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Thread: Why did shipping costs rise faster than inflation?

  1. #1
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    Default Why did shipping costs rise faster than inflation?

    I shipped a computer to Europe using the USPS in the early 2000s for about $80. I did the same thing (same computer, same dimensions and weight) this year and the absolute cheapest cost I could find at the major carriers (fedex, usps, ups) was $210. This is more than a 250% increase in cost over 18 years, but the average rate of inflation in the last 20 years has been roughly 2.14%. The increase in shipping costs should have been roughly 46% more, not 250% more.

    Any armchair economists able to explain this? Does it have something to do with the rise of amazon and ebay in that time? I would have thought those developments would have reduced shipping costs for the laymen, not increased them -- unless maybe they've negotiated such low bulk rates that they have to raise prices for the little guy to stay profitable?
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    My recollection is shipping prices spiked after a couple of gas "shortages" a number of years back. And then they never went back down even when gas got cheap again.

    Does anyone have a good set of historical data that could be graphed?

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    For medium-bulky items, USPS is rarely the best deal, even domestically. For bulky items, I use Fedex Ground, as they beat even UPS ground. I don't think rate increases have anything to do with Amazon--if anything, they're keeping USPS going, as is the shipping arrangement with UPS for certain packages.

  4. #4

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    Quote Originally Posted by Trixter View Post
    I shipped a computer to Europe using the USPS in the early 2000s for about $80. I did the same thing (same computer, same dimensions and weight) this year and the absolute cheapest cost I could find at the major carriers (fedex, usps, ups) was $210. This is more than a 250% increase in cost over 18 years, but the average rate of inflation in the last 20 years has been roughly 2.14%. The increase in shipping costs should have been roughly 46% more, not 250% more.

    Any armchair economists able to explain this? Does it have something to do with the rise of amazon and ebay in that time? I would have thought those developments would have reduced shipping costs for the laymen, not increased them -- unless maybe they've negotiated such low bulk rates that they have to raise prices for the little guy to stay profitable?
    First off, inflation as reported by the US government is very selective and changes over time, you can't go with what is reported because the "basket" used to calculate inflation has changed since we were kids. If you applied the same rules used in the 70's for example, the same "basket", then inflation would be closer to 90-110%, roughly-speaking, from 2000 to 2015.

    Profit margins are pretty thin for shipping, they have to use derivative contracts to purchase bulk fuel to control costs. Healthcare costs for drivers is higher. Labor is higher. There is a driver shortage in the USA. Taxes have gone up related to shipping.

    Very convenient for US economists to leave out rent and healthcare in the basket the US uses to calculate inflation. TV's are cheaper sure, but everyday things are more expensive.

    It fluctuates. The dollar had lost about 30% of it's value vs. some currencies from 2008 until about late 2017 and the came roaring back in the past 6 months....

    So - shipping from the US to other countries should be lower now than it was last year. Now is a good time to ship relatively speaking. It will be more expensive later this year based on economic forecasts I have read.

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  5. #5

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    Every time I look into economics, the only thing I really learn is how little economists seem to know. If you were to apply the logic of those inflation figures to a scientific field, you'd have woo. Once they start to change the way 'Inflation' is calculated, they've changed the measuring stick.

    Here's an interesting graph that I wasn't able to find on the internet anywhere. It's based on data from kitco.com (2014-onwards), and okfn.org (1950-2014). It shows the value of the USD in terms of 1oz gold, from 1950 onwards, as a ratio. 1950: 1oz=$34.73
    Image1.jpg

    Take it FWIW. Gold isn't everything. It did help me to partially understand how we have got into the situation that for example, milk is expensive to the consumer, the milk farmers hardly make any money, and the supermarkets make like 1p per pint. Or for example Levi used to make jeans (that I think were higher quality), but the employees who physically made them could afford to buy them. Today they can't be made in America (AFAIK) because they would cost too much. I haven't looked into it in too much detail but basically as far as I can tell, in relative terms, everything was more expensive back then, but profits were much higher. So this lead to much more money/capital moving between people. That is for a product, going through a chain of people, each one in the chain would charge 25% profit, now each charges 5% profit. Or something similar to that.
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    Profit margins and inflation are two different things. The middle class is going or gone leaving the poor and the rich just like medium sized companies are either going bankrupt (poor) and consolidating into very large companies (rich). The large companies squeeze the whole supply chain to the point of not being profitable hence nobody who works at the medium companies gets paid much and those companies have to ship whole factories over seas to keep cutting costs. Less companies around the less people are needed to run them which squeezes the buying base. So everything that can be purchased overseas (clothes, electronics) has dropped in price and everything that needs to be produced here (cars, houses, food) has skyrocketed. Automation has killed jobs as well even if companies can stay in the US.

    I kind of wonder if eventually the poor just go to a barter system and the mega corps no longer have customers and their money is basically worthless. Of course anything high tech will be gone and we will be back to farming all year just to eat (billions would starve).

    The garment industry vanished in the US because of global trade. A week ago I was Wal-Mart to get a small fan for my room and I purchased a polo type shirt 60/40 cotton/poly made in Cambodia for a grand total of $8 reg price. Now you know most of that cost is Wal-Marts profit so how much did the workers and company that made that shirt profit? Even with automation and minimum wage you can't make that shirt in the US. Shirts made in Asia fit ok, but jeans don't. I still have a bunch of Levi 550 jeans purchased a long time ago for $30-40 a piece that fit fine (I tend to buy in bulk). My understanding is that with the move to Asia the 550's are not the same fit anymore plus they cost $60 a pop.
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