Monday, April 7, 2014

Inflation is Hitting the Poor the Hardest

Ben Casselman at FiveThirtyEight writes:
We tend to talk about inflation as a single number affecting the whole economy. But everyone experiences a slightly different rate of inflation for the simple reason that we all spend money on different things. The price of cigarettes matters primarily to smokers; the price of diapers affects mostly parents of young children; and the price of gas is a much bigger deal to someone with an 80-mile daily commute than to someone who only takes the car out for weekend excursions.

Overall inflation has been muted in recent years; consumer prices were up just 1.1 percent in February from a year earlier, far below their long-run average. But prices are rising a bit faster for both the poor and the wealthy, who have been hit harder by the ongoing increase in college tuitions. The result: from February 2012 to February 2014, the poorest fifth of households have experienced an annual rate of inflation that’s about two tenths of a percentage point higher than the population as a whole. The richest fifth have experienced inflation about a tenth of a point higher.

The difference in the rate of inflation between income groups is too small to matter much in the short-term, adding just a few dollars to the average family’s monthly bills. But the longer that low-income families continue to experience faster price increases, the bigger the effect will be, quickly adding up to hundreds of dollars a year in extra costs for the households least able to afford it.


  1. B... but... but... The IFM director Christina Lagarde just said that the biggest boogeyman... I mean, bugaboo... Oh, crap! I mean the biggest threat to our economic way of life is Deeflay-zee-on!

    Falling prices! The horror! Boo! Eeeekkk!
    You know, falling prices! I want tomatoes to be progressively more expensive so I can help save the rich bankers! I mean, our economy!

  2. By April 21, to group says, Americans will have made enough to pay the $3 trillion in federal taxes and $1.5 trillion in state taxes — more than they will spend on food clothing and housing combined.

    Read more:

  3. Outside of the libertoonian la-la land, there's a minimum wage to keep incomes up with inflation.

    The real concern here, of course, is lowflation.

    1. Daniel Jones = Troll

    2. Re: Daniel Jones,
      -- Outside of the libertoonian la-la land, there's a minimum wage to keep incomes up with inflation. --

      Minimum wage does nothing of the sort. Learn some economics before you even think about having an opinion among the adults in the room.

  4. Well, it is a small price to pay to save the rich central bankers. Let them eat cake, right Jerry?

  5. Oh, Daniel Jones is the new Jerry the Troll.