Inflation Usually Hits Harder for Poor Families. For a Couple of Years, It Didn’t.

New research on how inflation varies between the poor, middle class and rich paints a different picture of poverty and inequality

By Justin Lahart of The WSJ. 

I've posted several items on inflation and how it has affected people and how they have been trying to deal with it. Links are below.

Excerpts from Lahart's article:

"It is often assumed that poor people face higher inflation because they spend more on essentials such as rent. Research released Sunday by Xavier Jaravel, an economist at the London School of Economics, shows that while this has generally been true, in the years after the pandemic began it wasn’t.

Using the same survey data used for the CPI, Jaravel constructed separate baskets for each income group. The methodology is similar to the BLS’s, he said. “When you do this, you find substantial inflation differences by income group.”"

"The biggest drivers of the divergent inflation rates were gasoline, up 132% in that period, and new and used vehicles, up 30%. As a group, poor people devote less of their spending to cars and gasoline and more to public transportation.

Even within income groups, inflation varies. Some poor people, such as those in rural areas with long commutes and no access to public transit, almost certainly experienced significantly higher inflation rates than other poor people following the pandemic’s start. Moreover, with less of a financial cushion, the poor can find inflation harder to negotiate, and more stressful."

"lower-paid workers received outsize wage gains right after the pandemic hit, which might have given them even more spending power."

"that in any given year, inflation for the poor tends to be a bit higher than for other people because more of their spending is on items that have risen faster than the overall CPI over time, such as rent, electricity"

"for Americans living at the 25th percentile by income, prices rose by 82% from the start of 2002 to the end of last year. That compares with 74% for those at the 75th percentile."

"the buying power of the poor rises more slowly when measured by their own—instead of the overall—inflation rate. Jaravel estimates that if the Census Bureau used his income-level price indexes in the period beginning in 2002, rather than the overall CPI, 2.3 million more people would be below the poverty line in 2023 than its official figures show."

Related posts:

The Haves and Have-Nots at the Center of America’s Inflation Fight: There’s a growing gap between Americans who are battered by high inflation and interest rates and those who are actually benefiting (2024)

An Increase in Uninsured Drivers Is Pushing Up Costs for Everyone Else (2024) 

Inflation has caused consumers to choose what they need to cut back on (insurance)

Costco and Sam’s Club Aisles Are Full of Gen Z Shoppers (2024)

Consumers are buying in bulk to save money by getting a lower per unit price

Inflation is mentally taxing (2024)

Inflation is mentally taxing. Dealing with a straitened budget exacts a psychological toll as well as a financial one

Store Brands Are Filling Up More of Your Shopping Cart (2024) 

People are on the look out for cheaper alternatives due to inflation

Consumers Fed Up With Food Costs Are Ditching Big Brands (2024) 

After years of price increases, food companies say more consumers pull back; fast-food chains and snack makers plan new deals and flavors

Are Americans Worrying Too Much About Inflation? Two opposing views (2024)

The Era of One-Stop Grocery Shopping Is Over (2024)

One thing that I always talked about with inflation was that one of its costs was all the things we had to do to avoid it. Consumers are making 8% more trips to different retailers as inflation continues to upend household budgets. They are going to more stores to find lower prices. But it costs time to do that and probably more money on gas.

When workers were paid twice a day and given half-hour shopping breaks (Germany, 1923) 

By mid-1923 workers were being paid as often as three times a day. Their wives would meet them, take the money and rush to the shops to exchange it for goods. However, by this time, more and more often, shops were empty. Storekeepers could not obtain goods or could not do business fast enough to protect their cash receipts. Farmers refused to bring produce into the city in return for worthless paper. The requirements to calculate and recalculate commercial transactions in the billions and trillions made it practically impossible to do business in paper Marks.