Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / Why Your Raise Is Finally Beating the Cost of College Textbooks
Transcript
- Lucas: So here's a strange one. We've spent seventy-seven episodes now tracking where your raise is finally beating the cost of something — pet care, housing, childcare, car repairs, you name it. And the one I kept circling back to but couldn't quite believe was textbooks. Luna: Textbooks? As in, the thing college students have been complaining about for decades? Lucas: Exactly. And I know — every parent who's bought a freshman a biology textbook has that moment of sticker shock. But the data is pretty clear. According to the Bureau of Labor Statistics, the price index for educational books and supplies peaked in 2019 and has been falling ever since. Down about 12 percent over five years. Luna: Wait — while overall CPI is up what, 22 percent in that same window? Lucas: Roughly. And here's the part that's actually relevant to anyone listening who isn't a student. If your raise last year was around 3 percent — which is about where average hourly earnings are, clocking in at 37 dollars 50 cents an hour in May — and textbook prices dropped 3.2 percent in 2025 alone, that's a double win. Your purchasing power for that specific category is actually recovering. Luna: That's a nice data point, but I have to ask — is this real, or is it a statistical mirage? Because I remember a few years ago, everyone was talking about how textbook prices were out of control. What changed? Lucas: Fair question. And full disclosure — I'm not a student, I haven't bought a textbook in years. But I dug into this because the headline numbers seemed too good to be true. What happened is a structural shift in how textbooks are sold. Digital rentals, open educational resources, and a big push from universities to adopt free or low-cost materials. Luna: That's interesting. So it's not just a one-time dip. Lucas: If walking through the economy with us has made something click — maybe you're thinking about your own purchasing power differently, or you've started tracking which costs are actually falling — we want to keep these conversations ad-free. That's a deliberate choice. If that kind of independent analysis is valuable to you, the simplest way to support it is buy me a coffee dot com slash fexingo. No pressure, no perks, just knowing the show stays listener-supported. Luna: Yeah, I think that's part of why we can have these specific conversations without worrying about a sponsor's angle. It's nice. Lucas: Okay, back to textbooks. So the shift really accelerated during the pandemic, when campuses went remote and students couldn't access physical bookstores. Publishers like Pearson, McGraw Hill, and Cengage had to pivot hard to digital — and once they did, they realized they could charge less for a one-semester rental than a $200 hardcover that would be obsolete in two years. Luna: And those digital rentals — they're typically non-transferable, right? So the publisher gets paid per student per semester, no used market. Lucas: Exactly. It's a trade-off. The per-student cost is lower, but the publisher captures more revenue because nobody can resell a digital license. Still, for the student writing the check, the out-of-pocket is down. And that shows up in the BLS data because the index tracks what consumers actually pay, not publisher list prices. Luna: So the BLS is picking up real transaction prices, not sticker shock from the campus bookstore. Lucas: Right. And there's another big factor: open educational resources, or OER. These are free, openly licensed textbooks created by faculty and nonprofits. Think of them like Wikipedia but for course materials. A 2024 report from the Scholarly Publishing and Academic Resources Coalition found that OER adoption saved students over $1.5 billion since 2020. Luna: That's huge. But is it sustainable? I mean, someone has to write and update those textbooks. Who pays for that? Lucas: Mostly institutions and grants. Universities like MIT, Rice, and the University of Texas have put serious money into OER initiatives. Some states — California, Texas, Florida — have passed legislation funding OER for high-enrollment courses. So it's not charity; it's a policy choice to reduce student debt burdens. Luna: And the publishers — Pearson, McGraw Hill — they must be feeling that pressure. Lucas: They absolutely are. Pearson's reported revenue from US higher education course materials dropped from about $1.8 billion in 2019 to around $1.2 billion in 2025. They've responded by bundling digital content with homework platforms and assessment tools — things OER doesn't always provide. So they're trying to add value beyond just the text. Luna: So the price is falling, but the product is also changing. Is it still a textbook if it's a digital platform with quizzes and videos? Lucas: The BLS says yes — they classify it under educational books and supplies. And from a consumer perspective, it's the same spend category. But you raise a good point. Some of the price decline is real, and some of it is substitution toward cheaper formats. Either way, the out-of-pocket is lower. Luna: Okay, so let's tie this back to the broader wage story. Average hourly earnings are up — say, 2.4 percent year over year as of May. Core CPI, the Fed's preferred gauge, hit 3.4 percent in May — highest since 2023. So overall, wages are still losing to inflation in many categories. But textbooks are a clear exception. Lucas: That's the right framing. If you're a worker whose raise is around 3 percent, and you're also a parent paying for a kid's textbooks — or a student yourself — that 3 percent drop in textbook costs means you're actually ahead in that line item. It's not a huge category — the average student spends about 400 bucks a year on course materials — but it's one of the few where the trend is moving in the right direction. Luna: And it's also a category that disproportionately affects younger workers, who tend to have lower wages and higher debt. So it's actually a targeted relief. Lucas: Exactly. And the mechanics behind it — digital disruption, open-source competition, institutional policy — those are things that could be replicated in other categories. Think about what happened with music, movies, and books: digital distribution crushed prices. Textbooks are just the latest industry to go through that wringer. Luna: So what's the one thing you'd want a listener to take away from this episode? Lucas: If you're still buying textbooks the old way — walking into a campus bookstore and paying list price — you're probably overpaying by a lot. Check your school's OER listings, look for digital rentals, and compare prices across platforms. The data says the market has shifted; make sure your wallet is following. Luna: Alright, that's a concrete takeaway. And for the rest of us, it's a reminder that not everything is getting more expensive. Some things — with the right pressure — actually come down. Lucas: Yeah. And that's worth celebrating, even as we keep an eye on the categories that are still stubborn. Next episode, we'll look at one that's been particularly sticky — but for now, your raise is finally beating the cost of college textbooks.