In an era of wild inequality, sputtering wages, and rising rents and health-care costs, the American working class has had one consistent financial respite: “stuff,” broadly defined, is cheap. Sure, workers might not be able to afford a decent apartment, a college education, or sufficient elder care for an infirm relative, or to ever, ever get sick. But burgers, leggings, yard tools, bicycles, dishes, smartphones, soda—these items have become less expensive, thanks to big-box stores and internet retailers and imports from abroad.
Or perhaps not. A new analysis from a prominent group of economic researchers suggests not only that rising prices have been quietly taxing low-income families more heavily than rich ones, but also that, after accounting for that trend, the American poverty rate is significantly higher than the official measures suggest. Call it “inflation inequality,” a subtle, pernicious way that the fortunes of the rich and the poor have diverged.
Using government data and scanner data from retail stores—the bar codes that get swiped at Target, the produce codes that get punched in at grocery stores—Xavier Jaravel of the London School of Economics found that from 2004 to 2015, the prices of the products purchased by the bottom income quintile increased faster than the prices of the products purchased by the top income quintile. As a result, low-income families experienced an annual rate of inflation conservatively estimated at 0.44 percentage points higher than that of high-income families.