Economists are warning of widening inflation inequality by the end of 2022

The coronavirus pandemic has initiated some era of inflation inequality, wherein economists have started laying out warnings, in which poor households are anticipated to bear the growing effects of the rising prices. It is so as the bigger portion of the poor household budget goes toward those particular categories that have been registering a spike in final goods prices. Food soared more than 6.4% over the past year, for instance, while gasoline registered a growth of 58%. And now many people have started witnessing those higher prices as federal stimulus have also begun to fade away. They’re essentially looking forward to stretching a dollar most days. It’s expected to lead to difficult choices among which is putting gas on the car or paying for kids’ child care.

A recent analysis conducted using the Penn Wharton Budget Model has found that low and middle income households have spent more than 7% for the same products in 2021 that they bought back in 2020 or 2019. It translates to more than USD 3,500 for an average household. In contrast to this, spending across wealthy households registered a jump of only 6%.

The disparity and the inequality is clear among the two groups and is becoming typical amid inflationary periods. However, since the 1980s, the last time that the prices registered such growth, higher-income households have started resorting more of their expenditure from goods and to services. For instance, in 2020, food happened to make over 12.7% of the budget for the top 5% of population, which is in contrast to the bottom 20% population that allocates more than 16% of the budget toward food. Meanwhile, pandemic-related production and supply chain disruptions have also resulted in driving up the costs for the commodities that poor households have long relied on.