Shiller finds that worry about inflation's costs increases dramatically as individuals near retirement age. Americans born before or after 1940 differ more in their evaluation of inflation's effects than do the U.S. and German populations as a whole. Social Security payments are now indexed to inflation, a policy change that has reduced somewhat the effects of inflation uncertainty on retirement. Thus, anxiety now focuses more on savings in long- term maturities such as bonds and on employer pensions which typically are not indexed. Concern about living standards also stems from the widespread belief that inflation pushes up prices before it pushes up wages.
Many people understand prices rise because of inflation.
But they seem to attribute nominal increases in their wages more to their own accomplishments than to the feedback effect of inflation. That is, they assume that price increases occur first and wage increases follow, often much later. Economists have tried to measure whether wage increases lag price increases since the 1890s but have consistently found the relationship difficult to estimate. Many people also dislike inflation because they feel it makes it easier for the government, employers, financial institutions, and others to deceive them. There is evidence that people do get fooled, at least initially, about their real wages.