Shrinkflation and Skimpflation

Inflation is bad. Is it even worse than we think?

The Commerce Department announced on October 29th, 2021 that inflation rose 4.4% in September, the fastest pace in thirty years. While it’s easy to ignore from an uninformed perspective, food and gas prices rising have hit consumers hard during the pandemic. Energy costs were up almost 25% and food prices were up 4%. But is inflation even worse than reported? Are the government statistics accurately capturing how bad inflation really is? There are actually other forms of inflation called Shrinkflation and Skimpflation, but these concepts are less well known and aren’t covered in the findings of the government. Shrinkflation is when companies make their package smaller but continue to charge the same price. Manufacturers have defended this practice by pointing out their increased costs due to the pandemic. General Mills shrunk their cereal boxes from 19.3 ounces to 18.1 ounces while not lowering the price per box. Tillamook decreased their ice cream cartons from 56 ounces to 48 ounces. Dorito’s, Hershey’s Kisses, Reese’s Peanut Butter Cups, Pringles – all have shrunk their products. Economic theory expects consumers to be rational, but shrinkflation is often not noticed by shoppers. While consumers notice changes in total price, they are less aware of changes in quantity or price per ounce. This behavior is the reason Shrinkflation occurs to begin with. In fact, package designs are often manipulated to fool consumers. General Mills made their Family Size cereal box taller and thinner, giving the illusion that there is actually more cereal in the box, but in fact, the opposite is true.

Skimpflation is another way companies shrink their offerings, but instead of shrinking the actual product, companies are skimping on service. Have you spent more time in the drive thru at McDonalds? Waited longer for your Dominos pizza to be delivered? Been stuck on hold with Southwest or American Airlines trying to rebook your cancelled flight? These are all examples of skimpflation. Skimpflation is “where we’re paying the same or more for services, but these services are lacking compared with what they used to be. While it is true that companies are struggling to deal with increased costs due to the pandemic, it is also true that companies are intentionally trying to make do with less. Instead of filling employment holes by attracting more candidates with higher wages, many companies are just cutting back on the quality of their service and pushing their existing employees to do more and more, which in turn causes those employees to quit, creating a vicious cycle. Supply chain issues are also wreaking havoc with quality levels. An economy wide decline in the level of service we are receiving is very noticeable to consumers and not something that the Commerce Department captures in their inflation figures. We are paying the same amount for smaller packages and a much lower level of service. Read the full articles below to learn more,

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