The chart below, inspired by the American Enterprise Institute’s “Chart of the Century,” displays 17 years of changes in wages, inflation, and the prices of consumer goods and services in Colorado since the beginning of the 21st century. As real wages have risen locally, most durable and nondurable goods have become more affordable; conversely, the rising costs of housing, health care, and higher education have increasingly crowded out more and more of every dollar of spending.
The Bureau of Labor Statistics (BLS) produces a historical price index for select metropolitan statistical areas (MSAs). They currently do not produce a statewide price index. Therefore, this chart includes three items which are representative of a statewide average and not just the MSA. Similarly, the price changes reported at the Denver MSA level may not be fully representative of actual price changes in regions across Colorado that are outside of the MSA.
While this chart offers no explanation of the reasons behind the variations in price growth between items, we hope it serves as a common starting point and inspires discussion and more informed questions.
Key Changes from 2020 Release:
- Few of the trends changed much between 2018 and 2019. Each item which was more expensive in 2018 remained so in 2019, as did each item which was less expensive in 2018.
- The only price to significantly change its directional trend was that of gasoline. Historically, the price of gasoline is highly-variable, and it began a sharp multi-year decline in 2019.
- Two spending items, durable goods and household furnishings, have become nominally cheaper since 2002; both were over twice as affordable in 2019 as they were in 2002.
- The price of housing, which comprises the largest share (33.5%) of the average Denverite’s budget, grew between 2002 and 2019 at a rate that outpaced that of wages by just over 50%. On average, for every 1% of wage growth, housing prices increased by about 1.5%. The second-largest budget item, transportation, grew by less than half as much as wages over that span.
- Some signs from the new data tentatively point to a slowing increase in the price of higher education. Over the previous decade, four-year tuition and fees increased by an annual average of 16.7%; in 2019, it rose 5.1%. Though the price of higher education grew almost four times faster than wages after 2002, wage growth exceeded it in 2019 for the first time since 2006. If 2019’s trends were not aberrant, this price may flatten somewhat over the next several years.