Why Worry About Inflation? Because It Disproportionately Harms The Poor.

Erik Randolph, my colleague at the Georgia Center for Opportunity, has written an op-ed on the impact inflation has on those in the lowest quintile of wage earners.

Consider this: The most recent mid-year consumer expenditure report from the BLS found that consumers in the lowest income quintile spend 82.2% of their income on housing, transportation, food and health care, compared to 64.4% for the highest quintile.

A 5% inflation rate would cost those in the lowest quintile an additional $1,156 for these items on their already tight budgets, averaging $28,141. A 10% inflation rate would double those costs to $2,312.

Worse, those in the lowest quintile are unable to save for their future, and inflation erodes the value of the little savings they do have. On average, those in the lowest quintile purchased only $563 in personal insurance or toward their pensions, compared to $19,736 in the highest quintile. This disparity guarantees the poor will be inadequately prepared for retirement or unforeseen loss or tragedy.

Under both Trump and Biden, unfathomable sums of money have been poured into the economy. Obviously some of that was necessary as the nation’s economy came to a grinding halt because of the pandemic. But the spending spree has continued even as the economy has begun to rebound.. As Randolph points out, if inflation continues as it has in the past two months, we’re looking at double-digit annual inflation, levels not seen since the Carter years.

One Reply to “Why Worry About Inflation? Because It Disproportionately Harms The Poor.”

  1. Inflation disproportionately affects everyone on a fixed income, including retirees. Retired people watch the value of their savings diminish and, as people live longer, the compound effects of inflation has a devastating effect on their standard of living.

Leave a Reply