Poor Americans disproportionately crushed by Biden-Harris inflation
All Americans are facing rising prices under the Biden-Harris administration, despite its claim that it’s “fighting to lower costs,” but the burden of soaring costs falls disproportionately on low-income families.
They spend a higher share of their income on necessities such as food and energy, which have seen above-average inflation. And since they already tend to buy the cheapest brands, they have far fewer low-cost alternatives.
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A simple trip to the grocery store will frustrate many Americans. Since January 2021, the price of cereal and bakery goods has risen 25%, and chicken, the most common meat, has increased by 24%. As you head back home, you realize your car needs refueling, only to find yourself paying 45% more at the pump. You arrive home and turn on the lights, knowing that your electricity bill will be 31% more than it used to.
Overall, for the lowest two quintiles of income households, prices have risen by 20.66% — higher than the average of 19.86% for the top two quintiles of income earners.
This may look like a small difference. But it doesn’t take away from the fact that prices are increasing faster for the poor than for the wealthy. Moreover, price increases don’t tell the full story, which is that income growth was a lot slower for the poor than for the rich.
Wage increases, however, have not caught up with the price surge. According to the Bureau of Labor Statistics, after-tax income for the lowest quintile (earning around $16,000 including government support like unemployment benefit and Supplementary Nutrition Assistance Program) rose by 1.65% from 2021 to 2023. The next quintile saw a mere 8.31% increase. Even with welfare, income has not kept up with soaring costs, making poor families even more dependent on Uncle Sam.
On the other hand, the top and second-highest quintiles saw higher after-tax income increases of 14.20% and 11.62%, respectively, over the same period.
Lower-income households bear the brunt of inflation as they have few cheaper alternatives. Most are already buying the most affordable option available.
For example, while middle- and high-income households can cut back on lobster and steak and purchase chicken, lower-income households may already be relying on rice and beans as the cheapest protein in their grocery stores.
Low-income households rent rather than buy, and high inflation has also pushed up rental costs. According to the Zillow Observed Rent Index, rental prices increased from $1,549 to $2,049 over the same period, a 32% increase.
It’s no surprise that over 70% of households earning less than $50,000 reported that life was “very stressful” or “moderately stressful” due to price increases, according to a Census Bureau survey published in October.
The widening gap between the increase of income and prices leaves poor Americans mired in debt and searching for the American dream. Politicians addicted to high spending need to be reminded of a harsh truth: high prices make life harder for the poor.
Austin Gae is a researcher in the Center for Energy, Climate, and Environment at The Heritage Foundation.
