A lot of it is due to sticky prices. Customers don't like seeing the number on the label go up, so the companies do what they can to keep the product quality the same at the same price point, which results in reduced quantity. The alternative is to reduce quality, which usually results in a death spiral.
I think consumers would be more willing to see the number on the label go up if they saw the number on their paychecks go up. Wages in the US peaked about 1968, a number of forces have been working to reengineer that deal ever since.
Similar to your point, executives don't like seeing the number on their costs go up. Isn't it possible that quality could take a hit in how the executive chooses to reduce costs?
Nominal wages in the US have most certainly gone up since 1968 a great deal, this much is really obvious. You might be talking about real wages, but those are irrelevant when we talk about sticky prices, because people don't accurately understand the changes in their real wages over time (and those have also gone up, though not as much as some people would expect).
Similar to your point, executives don't like seeing the number on their costs go up.
Yes, but they do go up, so they try to exploit quirk of human psychology to reduce the impact of rising costs on consumers.
Isn't it possible that quality could take a hit in how the executive chooses to reduce costs?
It sure is possible, and no doubt happens with lots of products across the board. Usually, it is wrong move, and the company eventually succumbs to competitors.
real wages have gone up on average, but median wages have gone down. If you're in the business of selling household staples the median income of your customers matters more to you.
