Rising prices are the hardest business and economy news for low-income U.S. families

Low-income Americans lost their jobs when the epidemic struck. They are now hitting hardest as prices rise as the economy recovers.

Major headline consumer inflation in the United States has declined, 1. at% – But what people buy masks the big difference.

Several of the biggest price increases in recent months, for example, have come from petrol. One gallon regularly from the end of last year adds more than $ 60 a month to the budget of a person who regularly fills up 75 cents 75 20 gallons a week.

Food inflation continues to more than double the headline rate, and major ones such as household cleaning products have also risen.

Rising prices like these cause problems around the world – and they hurt low-income people the most. This is because in the case of wealthy households groceries or gas takes up a large portion of their monthly shopping basket and these are items that are easily left behind or cannot be replaced.


An analysis by Bloomberg Economics, which revisits consumer-price baskets based on the spending habits of different income groups, shows that wealthy Americans are experiencing the lowest levels of inflation.

Those same high-earners are labeled K-shaped recovery from the epidemic that has already posted windfall gains over the years. Their total value has risen, for booming stock and real estate markets – and they have largely kept their jobs and been able to work from home.

That’s what Bloomberg Economics says.

“On average, high-income households spend a small portion of their budgets on food, medical care, and rents, all sectors that have seen faster-than-expected inflation in recent years, and especially in 2020.”

– Andrew Hosby, economist

According to the Federal Reserve, the richest 10% of households in 2020 accounted for 70% of the wealth acquired, and the bottom half received only 4%. A January survey by Harvard Research Project Opportunity Insights found that the recession was largely over for those earning at least $ 60,000 a year, but that the minimum wage – those earning less than that amount – was still about 30% below the pre-epidemic level.

As inflation accelerates, the question of who exactly is being hit by higher prices may become even more urgent. Most economists expect a pickup in the next 12 months.

The Fed, which is responsible for controlling inflation, says any increase is likely to be temporary. The central bank is not planning to use the high-interest rate-fighting tool any time soon.

The idea behind the Fed’s new thinking is to keep the economy somewhat warmer – and inflation could be a bit higher – which would actually help reduce income inequality, as it would stimulate a stronger job market that would benefit low-wage Americans the most. There is some evidence that this is already happening in the restaurant, hotel and other service industries.

Meanwhile, the Beadon administration has said it will press U.S. statisticians to produce more detailed data that breaks down the economic results of different ethnic or income groups.

This initiative could have consequences for people whose incomes are tied to inflation – such as recipients of social security or food stamps. When those gauges fail to properly capture changes in living expenses, they can shrink. There has been talk in the past, for example, of pegging to an index of social security that measures the inflation of experience, especially by older people.

‘Unequal effects’

Distribution questions raised by higher prices are not the only U.S. phenomenon.

The UN’s global food spending rose for the tenth straight month in March, the longest increase since 2008 when the world fell into two food crises in a few years.

“The story of food prices and the story of inflation about equality are important,” said Carmen Reinhart, the World Bank’s chief economist. “It’s a shock that has had a very uneven effect.”

According to Xavier Zaravel, an assistant professor at the London School of Economics, the problem of K-shaped inflation predicts the epidemic and could be the root cause.

His research shows that one of the main reasons rich people have lower inflation is that there is more competition among manufacturers for their dollars – inventing higher levels of the type of goods and services bought by rich people, which helps keep prices down.

“One would expect that global statistical agencies would soon adopt new data sources and price indices to measure inflation inequality,” Jaravel wrote in a recent study, “and economists will pay more attention to the distributional effects of prices.”

(Update with new UN data on global food prices in Article 15))

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