Inflation Erodes Pay

The Morning Call Business Section had a feature article today by Sam Kennedy "Inflation eroding incomes" (read it here).

In the article it notes that while unemployment is below 5%, inflation was 6.8% in 2006. The inflation was the highest recorded in 23 year history of tracking it using The Morning Call/Kamran Afshar Consumer Price Index. It was also twice the national average.

The article states that "If you didn't get a pay raise of nearly 7 percent last year, you're actually poorer than you were the year before," (ironically this is the same percentage being offered to Dr. Lesky retroactive to July 2006, but that is a conversation for a different post).

The article goes on to explain that this is the fourth straight year the Lehigh Valley had bigger increases than the nation with 3.3% in 2003, 4.9% in 2004, 4.7% in 2005, and now 6.8% in 2006. The net is an increase in living expenses of 19.7%. Have your raises met these increases?
At the same time, medical care rose 17.1% in 2006 in the Lehigh Valley compared to 3.6% nationally.

Most of these increases have been driven by the housing boom that has resulted in an 80% increase since 2000 and brought with it more demand for more products and hence increased costs.

For long-time residents who have no plans of selling their homes and therefore do not benefit from the increase in real estate prices, the increased medical costs and rising inflation is further compounded by the increase in school taxes.

Property tax will continue to be an issue as the county prepares for a reassessment.

I don't think we'll see employers begin to double annual raises to keep pace with inflation, so it will become even more important for our governmental bodies to be as efficient as possible.

Thanks to the Morning Call for quantifying what I'd been feeling.