It's the opposite here. Just today I went shopping - all my clothes I bought 4/5 years ago still fit. The same size nowadays doesn't even come close. I will admit, in that time I have gained weight, but all of my friends are noticing they cannot wear the sizes they used to. We think it's a way to make people lose weight.
Yes. It does happen. It's called "vanity sizing." I'm not sure how often it's done. Partially, it can be attribute to different companies using different scales, units, or differences in estimations. Also, pants are worn lower than your "Natural waist." So if you're chunkier on your upper body than your lower body, you'll wear a smaller size than your actual waist line. On the other hand, if you have a larger lower body, you might end up wearing a larger "waist" size in pants than your actual waist.