How Prices Effect Poverty & Social Mobility

Toys are Cheaper, Essentials Cost More

Due to a variety of market forces, prices for goods and services are always changing. Some things seem to become more expensive over time, while other things tend to get cheaper. But, these prices changes actually tend to occur in broad categories and as a result, they have an effect on poverty and social mobility. Take a look at this graphic, which shows the relative price change in a variety of categories since 2005. You'll notice that the most important goods and services: college tuition, healthcare, childcare and food, have all gotten more expensive, while fun items, such as TVs and computers have gotten much cheaper.

The Effect on Poverty

Now that prices have changed so much, poverty has changed as well. As the adage goes "poverty now comes with a color TV." But ironically, even as the poorest among us have more purchasing power to afford fun items like TVs, they are actually less capable of purchasing the goods and services that lead to a way out of poverty. It has become more and more expensive to finance college and this has turn many low-income kids away. At the same time, it becomes increasingly expensive to afford the cost of daycare, which creates an incentive for low-income parents not to work.

Interestingly enough, the things which have declined in price also tend to be those products which have seen their manufacturing bases outsourced. The cost of labor is much lower in other countries, so as jobs have left American manufacturing, so have prices on these products dropped.