Inflation Will Wreak Havoc On The Working Class

Inflation Leads To A Widening Of The Wealth Gap

The impact of inflation isn’t felt equally by all Americans. The working class is at risk. They are at the mercy of rapidly rising costs. This includes housing, food, gas, cars, trucks, and other daily necessities.

Unlike the upper middle class and wealthy, the less fortunate Americans don’t possess assets that can appreciate in value, such as real estate, stocks and other investments. Inflation will add to the already considerable wealth gap in our nation.

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 may pay back the loans with cheaper money due to the corrosive effects of inflation.

Senior citizens on a tight budget who scrimped and saved over the years are punished for their fiscal sobriety. Inflation harms the value of money sitting in a bank account. They are earning a minuscule interest rate, and the rapid rise in inflation further devalues their savings. Purchasing power is reduced, and the dollar doesn’t go as far as it used only six months ago.

Local bodegas tend to charge larger prices on goods as they don’t have the leverage with suppliers like the big chains and have a captive market. They also offer less variety, leaning towards inexpensive junk food over more expensive fruits and vegetables. This doesn’t help the health of the local community. Lower-income families are often forced to pay higher prices as they don’t or can’t spend the money on gas to travel to big box stores and buy bulk household products. Comparatively, wealthier consumers are financially capable of stocking up on necessities when they are on sale. They can also afford to shop at places such as Whole Foods, which offers a broader variety of healthy choices.

As this cohort depends on paycheck-to-paycheck, inflation serves as another pernicious tax. After factoring in the over 9% inflation rate, their wages don’t leave them with much disposable income.

Lower-income families often rely upon credit for their purchases as they may not have sufficient funds available. 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 Damn High’

Rents have been steadily rising recently at the fastest pace since 1986. The higher costs add to inflation. According to a disturbing report by the U.S. Government Accountability Office, every $100 increase in median rent correlates with around a 9% increase in homelessness. Since rental contracts usually have an inflation escalation clause, the law allows rents to rise with inflation. As rental prices continue to spike, economists are concerned about the repercussions for those who don’t have the financial wherewithal to withstand the rising costs.

The American dream of home ownership may be beyond 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 is fading fast. Lower-income renters and senior citizens subsisting on fixed incomes may be unable to remain in their apartments due to the inflation increases in rent. The rise in interest rates caused by inflation put them out of reach for purchasing a home due to the new substantial monthly mortgage and interest payments required.

Companies May Take Advantage Of The Working Class

An executive director of operations associated with a group that owns about fifty Applebee's chain restaurants in the Midwest sent out an email to colleagues offering a plan to benefit from the pain of low-income workers. The executive said in the email that the combination of skyrocketing gas prices, inflation, the ending of enhanced unemployment benefits and stimulus checks from the government will give the company the upper hand in dealing with workers.

The tone-deaf manager wrote, "Most of our employee base and potential employee base live paycheck to paycheck," and "Any increase in gas prices cuts into their disposable income." He added, "As inflation continues to climb and gas prices continue to go up, that means more hours employees will need to work to maintain their current level of living."

His thesis was that the higher costs would cause people to need two jobs to survive. Feeling afraid that the company could bring in workers at a lower wage. "Everyone has heard that gas prices continue to rise. The advantage this has for us is that it will increase application flow and has the potential to lower our average wage."

He also took pleasure in his belief that high gas and food prices will adversely impact the large restaurant chain’s smaller mom-and-pop competitors. "We all competed to hire out of the limited applicant pool and there was a wage war," and "They will no longer be able to afford to do this," and may not survive.

A Bright Spot?

There is a bright spot for working-class families now: the strong job market. However, it may not last. Jerome Powell, head of the Federal Reserve Bank, has announced his plans to cool down the economy to whip inflation from contributing to the spike. As companies feel the pinch, they’ll cut costs, including layoffs harming economically disadvantaged workers. The Center for Public Integrity states, “Rising unemployment always disproportionately affects Black and Latino workers.”