Nov 30, 2023 - Economy

Young and low-income Americans experience inflation at higher rates

Illustration: Shoshana Gordon/Axios

Young and low-income Americans are experiencing inflation at higher rates than other folks, finds a report out Wednesday from the Federal Reserve Bank of New York.

Why it matters: Though inflation rates have come down this year, they're still elevated — which especially hurts lower-income Americans, who are far more likely to feel the pain of higher prices.

  • As Federal Reserve chair Jerome Powell said last year, "The burdens of high inflation fall heaviest on those who are least able to bear them."

By the numbers: Housing costs — which ran hotter than overall inflation this year — really pinch lower-income and young Americans. Both groups are far more likely to rent than own a home.

  • In October, the bottom 40% of income earners experienced inflation rates 0.16 percentage points higher than average, the report says, implying a 3.4% inflation rate compared with the 3.2% overall CPI number.
  • Households headed by someone under the age of 25 saw a rate that was 0.35 points higher.
  • Meanwhile, higher-earning households saw a slightly lower-than-average rate of inflation.

Between the lines: These differences seem small but they add up over the year — and research from the Dallas Fed shows that inflation tends to be much more stressful for lower-income households.

Of note: Some economists argue that because wage growth for lower-income folks has been good recently, it mitigates the effects of the inflation imbalance somewhat.

The bottom line: Everyone experiences inflation differently; your personal rate of inflation depends on where you live and what you need to buy.

  • If you drive to work every day, higher gas prices are painful. If you're a renter, housing inflation is a beast.
  • Lower-income Americans spend more of their income on necessities, and can't simply reduce spending — or buy cheaper goods — to deal with higher prices, as the Dallas Fed paper noted. They're typically already buying the cheaper stuff.
Go deeper