In an era of economic uncertainty, few visualizations have captured the attention of economists, policymakers, and everyday consumers like the “Chart of the Century” created and named by Mark Perry, an economics professor and AEI scholar. This chart tracks the dramatic shifts in consumer prices across various sectors of the American economy over a quarter-century, revealing patterns that challenge conventional wisdom about inflation, purchasing power, and economic well-being.
The most current version reports price increases from 2000 through the end of 2024 for 14 categories of goods and services, along with the average wage and overall Consumer Price Index. Here are the key findings.
- Wage growth has outpaced inflation by a significant margin (123.3% vs. 90%) from 2000 to 2024, resulting in a 16.1% increase in real purchasing power.
- Sharp divergence exists between sectors: Technology and tradable goods have become much cheaper, while healthcare, education, and childcare costs soared.
- Market competition and trade liberalization drive price decreases, while regulated markets and limited competition contribute to price increases.
- Despite objective improvements in purchasing power, many consumers still feel financial pressure due to changing consumption patterns and “quality of life creep”.
- Policy challenges remain in balancing regulation with market forces, particularly in essential services like healthcare and education.
Core Economic Metrics: The Big Picture
Metric
|
Change
(2000-2024) |
---|---|
Consumer Price Index (CPI)
|
+90%
|
Average Hourly Income
|
+123.3%
|
Real Purchasing Power
|
+16.1%
|
Meanwhile, the cost of hospital stays, childcare, and college tuition, to name a few, have surged. Why? These sectors share important characteristics: they are typically non-tradable services (cannot be imported), operate in markets with limited competition, and are often subject to extensive regulation.
Below is Perry’s Chart of the Century. To help you interpret it better, lines above the overall inflation line have become functionally more expensive over time, and lines below the overall inflation line have become functionally less expensive.
via Human Progress
For context, at the beginning of 2020, food, beverages, and housing were in line with inflation. They’ve now skyrocketed above inflation, which helps to explain the unease many households are feeling right now. College tuition and hospital services also have continued to rise relative to inflation over the past few years.
Market Dynamics: Understanding the Divergence
Factors Driving Price Increases
- Government regulation creating compliance costs and barriers to entry.
- Quasi-monopolistic markets with limited price competition.
- Non-tradeable services protected from foreign competition.
- Limited technological disruption in certain service sectors.
Factors Driving Price Decreases
- Foreign competition putting downward pressure on prices.
- Technological advancement reducing production costs.
- Manufacturing optimization increasing efficiency.
- Market competition forcing price discipline.
- Trade liberalization expanding access to global markets.
Looking at the prices that decrease the most, they’re all technologies. New technologies almost always become less expensive as we optimize manufacturing, components become cheaper, and competition increases. According to VisualCapitalist, at the turn of the century, a flat-screen TV would cost around 17% of the median income ($42,148). Since then, though, prices fell quickly. Today, a new TV typically costs less than 1% of the U.S. median income ($54,132).
We should also consider the larger trends. For example, In 2020, I asked what Coronavirus would do to prices ... and the answer turned out to be way less than expected. If you don’t look at the rise in inflation but instead the change in trajectories, very few categories were heavily affected. While hospital services have increased significantly since 2019, they were already rising. There were some immediate impacts, but they went away relatively quickly.
Another thing to consider is average hourly income. Since 2000, overall inflation has increased by 87.3%, while average hourly income has increased by 123.3%. This means that hourly income increased 38% faster than prices (which indicates a 16.1% decrease in overall time prices). You get 19.2% more today for the same amount of time worked ~24 years ago. This represents a mild increase in abundance since last year.
via Human Progress
Although 10 of the 14 items rose in nominal prices over the past 24 years, only five had a higher time price when accounting for the 123.3 percent increase in hourly wages. Those items were medical care services, childcare and nursery school, college textbooks, college tuition and fees, and hospital services.
The Consumer Experience: Perception vs. Reality
It’s interesting to look at data like that, knowing that the average household is feeling a “crunch” right now.
My guess is that few consumers distinguish between perception and reality. However, feeling a crunch isn’t necessarily the same as being in a crunch.
A clear pattern emerges when examining the relationship between market structures and price trends.
Regulated Markets (like healthcare and education) tend toward higher prices over time, feature less price competition, and offer limited consumer choice.
Free Markets, show price decreases over time, feature greater competition, and provide consumers more options.
This pattern raises important questions about the role of regulation in various economic sectors and the balance between consumer protection and market efficiency.
With that in mind, how can policymakers address sectors experiencing significant price hikes, such as healthcare and education, without stifling innovation in tradable goods and services?
Future Outlook
Beyond all that, here are three other key trends to watch.
- AI Disruption: Telemedicine and online education could bend healthcare/education cost curves.
- Trade Wars: New tariffs risk reversing tech price declines (e.g., proposed tariffs on Chinese electronics).
