Prices are improving. So why is everyone still so worked up about inflation?

Ever since 2022, when inflation hit a 40-year high of 9%, Americans have been pissed off about the economy. In a survey conducted by the Pew Research Center in May, only 23% had a positive view of economic conditions. And when asked to identify “very big problems” facing the country, their top concern wasn’t immigration, gun violence, crime, or healthcare — it was inflation. Pollsters say the sour economic mood could help tip the election to Donald Trump, as voters continue to fret over the price of milk and meat.

But the thing is, wages have actually caught up with inflation. Prices are moderating. Unemployment is low. Inequality is shrinking. Financially, Americans are better off than they were before prices took off during the pandemic. So why is everyone still fixated on inflation?

The answer may lie in a new paper published by the National Bureau of Economic Research. Traditionally, economists (being economists) have focused on the economic costs of inflation — i.e., are price increases wiping out everyone’s annual raise? But the new study, intriguingly, examines the emotional cost of inflation. How do high prices make people feel, regardless of their financial circumstances?

The key, researchers found, lies in the relationship between inflation and wages. In a normal economy, the small raises companies give are enough to offset the minimal inflation we typically see. But when prices spike, companies still default to giving more or less the same small raises. That presents workers with a dilemma. Do they accept the tiny increase and watch their standard of living fall? Or do they ask their boss for a bigger raise?

In a survey of 3,000 workers, researchers found that most — a whopping 79% — just accepted the salary they were offered. Only 21% took action to secure a bigger raise. And doing that put them in a situation people really hate: They had to enter into conflict with their employer. Trying to land a bigger raise meant doing things like having a difficult conversation with their boss, securing a job offer from a different company to use as negotiating leverage, switching jobs entirely, or having their union negotiate on their behalf. Inflation, in other words, requires people to fight for better pay, which takes a toll on their emotional well-being.

“We find that conflict with employers is costly to workers,” the researchers write. “Inflation imposes costs on workers beyond its impact on real wages.”

The study found that workers are so averse to conflict, most avoided negotiating for a raise even though they believed that doing so would have paid off financially. Those who didn’t put up a fight knew they were paying a price: Had they gone to bat for themselves, they predicted, they would have boosted their salary by 2 percentage points. The fact that they didn’t suggests something powerful: Most people hate conflict so much that they’d rather leave money on the table rather than speak up for themselves. The median worker, the researchers calculated, was willing to give up 1.75% of their salary to avoid the anxiety and hassle of negotiating. Most of us, it appears, would rather let inflation screw us over than put the screws to our boss.

Thinking about inflation this way — as having both an economic and an emotional cost — helped me make better sense of all the strife that’s been roiling the American workplace in recent years. Some of it, as I’ve reported, was spurred by the red-hot job market during the Great Resignation, which shifted the balance of power between workers and their employers. Some of it arose from the ongoing war over remote work. And some of it has been driven by historic shifts in the social contract, as white-collar professionals began facing the same threat of mass layoffs that blue-collar workers have long experienced.

But now, poring over the new study, I realize I overlooked the role inflation has played in reshaping the pandemic-era workplace. In recent years, I’ve repeatedly heard a sense of injustice from the workers I’ve spoken with — a feeling that there’s something fundamentally unfair about having to accept what is essentially an inflation-adjusted pay cut. HR departments don’t benchmark salaries against inflation, but employees think they should. And the faster prices rise, the study found, the more contentious the workplace becomes.

Reading the research, I recalled a conversation I’d had with a friend who had fought for a raise. To force her boss to pay her more, she secured a competing offer from another company. She wound up getting what she wanted — but she still felt resentful. Why couldn’t her employer just pay her a fair salary to begin with? She hated having to go through all that drama.

I get how hard and frustrating it can be to ask for a raise. I spent most of my career unwilling to stomach the conflict involved in negotiating a higher salary. The first time I ever asked for more money, in fact, was during this recent stretch of super-high inflation. And even then, I agonized over the decision. I didn’t want my boss to think I was greedy or ungrateful, and I worried I would feel rejected if he turned me down. I drafted and redrafted my request more times than I’d care to admit — and I literally write about this stuff for a living. Turns out I’m just like everyone in the study: Even when I wound up getting a raise, I left the experience wishing that inflation hadn’t forced the confrontation in the first place. Rising prices took a toll on me, beyond their financial impact.

That, in a nutshell, is why inflation makes us so mad: It dredges up all the complicated feelings we have about our relationship to our employers. Will asking for a raise make us seem disloyal? Will not asking for a raise make us feel like chumps? And why do we have to fight so hard to make sure our paychecks keep up with the rising cost of living? In a normal economy, when inflation is low, we don’t have to think about that stuff. But when high prices start eating into our paychecks, we’re forced to reconsider the value of our labor — and how hard we’re willing to fight for it. Our response to inflation isn’t about the price of eggs. It’s about the cost of conflict.

Aki Ito is a chief correspondent at Business Insider.