Dealing with shrinkflation

It’s hard to believe, but the holiday season is already upon us all. When better than “the most wonderful time of the year” is there to talk about the economics that really affect people? (I like to call these concepts “streetnomics” – you know, the kind of economics you learn in the real world on the street, as opposed to the abstract stuff we are taught in university.) This month, I’d like to share a concept with you that affects us all, especially during the holiday season. Allow me to introduce one of my favourite streetnomic concepts: “shrinkflation.”

I know what you’re thinking… so stop it. It’s the holiday season, so get your mind out of the gutter! I am not talking about what happened to George in that one Seinfeld episode when he went into a swimming pool and came out feeling like a smaller man. No. I am talking about a concept in that needs to be better understood as it can lead to more informed consumers and most importantly, more money in your pocket.

Shrinkflation is the process of tangible consumer goods shrinking in size, weight or quantity, while their prices remain the same. Translated into streetnomics, that means you pay the same price, but receive less of the good.

You’ve likely seen this phenomena before throughout your life, but have never really had a name for it (corporate ‘Merica prefers to keep it that way if you ask me). Shrinkflation is bad if you’re a buyer, but good for the seller. And since most of us are buyers when it comes to food, shelter and clothing, believe me when I tell you – shrinkflation is not a good thing.

Now that you know about it, you’ll be able to see it everywhere around you. The supermarket offers the most readily available examples of shrinkflation. From 1.89 litres of 100% pure Florida orange juice (remember when they were 2 litres?) to less skittles, smarties and M&M’s per bag, Shrinkflation is all around of us. It seems like with every trip to the grocery store, shrinkflation is on the constant rise – smaller loaves of bread, less grains of rice per package, and less milk per jug means average consumers are paying the same price, but getting less for it.

Another popular place to see shrinkflation work its magic is at restaurant chains. From less McDonald french fries despite the same cost, to less pickles per A&W teen burger, shrinkflation is the concept responsible for you getting less for the same amount of money. This whole idea has big implications for consumers, and even affects how we measure economic growth.

Shrinkflation is bad. It’s very very bad. It’s a very very very bad man, Jerry. Here’s why.

Shrinkflation is absent from mainstream economic key indicators because it does not count as inflation. When economists measure the effects of inflation on consumers, they do so by measuring the cost of the same basket of goods over a period of time. Better known as the consumer price index, this measure helps determine how much inflation is eating away at the value of the money we have earned. Because shrinkflation doesn’t actually increase the cost of a good (it only lowers the amount), it is skipped as a measure of eroding purchasing power.

With wages and incomes having stagnated for decades when adjusted for inflation, average consumers are now seeing their purchasing power erode even further, but without proper quantification. This means that middle class consumers – the backbone of all modern economies – are being further pressured to do more with less income.

Shrinkflation is also a great barometer of our times. Just like GDP as a mainstream economic indicator fails to capture positive social value and negative externalities, shrinkflation fails to capture the reduction in purchasing power for the average consumer. Policy-wise, until this term is quantified and measured economically, the average consumer will suffer.

So, what is the average person to do? Especially with the consumerism of the holidays upon us?

Try to take a stand by using your dollars more wisely. See a shrinkflated good? Look for a competing equivalent that is not shrinkflated. Often time, no name branded products offer the same (if not more) quantity, and at a lower price. Elect to purchase those products and send a message to those companies profiting off of you and I from Shrinkflation. Send a message to those corporate ‘Merican overlords and buy goods from those who do not engage in this predatory economic tactic. Last, tell all your family and friends of this idea, so they too can become savvier consumers.

Michael Silicz helps people separate the signal from the noise. He has experience in finance, law and public policy. If you have any column ideas or would like to see Michael write about a specific topic, email him at msilicz@shaw.ca.

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