are more likely to see rising salaries in real terms (either by growth-in-job; internal promotion; or selling themselves to the highest bidder).

The other side of that intuition is that those on lower incomes are more likely to be stuck in dead-end jobs, getting whatever across-the-board "cost-of-living" increase their employer decides to award. If (as is often the case) this is below CPI, then the inflation in the cost of their basket of goods is effectively higher for them.

andrewcooke2• 14 years ago

this seemed like another argument for food prices (since i assume they are a larger proportion of total expenditure for low income people). see my other comment here about that...

roc• 14 years ago

> "Over time, this effect increases inequality, another effect already observed."

I think you'd need some evidence that the lowest income groups experience higher inflation to make this connection. As distinct from merely reporting a perception of higher inflation.

Further, you'd also want to isolate from other notable observed data, such as stagnant-to-falling wages among the lowest income groups over the last couple generations.

One would expect people with stagnant wages and inflating prices to "feel" the negative effects more than those with inflating wages to offset or match those inflating prices. But that doesn't necessarily mean that the inflation component is the culprit for any perpetuated or exacerbated inequality.

hoodwink• 14 years ago

_Inflation is higher for the things they purchase_

I don't agree with this. The Consumer Price Index is how we Americans typically measure "inflation" which measures the change in retail prices of a "market basket" of goods from period to period. The Bureau of Labor Statistics goes to great lengths to determine this market basket. You are essentially saying that the BLS is favoring a higher income basket over a lower income basket and if they focused on the latter, CPI would report much higher inflation. I don't think this is true. CPI is far from perfect, especially if you introduce Austrian definitions of inflation, but I think they do a good, consistent job. Here is a BLS description of market baskets. http://www.bls.gov/cpi/cpifaq.htm#Question_6

I agree with others who replied to your comment that hypothesize this dynamic is the result of a disproportionate impact to a low income household's bottom line from price inflation. This essentially the concept of operating leverage applied to households. Assume a typical family needs to spend $40K a year to pay for the basics. A $50K household will have $10K left over and a $100K household will have $60K left over. If prices increase by 5% on the $40K, that's now $42K. The $50K household has $8K left over, a 20% reduction from $10K previously. The $100K household has $58K left over, a 3.3% reduction from the $60K previously.

jholman2• 14 years ago

Did you know that according to the CPI, 2/3 of "public transportation" is airfare?

So in the specific area of "public transportation", the basket favours higher-income households. Not that I think this is necessarily representative (public transit is a tiny slice of the CPI, 1.2%); I just think it's surprising and amusing.

jcampbell1• 14 years ago

> because inflation is higher for things they purchase.

That is easily disproved. It is quite easy to find periods where lower income people face lower inflation, but still estimate higher inflation. (basically any period with food & gas price deflation, which represents a larger component of a lower income basket)

The reason lower income people ascribe a higher number to perceived inflation is because when you live paycheck to paycheck price changes are simply more concerning.

Some of the highest inflation categories are higher eduction, and healthcare which are under represented in lower income baskets.

andrewcooke2• 14 years ago

my immediate reaction was to blame food prices (and gender roles), so i was surprised to read that food prices in ohio have risen less than other products. i am pretty sure that's not the case here in chile, and i thought that it was a global effect (there have been various "scares" related to poor harvests over the last few years). see, for example, http://www.ft.com/intl/indepth/rising-food-prices

so how come food prices are so stable in ohio?

sethg3• 14 years ago

The US Federal government subsidizes agriculture to a certain extent, using price supports to keep prices above a certain floor, and the US is also a net exporter of food, so that may be blunting the impact of rising food prices.

csense• 14 years ago

If people tend to disproportionately forget small price changes and remember large price changes when taking surveys, it could skew the results this way.

Both the distribution of observed price changes, and the probability of forgetting/remembering, could be different between men and women.

For example, suppose women buy equal amounts of two different goods X and Y.

On even-numbered years, manufacturers raise the price of X by 6% and keep price steady on Y. On odd-numbered years, manufacturers raise price on Y by 6% and keep price steady on X.

Actual inflation is 3% but women see a price jump of 6% per year in one of the products they buy. If they only notice/remember changes in prices and ignore/forget prices staying the same, then they'll report inflation as 6%.

Men buy equal amounts of X, Y and Z, where Z increases by 2% per year. Thus, men report an average price increase of (2% + 6%)/2 = 4% per year, again ignoring the non-inflating good.

All these numbers and effects are totally made-up speculation, but the idea seems sound and reasonable.

The Curiously Different Inflation Perspectives of Men and Women [pdf]

Related Stories