Platypus Economics with Justin Wolfers

A college student said a burrito shouldn't cost $20, and suddenly everyone seemed to be arguing about affordability. In this latest installment of Diving In, Justin Wolfers uses that burrito as a metaphor to untangle a real puzzle: 95% of Americans think there's an affordability crisis, two-thirds say groceries are unaffordable — yet by early 2026, every measure of real pay is above where it stood before the 2022 inflation burst. Both things can be true, and Justin shows you how.
Using five different real-wage measures, the Atlanta Fed's tracker of the same workers over time, and price and wage growth data from 12 countries over 60 years, he shows that when prices rise, your wages almost always catch up — and pretty quickly. But since most people experience wage and price hikes as two separate acts in a psychological drama, it can feel like your raise got stolen. Now, a record 71% of Americans believe their income won’t keep pace with prices. And the bundle of bad policies raising the price of your burrito is making matters worse.
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One more thing: When I create these videos, I often crunch a few numbers in Stata, with whom I’ve got a paid partnership. Today, I used it to explore the relationship between rising prices and wages in America and 11 other countries.
Click through here: https://platypuseconomics.com/stata/wages_and_inflation_oecd_worksheet.pdf if you'd like to follow along!
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Justin Wolfers and Bloomberg's Stacey Vanek Smith pick through a week of confusing economic news on the latest episode of Off the Clock.
First up, inflation. Inflation came in at 3.4% — not great, not terrible — but here's the part that stings: prices are still rising faster than wages and the average American paycheck buys less than it did a year ago. They also dig into the July jobs report and why it was a real jolt: the economy lost 23,000 jobs when forecasters expected a gain of 80,000, and earlier months got revised down too.
Then Stacey talks to Justin about how lab-grown diamonds have absolutely crushed prices in this luxury industry (a $6,000 stone now sells for $10 at Walmart). This prompted a fascinating discussion on the diamond-water paradox, thinking at the margin, and why the AI shock to "cognitive work" may be the labor market's version of the same thing.
Finally, Justin and Stacey cap off the episode with another round of Chart versus Chart. Be sure to vote for your favorite on the channel homepage for Platypus Economics.
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Justin Wolfers sits down for The Professor Is In to answer your follow-up questions about labor's declining share of income — the reason a soaring market can coexist with wages that feel stuck. He explains that this isn't just an American story: across industrialized countries, workers have been getting a smaller cut of the pie for decades, which points less to any one country's politics and more at shared forces — bigger "superstar" firms, weaker union bargaining power, and a shared intellectual culture across the developed world.
Justin also unpacks monopsony power — what happens to your wages when only a handful of employers are hiring near you — with the classic example of Hershey, Pennsylvania. Then he gets to what we can actually do about it: stronger, more constructive unions, Australia's superannuation system that turns workers into owners of the stock market, and the "MeganBot 2000" thought experiment that shows why AI could either be utopia or dystopia depending on one very important thing — ownership.
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The stock market keeps breaking records, but your paycheck doesn't feel like it. In this episode of Diving In, Justin Wolfers explains that disconnect with one number: labor's share of income has fallen to 54.4 cents on the dollar, the lowest share on record. And it’s significantly less than the two-thirds that was common for most of the last century.
Justin fires up the actual data to stress-test the claim — accounting for depreciation and tax-driven accounting tricks. But the decline is real and still stands. Then he sizes what it means for you: a five-point drop in labor's share works out to about $10,000 a year in lost wages for the average worker — while the gains flow overwhelmingly to the very top, where the richest households collect over half of all capital income.
Why is this happening? Giant firms that grow sales faster than payroll, weaker worker bargaining power, and globalization that lets your job move elsewhere. And now AI could either make you more productive and better paid — or automate your job and hand the upside to owners. How we slice that pie is up to us.
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Cited Research:
The Rise of Pass-Throughs and the Decline of the Labor Share: https://zidar.princeton.edu/sites/g/files/toruqf3371/files/syzz2022.pdf
Not a Typical Firm: Capital–Labor Substitution and Firms’ Labor Shares: https://www.econ.queensu.ca/sites/econ.queensu.ca/files/HubmerRestrepo_NotTypicalFirm_Oct2023.pdf
Automation and New Tasks: How Technology Displaces and Reinstates Labor: https://shapingwork.mit.edu/wp-content/uploads/2023/10/acemoglu-restrepo-2019-automation-and-new-tasks-how-technology-displaces-and-reinstates-labor.pdf
One more thing: When I create these videos, I often crunch a few numbers in Stata, with whom I’ve got a paid partnership. Today, I used it to compare labor's share of income with and without depreciation.
You can follow along with me here: https://platypuseconomics.com/stata/labor_share_worksheet.pdf
See omnystudio.com/listener for privacy information.

The newest inflation report is out, and Justin Wolfers walks you through what actually matters. Annual inflation is running at 3.4% — well above what the Fed wants, and high enough to explain why the checkout line still feels uncomfortable. Core inflation, which strips out food and energy to predict where prices are headed, sits at a better — but still high — 2.5%. July's monthly numbers came in almost exactly as economists expected, which is why the report is less "news" than confirmation: prices are still rising quickly, just about the way everyone thought they would.
Here's what it means for you. Prices are outpacing wages, so real (inflation-adjusted) pay has fallen over the past year — the average paycheck buys less than it did twelve months ago. Energy is the main culprit: gas is up 25% over the year, diesel 39%, and airfares have shot up on the back of it. If you're flying anytime soon, that ticket is a whole lot pricier. Justin also digs into the tariff story, the burrito discourse, a record 16% drop in lettuce prices, and the Fed's tough spot between stubborn inflation and slowing employment growth.
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