How has inflation impacted a college student’s expenditures?

While the present elevated inflation is one of the hottest economic and political topics, there is very little coverage on how higher prices have affected a college student’s consumption basket. While everyone can observe how much gas prices have risen, I did a little investigative research to see how the prices of key items have changed and why.

Food prices high across the board

While the food category of the Consumer Price Index (CPI) is comprehensive and reflects a composite, I examined recognizable single items. The Economist’s Big Mac Index paints a picture of exchange rates, but there is no proxy for McDonald’s price inflation. However, the BLS does break down food inflation into a quick service menu portion, which has increased more than 8% over the last year.

Rising commodity costs hurt restaurants in multiple ways. First, their menu inputs (beef, chicken, and other meats) have risen greatly in cost, due to elevated demand. In addition, key shipping bottlenecks have slowed all supply chains, which has amplified the inability of producers to satisfy demand. Restauranteurs have passed many of these costs onto the consumer, but a continued rise in commodity prices will squeeze their margins. In a recent shareholder call, McDonald’s reported that they expect food and paper costs to increase by over 8% in 2022. These days, it is not uncommon to be spending more than $10 per person on a trip to the Golden Arches.

Key student expenditures on the rise

While the high nominal price of college tuition is a huge topic of debate (Colby College being no stranger to this), college tuition inflation has decelerated for much of the last decade. In fact, the index dropped below 2.5% year-over-year growth during 2021 and has remained well below overall inflation. 

Recreational book prices have experienced a disinflationary (or even deflationary) trend over the last five years. Thus far in 2022, book prices have risen a paltry 0.36%. Other key costs – such as textbook prices – have risen astronomically over the last decade, but the pandemic shock is unlikely to influence such a distorted market.

In the skincare market, producers have been very keen to pass rising costs onto consumers, as the average price for fragrances has risen 12% in 2022. In addition, elevated steel prices have led to about an 8% increase in the price of razors and other shaving tools. 

Alcohol prices rise both at home and away from home

The current inflationary bout has also affected the price of beer since the onset of the pandemic. In 2020, the price of beer at home (reflecting the price paid at stores) increased nearly 3.5% over the year prior and has now normalized to 2.3% in 2022. A student who preferred to be unnamed reminisced, “I once paid $14.99 for a 30 rack of Natural Light. Now, that price is often near 17 or 18 bucks.” Away from home, this rate is much higher at nearly 5%. Most notably, these price hikes are felt at the ballgame or arena, where a single Bud Light may cost upwards of $20.

~ Cam Dyer `22