Like it or not, inflation is here and it looks like it’s here to stay for a while. The Federal Reserve “is openly nervous about rising prices, but it isn’t doing anything abrupt to counteract them,” The New York Times reported. So far this year, consumer prices have continuously risen.
Inflation hurts Black America. Here are five things to know.
Wages are rising at their fastest rate since the 1980s, but they still aren’t keeping up with inflation.
With prices rising so fast, minimum wage workers are poorer than they have been in decades, Business Insider reported. According to the U.S. Bureau of Labor Statistics, 3 percent of minimum wage workers were Black Americans in 2018.
The average hourly wages increased 3.6 percent in June compared to a year ago — the biggest increase in more than a decade. But due to increased inflation, once workers pay for their goods and services, they have actually been dealt a 2 percent cut in pay, CNBC reported.
So workers’ “real wages” — a measure of income after accounting for the cost of goods and services people buy — has fallen.
Average hourly earnings rose 3.6 percent to $30.40 in June compared with the same month in 2020. That’s the biggest boost since January 2009, according to data compiled by the Economic Policy Institute.
“The staples of American life are increasing exponentially,” said Sen. Tim Scott, R-S.C., who cited examples such as higher prices for gas, laundry, airfare, moving costs, hotels, bacon, and TVs.
Black Americans constitute 13 percent of the U.S. workforce, according to the U.S. Bureau of Labor Statistics. So as inflation increases, Black America is hurt.
Low- and middle-income Americans are “worse off when wage increases don’t keep pace with the cost of living. Workers feel particularly vulnerable to changes in the price of fuel, groceries, healthcare, and housing,” The Wall Street Journal reported.
Income and wealth inequality can be seen in all facets of the economy but when inflation hits, this is all more evident. According to a recent study, there is a new and burgeoning form of economic inequality described as inflation inequality, Clasp reported.
With inflation inequality, prices may rise more quickly for those who have lower incomes.
“In other words, a rise in income for wealthy households spurs innovation in products that high-income households buy. This innovation is measured by the entry of new products that wealthy households consume such as craft beer, organic foods, and branded drugs. With an increase in a variety of goods, or an increase in competition, businesses often set lower prices so their goods are more competitive,” Clasp reported.
But in low-income areas, goods actually experience an increase in prices since there is no spur of innovation and competition to drive down prices.
Lower-income households see higher inflation rates and less variety with low-cost goods such as generic, non-branded paid medication and non-organic, low-cost groceries that are more accessible to low-income households. They may not be able to afford goods that are critical to their health needs or the needs of their families, Clasp reported.
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Economist after economist has pointed out that homeownership is an important way to help close the racial wealth gap. Black homeownership dropped to 43 percent in 2017, erasing all of the gains made since the passage of the Fair Housing Act in 1968, The Washington Post reported.
Now due to inflation, the stats will be even more dire. With the boom in home sales slowing down and real estate prices rising, new homes are unaffordable for many people.
Home sales of newly built homes dropped by 6.6 percent from May to June — the lowest level since April 2020, according to recently released U.S. Census Bureau data.