Prices were skyrocketing in Shuey Hoffman’s world. Inflation price spirals in the frum community far surpassed national inflation statistics. Food. Clothing. Babysitters. Housing. Cars. Salaries. Even local cleaning help costs exploded much faster than elsewhere. Why was “frumflation” so much higher than national inflation? he wondered. He knew that economics 101 teaches that as prices rise, supplies tend to rise and demand falls. But frum prices seemed to fall very slowly, if at all.
Why does pricing in the frum world sometimes seem to ignore typical microeconomics?
A Vexing, Burning Issue
Economics is a complicated topic, and accurate data is hard to come by. But there’s a broad perception that the frum world’s pricing increases have been much more drastic and widespread versus broader society. I’ve dubbed this perceived phenomenon “frumflation.” Many people have been wondering and talking about frumflation and what can be done about it. So I’ll take a stab with some thoughts about why frumflation may exist.
Some Caveats First
A few very important caveats first. These are musings and theories, not facts. Also, I’m not discussing rises in standards of living. A lot of the cost pressures we experience are due to us communally ratcheting up the quantity and quality of purchases, not price rises of the same stuff. And I’m not criticizing or pointing fingers at anyone. Most people and businesses are doing their best to survive in a system they have little control over. Finally, some of the following thoughts bump directly into halachic and hashkafic issues. Ask your LOR before concluding anything that falls into those categories.
Amplified Price Signals on the Way Up
Prices spiral much more quickly when information flows speedily. In our tight-knit world, word often gets around in a flash. Ten minutes after a woman got a hefty salary raise, her five sisters, 15 sisters-in-law, 50 cousins, and 300 chat group friends are in their bosses’ offices demanding something similar. I exaggerate a bit here, but the kernel is probably accurate.
Muted Downward Price Signals
But frum pricing information does not flow as rapidly in reverse. Klal Yisrael is, correctly, extremely hesitant to harm someone’s parnassah by telling others that their products or services are overpriced. There’s also a halachah not to tell people they overpaid on a done deal. It may be logically and even halachically inconsistent, but frum-world price information zips around quickly on the way up yet trickles very slowly on the way down. So there’s much more upward price pressure than downward pressure.
Why Doesn’t the Market Adjust to High Prices?
These unusual information-flow patterns may be a factor in the velocity of frumflation but definitely can’t explain all of it. Typically, at some point, high prices suppress demand and increase supply. Why doesn’t frumflation force consumers to lower demand and encourage producers to increase supply significantly, eventually pushing prices lower?
Demand Indifference
On the demand side, the frum world seems to exhibit a lot more price indifference, that is, spending without close regard to pricing shifts. From a chessed perspective, we may grit our teeth a bit, but we very much want to support frum stores and service providers even in the face of higher prices. Beyond frumkeit, the heimishe world has a high percentage of high-earning families that may not like paying more for food, clothes, babysitting, and cleaning help, but they aren’t going to cut back on their day-to-day basics either.
Rich and Poor
On the opposite side of the spectrum, a good slice of frum families have most of their food, housing, health care, and day care covered by Uncle Sam. Some are also getting significant communal help or family assistance for tuition, clothing, simchos, therapy, camp, and/or other needs that they couldn’t otherwise afford. While it’s vital and beautiful that struggling people get financial help, they may be more likely to become price indifferent. If WIC, CHS, or a gvir is footing the bills, the consumer often doesn’t care about costs. This means that demand can stay rock-solid even though prices spiral.
Of course, being wealthy or poor isn’t a frum thing but I think we have a higher percentage when both those segments are combined.
Oligopolistic Markets
On the supply side, we may have some oligopolistic behavior keeping prices higher than they would be in a fully competitive market. An oligopoly is a market dominated by a small number of firms that realize they are interdependent in their pricing and output policies. The number of firms is small enough to give each firm some market power. They’d rather keep prices high than compete against each other into a losing battle of lower profit margins. In some frum industries, a small number of players control huge chunks of the market. This is usually not good for price competitiveness.
Blue Collar Labor Supply
Some of the supply shortages may not be easily corrected because many of us simply don’t want to do certain kinds of work. After years of guiding and incentivizing yungeleit, directly and indirectly, to become accountants, Amazon business owners, or real estate flippers and young ladies girls to become therapists, programmers, or marketing entrepreneurs, we shouldn’t be shocked when we have severe shortages of plumbers, bus drivers, teachers, school administrators, and office managers. I’m not saying our career-selection approach is wrong, but there are ramifications to encouraging certain kinds of work over others.
Ein Breirah
I suspect that overarching all of this is an element of ein breirah. Frum life is costly, so we spend, regardless of price or affordability. “Hashem will figure it out for us in some way. Everyone figures it out somehow, and so will we,” is a common refrain. Similarly, when things are tight, we might say, “I must Jack up my rates so I can pay my bills. Everyone else is raising prices on me, so ein breirah.” And there is some truth to these perspectives. This equals added price indifference to both consumers and suppliers.
Realistic Competition
For now, I will conclude with this personal anecdote. As the founder of Lakewood’s first moving-bin gemach, I had to get my hands on hundreds of bins. A local heimishe store was selling them for about $9 apiece while Walmart was charging under five. I figured I would get the best pricing directly from Rubbermaid’s wholesaler, so I contacted them. But even wholesale, the cost averaged about $7 each. The fellow explained that Walmart’s retail price for even one bin was way beneath wholesale. Such is the power of some national firms.
It is often impossible for local businesses to compete on an even footing with these behemoths. We need to be realistic in our expectations of our local vendors. There may be some pricing abuses, but there may also be economic realities that we are unaware of.
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