Cost of a Big Mac in 2000: $2.51 (in 2000 dollars)
$2.51 (2000) in 2021: $3.92 (in 2021 dollars, CPI adjusted)
Cost of a Big Mac in 2021: $5.66 (in 2021 dollars)
So a Big Mac in 2021 is 44% more expensive than what CPI would explain.
If the Big Mac would be an item in the CPI, it would gradually be removed from it because the more expensive it becomes, the less Big Mac's a person would buy.
Arguing that items which become more expensive are rightly removed from the CPI because they become "unnecessary luxury items" is fine for modelling consumer behaviour, but misleading for establishing inflation metrics.
I ran the numbers average wages/big mac index.
And it was showing a decrease in cost untill about 2000 but ever since then the cost of the big mac index has increased in the US, relative to average wages. Not that we should be eating big macs, but it's supposed to take a variety of inputs into account.
Thanks for taking a look! I do like both those indices. As the Big Mac Index looks at inter-country comparisons and I'm looking at intra-country (US). That said, I'm going to see if:
a) it's possible to get pricing data on Big Macs city by city in the US
b) do the prices change with any frequency?
WRT b) I am very fascinated by the fact that grocery prices are changing daily within the same major super market within the same city. I can't really understand why and that isn't inflation, that's just pricing. Pricing based on .... ?
All I'm saying is, it used to reflect the PPP ratio in my country a few years ago and it definitely did when they first formulated this.
But it no longer does.
Also, unrelated: India doesn't have a Big Mac because beef is illegal in most of the country and in the other parts, most of population still doesn't eat beef.
Probably 190 is the price of some hypothetical big Mac.
It's somewhat easier to measure if you ignore brands and look at commodity prices instead. Whole chicken (price per kg) instead of Big Mac, 100% cocoa instead of some random chocolate bar, etc. Of course, for many (most?) people, that will be even less relevant than the current consumer basket.
So that's a 4.3x change, not a 28x change as claimed, and represents an "inflation" of about 7.5%/yr over the past two decades (or 5.5%/yr since 1990).
+1 for sources and data, but keep in mind that the minimum rate hike doesn't fully rise to $15 until 2020. If this were happen immediately, then I'd probably concede your point.
But we've got a while between now and then, and I think both inflation and the rising cost of beef will play a role. And who knows if automation will play a part?
I bet that $8.28 for a Big Mac meal in 2020 will seem like a good deal.
Depending on how you set your endpoints, you can basically come up with any number for inflation you want, from 1.7% to 20+%
I guess this is all well-understood and taken care of under the hood by processed food companies, though, since the Big Mac Index has pretty steadily held to an inflation level near the CPI
Prices vary. While the price of a McD's meal may have doubled over some period of time (or space -- compare your neighborhood McD vs the one at OHare airport), MIT's billion prices project shows pretty conclusively that prices on average have been going up very slowly (< 2%/year) since the 2008 Great Recession.
The fast food item that was $1 and is now $1.19 — when was that $1 price originally set? Presumably it had held the $1 price for longer than just a year.
So this argument doesn't really belong in a discussion about annual inflation.
I don't think food has gotten that much cheaper in the last 50 years. Don't believe the fake CPI. Just take the average hourly earnings and divide it by something like the big mac index or a basket of food commodities.
McDonald's annual cost of goods sold for 2023 was $10.931B, a 9.58% increase from 2022. McDonald's annual cost of labor for 2023 was $2.885B, a 10.24% increase from 2022. The spread on beef/lb since 2020 is 40% delta, flour 60%, and cheese over 100%. Big Cheese Industrial Complex. I guess if McDonalds is greedy for people spending more money, the workers and the farmers are greedy too. Especially in California, where workers just got a 25% wage increase. As you said, /u/imglorp, "It's just greed"
If the Big Mac would be an item in the CPI, it would gradually be removed from it because the more expensive it becomes, the less Big Mac's a person would buy.
Arguing that items which become more expensive are rightly removed from the CPI because they become "unnecessary luxury items" is fine for modelling consumer behaviour, but misleading for establishing inflation metrics.
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