{"text":[[{"start":7.08,"text":"The writer is the Rene M Kern professor at Wharton School, chief economic adviser at Allianz and chair of Gramercy Fund Management"}],[{"start":17.009999999999998,"text":"As suggested by recent US elections, no word may capture the American public’s anxiety more completely than “affordability”. As in other countries, the worries are amplified by daily media coverage of a simple and convenient antagonist: prices."}],[{"start":35.61,"text":"It is a dynamic that market participants will need to pay attention to as the challenges of affordability are set to accelerate, especially as employees worry about workplace changes related to artificial intelligence. Political pressure will demand policy responses that will also impact markets."}],[{"start":55.59,"text":"The focus on prices is understandable. The inflationary surge of 2021-22 was a major shock that made the cost of staples, such as groceries and utilities, a source of pain. For politicians, fighting the cost of living became a clear, concise and compelling battle cry, made more attractive by the potential for lots of finger pointing, be it government spending, central bank policy or “corporate greed”. The anger of voters was reinforced by the disconnect between what they then heard (inflation is coming down) and what they expected to see (lower prices as opposed to a lower rate of increase in prices)."}],[{"start":101.43,"text":"Yet this focus on prices as a metric of affordability is far from sufficient. It ignores a critical component: what people earn. And it is income that is now under greater pressure, exposing the fragile financial foundation of too many households."}],[{"start":119.51,"text":"In the prior decades, the “affordability crisis” was a slow-moving, structural problem, masked by low overall inflation. The problem was not that the price of groceries was increasing in a shocking manner, but that the costs of the core components of a middle-class life — housing, education and healthcare — were rising in a consistent fashion to worrisome levels."}],[{"start":146.34,"text":"The inflation surge of 2021-22 turned a chronic condition into a potentially more acute one. Its immediate impact on purchasing power was offset first by government income transfers and, second, by rapidly increasing wages, particularly for lower-income households. That income boost is fading, as illustrated by data showing not only lower earnings growth but more vulnerable lower-income households as significant laggards."}],[{"start":179.62,"text":"No wonder the Trump administration has been focused on ensuring lower costs for energy, pharmaceuticals and mortgages in particular. Yet income anxiety is increasing due to insecurities associated with the impact of AI on the workplace and the increase in lay-offs, as reported last week by outplacement firm Challenger, Gray & Christmas."}],[{"start":202.76,"text":"And affordability is not just about real metrics; it is also about perceived stability. It is particularly unsettling for households when they feel like they are running on a treadmill, working harder just to risk falling behind. This “vibecession”, where the lived experience of economic insecurity overrides positive macroeconomic headlines, was particularly problematic for the Biden administration."}],[{"start":229.64,"text":"Households also tend to judge themselves against others, with today’s uneven economy fuelling a greater feeling of “relative deprivation”. This undermines the implicit social contract that was built on a promise of upward mobility: work hard, your children will be better off than you were, and you have a shot at the American dream. And when a society transitions from a state of collective aspiration to one of insecurity, the political implications can be consequential. It can fuel a profound sense of cynicism and distrust in the political establishment and big corporations."}],[{"start":269.53,"text":"Viewed through this lens, it becomes crystal clear that the current affordability crisis will not be solved simply by bringing inflation down from its current 3 per cent to the Federal Reserve’s target of 2 per cent. What is required is an approach that also addresses the income side of the standard of living calculus in a sustainable, inclusive and, most important of all, forward-looking manner."}],[{"start":298.71,"text":"This is partly about a more comprehensive policy emphasis on traditional drivers of growth, such as infrastructure and deregulation. But policymakers also must seek to ensure that the diffusion of the exciting labour-enhancing promise of AI is not overshadowed by its labour-displacing aspects. It is a joint responsibility of governments, corporates and households that is yet to attract the needed attention."}],[{"start":328.79999999999995,"text":"Until this happens, affordability will be even more of a central issue. Failure to tackle it would risk economic instability, social fracture and political polarisation while constraining AI’s potential to lift productivity and growth."}],[{"start":352.4099999999999,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1762941466_6705.mp3"}