Inflation will wreak havoc on the working class
Inflation leads to a widening wealth gap
The impact of inflation is not felt in the same way by all Americans. The working class is in danger. They are at the mercy of rapidly rising costs. This includes housing, food, gasoline, cars, trucks, and other daily necessities.
Unlike the upper middle class and the wealthy, less wealthy Americans do not own assets that can appreciate in value, such as real estate, stocks, and other investments. Inflation will add to the already huge wealth gap in our country.
The savings of the working class are eaten away by the effects of inflation. Wealthy families, by comparison, who have borrowed heavily for their homes, investments, and business ventures can repay the loans with cheaper money due to the corrosive effects of inflation.
Seniors on tight budgets who have skimped and saved over the years are being punished for their tax sobriety. Inflation harms the value of money deposited in a bank account. They earn a miniscule rate of interest, and rapidly rising inflation further devalues their savings. Purchasing power is reduced and the dollar is not going as far as it was just six months ago.
Local bodegas tend to charge higher prices on merchandise because they don’t have the influence over vendors like the big chains and have a captive market. They also offer less variety, leaning towards cheap junk food over more expensive fruits and vegetables. It does not help the health of the local community. Low-income families are often forced to pay higher prices because they don’t or can’t spend the gas money to go to big-box stores and buy household goods in bulk. Comparatively, more affluent consumers are financially able to stock up on basic necessities when they are on sale. They can also afford to shop at places like Whole Foods, which offers a wider variety of healthy choices.
As this cohort depends on paycheck to paycheck, inflation is another pernicious tax. After taking into account the inflation rate above 9%, their salaries do not leave them much disposable income.
Low-income families often rely on credit for purchases because they may not have sufficient funds. The Federal Reserve Bank’s policy of fighting inflation by, in part, raising interest rates makes their credit card bills significantly higher.
The rent is “too high”
Rents have risen steadily at the fastest rate since 1986. Higher costs are adding to inflation. According to a disturbing report by the US Government Accountability Office, every $100 increase in median rent is correlated with an increase of about 9% in the number of homeless people. Since rental agreements usually include an inflation increase clause, the law allows rents to increase with inflation. As rental prices continue to soar, economists worry about the repercussions for those who cannot afford the rising costs.
The American dream of home ownership may be out of reach for many families. The goal of finding a home in a nice, safe neighborhood with a white picket fence and a lush green yard quickly fades. Low-income renters and seniors living on fixed incomes may not be able to stay in their apartments due to rent inflation. Rising interest rates caused by inflation have put them out of reach for buying a home due to the substantial new monthly mortgage and interest payments required.
Business can take advantage of the working class
An executive director of operations associated with a group that owns about 50 Applebee chain restaurants in the Midwest has emailed colleagues offering a plan to benefit the pain of low-income workers. The executive said in the email that the combination of soaring gas prices, inflation, the end of enhanced unemployment benefits and government stimulus checks would give the company l advantage in its relations with the workers.
The deaf manager wrote, “Most of our employees and potential employees live paycheck to paycheque” and “Any increase in gas prices reduces their disposable income.” He added: “As inflation continues to climb and gasoline prices continue to rise, that means more hours employees will need to work to maintain their current standard of living.”
His thesis was that the higher costs would force people to need two jobs to survive. Being afraid that the company might bring in workers at lower wages. “Everyone has heard that gas prices continue to rise. The benefit this has for us is that it will increase the flow of applications and has the potential to reduce our average salary.”
He also gloated in his belief that high gas and food prices will negatively impact the big restaurant chain’s smaller mom-and-pop competitors. “We’ve all been competing to hire from the limited pool of candidates and there’s been a wage war” and “They won’t be able to afford to do this anymore” and may not survive.
A bright spot?
There is now a silver lining for working-class families: the strong job market. However, this may not last. Jerome Powell, head of the Federal Reserve Bank, announced plans to cool the economy to prevent inflation from contributing to the surge. As businesses feel the effects, they will cut costs, including layoffs that hurt economically disadvantaged workers. The Center for Public Integrity says, “Rising unemployment still disproportionately affects black and Latino workers.”