The affordability illusion 

Today, we hear the word “affordability” everywhere. But what exactly does that mean? 

The annual inflation rate of 3.4 percent reported in August 2026 sounds manageable, especially compared to the pandemic-era peak of 9 percent. But a closer look reveals that the day-to-day cost of living is far more troubling. What matters to consumers is not merely how quickly prices are rising, but the much higher prices they are paying after several years of inflation.  

Households do not experience inflation as an annual percentage. They experience it as the price of groceries, rent, utilities, insurance and other necessities that they pay every month. A lower inflation rate does not mean prices have returned to where they were before the pandemic-era inflation surge — it just means prices are rising more slowly.

The Consumer Price Index shows that the cumulative increase in prices since December 2019 is 30 percent: What cost $100 then now costs $130. Once prices move higher, slowing the rate of increase does little to reverse the loss in purchasing power, unless people’s income rises faster than prices.

When prices rise faster than wages, purchasing power falls. Since 2016, total wage increases have kept up with consumer prices, but only just barely. This means that working people are effectively treading water between income bumps and rising prices. 

Consumers facing this squeeze may respond in three ways: buy less in either quantity or quality, tolerate getting less for their money through........

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