Not really. Living expense cost higher each year, annual raise for employees, things cost more each year, etc..
And lots of things cost less each year if you're outsourcing your work to places that pay employees 75 cents per hour.
I wish my employer would raise my wage because of "living expenses" - especially at the same rate bags are going up! I know of no other industry that outsources so much to China *and* raises prices.,(again, even though your bag may say "Made in Italy, according to FTC rules, it *can* be partially made in China) Usually, it's because they want to keep prices low.
And again, I cannot find one popular (highly knocked off) luxury bag business that is losing money. Their profits continue to go up and production costs continue to go down. For example, in 2006, LVMH's (which owns Louis Vuitton) net profit grew 30%! (source: Businessweek 2/15/07)
Not all the money is going towards salaries, etc! If you look at their history, it seems every time they raise prices, their sales and profits go up! And any increased production cost, salary is figured into this equation. It's just profit! Replicas certainly aren't hurting their bottom line much!
*looking at LVMH as a stock option*