The other day, I came across a headline that stopped me in my tracks: “America’s Affordability Crisis Is a Mirage.”
That’s a bold claim. And if you’re like most people—feeling squeezed at the grocery store, frustrated by rising costs, or wondering why your money doesn’t seem to stretch as far—it probably sounds out of touch.
So let’s unpack it. Calmly. Clearly. And without judgment.
Because here’s the truth: prices have gone up. Over the last six years, overall prices in the U.S. have increased by about 25%. That’s real, and it’s not something people imagined.
But context matters.
That 25% didn’t happen overnight. It happened gradually, in smaller increments over six years. And at the same time, something else was happening that often gets left out of the conversation: real wages—that is, wages adjusted for inflation—have risen by about 30% over that same period.
In simple terms, our purchasing power has actually improved. Wage growth has, on average, outpaced inflation.
So if that’s the case, why does it feel like we’re in an affordability crisis?
The answer has less to do with spreadsheets—and a lot more to do with psychology, behavior, and where our money is actually going.
Let’s look at the three biggest reasons.
1. Elasticity: Why Price Increases Hurt Emotionally
The first reason is something economists call elasticity.
Elasticity measures how sensitive we are to price changes. When prices go up, do we adjust our behavior? Do we buy less? Do we feel it immediately?
Most goods are elastic, meaning when prices rise, we notice—and we react. We might switch brands, delay purchases, or feel a sense of frustration even if we’re technically still able to afford the item.
Those reactions matter. Because even small, repeated price increases—gas, groceries, utilities—create a constant drumbeat of “things are getting more expensive,” even when income is rising too.
Emotionally, it doesn’t feel balanced.
2. The Psychology of Inflation: Control Matters
The second reason comes from economists at Harvard and something they call the psychology of inflation.
Here’s the key insight:
We tend to feel like we have some control over our income—through working more hours, negotiating pay, changing jobs, or developing skills.
But we feel like we have no control over price increases.
And that lack of control is stressful.
Even if wages are rising, inflation feels like something that’s being done to us. That perception alone can create anxiety, resentment, and a sense that we’re falling behind—even when the numbers say otherwise.
Money stress isn’t just about math. It’s about agency.
3. We’re Spending More on Services—And That Changes Everything
The third reason is one of the most important, and it doesn’t get enough attention.
Today, Americans spend about two-thirds of their disposable income on services, not goods.
Think childcare. Haircuts. Restaurant meals. Home repairs. Fitness classes. Cleaning services. Convenience.
When wages go up, the cost of services goes up too—because those services are provided by people whose wages have also increased.
And since services now make up a much larger share of our spending, we feel those increases more acutely.
If more of your paycheck is going toward services, that leaves less room for tangible items—and less flexibility overall. Even if you’re earning more, it can feel like there’s never quite enough left over.
So… Mirage or Reality?
Here’s where both things can be true at once.
From a data perspective, wage growth has kept pace with—or exceeded—inflation over time. That matters.
But from a lived experience perspective, the way prices rise, where we spend our money, and how little control we feel over costs all contribute to the sense that money is tighter than ever.
That doesn’t mean you’re bad with money.
And it doesn’t mean you’re imagining things.
It means the story is more nuanced than the headlines.
Understanding that nuance is powerful. Because when we stop assuming something is “wrong” with us, we can start making clearer, calmer decisions—about spending, priorities, and tradeoffs that actually reflect our values.
And that’s what Common Cents is all about.
So for now, take a breath. Question the headlines. And remember: understanding money starts with understanding context.
Want to learn more about behavioral economics and how consumers spend? Check out these related posts:
Image by Mohamed Hassan from Pixabay
