Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / Your Raise Beats the Cost of Diapers
Transcript
- Lucas: So there is one item in the family budget that has been an absolute beast for years, and finally, the data is turning. I'm talking about diapers. Luna: Diapers. My sister has twins, and she would tell you that her monthly diaper bill was basically a second mortgage for a while. Lucas: Right, and that's the thing — diapers are a non-negotiable expense. You can't just skip them, and until recently, they were inflating way faster than your paycheck. But the latest data shows that's flipped. Luna: Okay, walk me through the numbers. Because I feel like every time we talk about wages vs prices, the headline is either 'finally beating' or 'still losing.' Lucas: Well, for diapers, it's the former. Over the past twelve months, diaper prices are up about 1.8 percent. Meantime, average hourly earnings are up 4.2 percent as of July. So on a percentage basis, your raise is beating diaper inflation by more than two full points. Luna: Two points is huge. But it wasn't always like this. What changed? Lucas: So let's rewind to 2021 and 2022. Diaper prices spiked about 12 percent in a single year at one point, which was way above overall inflation. And the culprit was a perfect storm in the supply chain. Luna: I remember hearing about shortages of wood pulp and other materials. Is that what did it? Lucas: Exactly. Diapers are essentially wood pulp, super-absorbent polymer, and plastic. During the pandemic, the cost of wood pulp shot up because of logistics snarls and labor shortages at mills. Plus, there was a spike in the price of resin, which is a petroleum product. And diaper manufacturers couldn't pass all of that on to consumers without losing market share. Luna: So they ate some of the cost initially, but eventually they had to hike prices. And now those costs have come down. Lucas: Right. Wood pulp prices have fallen as shipping routes have normalized and new mill capacity came online in Brazil and Southeast Asia. And oil prices, while still volatile, are well off their 2022 highs. That's taken the pressure off the raw material side. Luna: But it's not just raw materials. I feel like there's a competitive dynamic here too. I've noticed a lot more store-brand diapers on the shelves lately. Lucas: That's a huge part of the story. Store brands now make up about 30 percent of the diaper market, up from maybe 20 percent a decade ago. Retailers like Target and Amazon have pushed their own labels hard, and they've gotten good enough that parents are willing to switch. Luna: And that forces the big guys like Procter & Gamble and Kimberly-Clark to compete on price, not just brand loyalty. Lucas: Exactly. So you've seen them introduce more value packs and run more promotions, which keeps the average transaction price down. The result is that the overall price index for diapers has been nearly flat over the past year. Luna: But is this just a temporary reprieve? I mean, we saw what happened when supply chains broke down before. Lucas: That's the million-dollar question. The long-term trend is that diaper prices will still rise with general inflation — maybe around 2 percent a year. But the super-spike we saw during the pandemic was a one-off event, not a new normal. As long as the raw material markets stay stable, diaper inflation should stay in check. Luna: So for a family with two kids in diapers, what does that actually mean in dollars and cents? Lucas: Let's do the math. A typical family might spend about $80 a month on diapers for one child. If prices had kept rising at the 2022 pace of 12 percent, that would be nearly $10 more per month. But now, with 1.8 percent inflation, it's about $1.40 more. So you're saving roughly $100 a year compared to the old trajectory. Luna: That's real money. And it's a great example of how wage growth can actually outpace a specific price category, not just the overall CPI. Lucas: And that's the broader point — the headline CPI number is running around 2.8 percent, but your raise is 4.2 percent. So on average, you're gaining ground. But not every category is the same. Some, like rent, are still sticky. But diapers are a win. Luna: It's a nice feeling to have one less thing to worry about. Although, I'm told that once kids are out of diapers, you just start paying for their car insurance. Lucas: Ha, that's a future episode. But for now, let's celebrate the diaper win. It's a small but meaningful sign that the inflation beast is tamed, at least in this corner of the market. Luna: And it's a reminder that supply chains, competition, and consumer choice all matter in the inflation story. It's not just the Fed's interest rate decisions. Lucas: Absolutely. And speaking of what matters, we want to take a second to mention that this show is ad-free, and that's because of listeners like you. If you want to support that, the link is buy me a coffee dot com slash fexingo. No pressure, just a way to keep this going. Luna: Yeah, it makes a difference. Even a small contribution helps us keep digging into these numbers. Lucas: So back to diapers — the takeaway is that your raise is finally beating the cost of diapers, and that's a win for families. But keep an eye on those raw material prices, because that's the wildcard. Luna: And maybe next time we can tackle the cost of baby formula? I've heard horror stories. Lucas: That's a great topic for a future episode. But for now, we'll leave you with this: the next time you're in the diaper aisle, notice the prices. They might just surprise you. Luna: Thanks for listening, and we'll catch you next time.