- Generational Shifts: Millennials prioritize experiences over goods, potentially easing service demand.
As we continue to innovate and policy changes, it will be interesting to see if we can make essential services as dynamically competitive as consumer electronics. While America is one of the best countries in the world in countless ways, we do lag behind several countries in healthcare and education.
Are Your AI Fears Valid? What Experts Say
It's no surprise that there is often a disparity between what experts believe and what the average adult feels. It's even more pronounced in industries like AI that have been lambasted by science fiction and popular media.
Even just a few years ago, many of my advisors and friends told me to avoid using the term "AI" in our materials because they thought people would respond negatively to it. Back then, people expected AI to be artificial and clunky ... yet, somehow, it also reminded them of dystopian stories about AI Overlords and Terminators. An incompetent superpower is scary ... so is a competent superpower you can't trust!
As AI integrates more heavily into our everyday lives, people's hopes and concerns are intensifying... but should they be?
Pew Research Center surveyed over 5,000 adults and 1,000 experts about their concerns related to AI. The infographic shows the difference in concern those groups had regarding specific issues.
Statista via VisualCapitalist
The most common—and well-founded—fears center on misinformation and the misappropriation of information. Experts and the average adult are in alignment here.
I am consistently surprised by the lack of media literacy and skepticism demonstrated by otherwise intelligent people. Images and articles that scream "fake" or "AI" to me are shared virally and used to not only take advantage of the most susceptible but also to create dangerous echo chambers.
Remember how bad phishing e-mails used to be, and how many of our elderly or disabled ended up giving money to a fake Prince from various random countries? Even my mother, an Ivy League-educated lawyer, couldn't help but click on some of these e-mails. Meanwhile, the quality of these attacks has risen exponentially.
And we're seeing the same thing now with AI. Not only are people falling for images, videos, and audio, but you also have the potential for custom apps and AI avatars that are fully focused on exploitation.
AI Adoption Implications
Experts and the average adult have a significant disparity in beliefs about the long-term ramifications of AI adoption, such as potential isolation or job displacement.
I'm curious, how concerned are you that AI will lead to fewer connections between people or job loss?
I often say that technology adoption has very little to do with technology and much more to do with human nature.
That obviously includes AI adoption as well.
Career growth often means abandoning an old role to take on something new and better. It's about delegating, outsourcing, or automating tasks so you can free up time to work on things that matter more.
It may sound like a joke, but I don't believe most people will lose jobs to AI. Instead, they'll lose jobs to people who use AI better. The future of work will be about amplifying human intelligence ... making better decisions, and taking smarter actions. If your job is about doing those things – and you don't use AI to do them – you will fall behind, and there will be consequences.
It's the same way that technology overtook farming. Technology didn't put people out of work, but it did force people to work differently.
Innovation has always created opportunity and prosperity in the long term. Jobs may look different, and some roles may be phased out, but new jobs will take their place. Think of it as tasks being automated, not jobs.
Likewise, COVID is not why people have resisted returning to the office. COVID might have allowed them to work remotely in the first place, but their decision to resist going back to the office is a natural part of human nature.
When people found that technology enabled them to meet expectations without a commute, opportunities and possibilities expanded.
Some used the extra time to learn and grow, raising their expectations. Others used that time to rest or focus on other things. They're both choices, just with different consequences.
Choosing to Contract or Expand in the Age of AI
AI presents us with a similar inflection point. I could have easily used AI to write this article much faster, and it certainly would have been easier in the short term. But what are the consequences of that choice?
While outreach and engagement are important, the primary benefit of writing a piece like this, for me, is to take the time and to go through the exercise of thinking about these issues ... what they mean, what they make possible, and how that impacts my sense of the future. That wouldn't happen if I didn't do it.
I often say, "First bring order to chaos ... then wisdom comes from making finer distinctions." Doing work often entails embracing the chaos and making finer distinctions over time as you gain experience. With repetition, the quality of those results improves. As we increasingly rely on technology to do the work, to learn, and to grow, the technology learns and grows. If you fail to also learn and grow, it's not the technology's fault. It is a missed opportunity.
The same is true for connection. AI can help you connect better with yourself and others... or it can be another excuse to avoid connection.
You can now use an AI transcription service to record every word of an interaction, take notes, create a summary, and even highlight key insights. That sounds amazing! But far too many people become accustomed to the quality of that output and fail to think critically, make connections, or even read and process the information.
It could be argued that our society already has a connection problem (or an isolation epidemic), regardless of AI. Whether you blame it on social media, remote work, or COVID-19, for a long time, how we connect (and what we consider "connection") has been changing. However, many still have fulfilling lives despite the technology ... again, it's a choice. Do you use these vehicles to amplify your life, or are they a substitute and an excuse to justify failing to pursue connection in the real world?.
As said, actions have consequences ... and so do inactions.
I'm curious to hear your thoughts on these issues. Are you focused on the promise or the perils of AI?
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