- Middle-class Americans are experiencing the effects of inflation more than lower-middle class or upper-middle class Americans, a new study says.
- One reason that might be the skyrocketing cost of gas and used cars. "For the middle class, a larger share of their budget goes toward gasoline," one expert says.
Inflation in the United States is the highest it's been since 1982, according the Bureau of Labor Statistics: The consumer price index, which measures the average price of many household items, rose 7.9% in February. This is costing Americans almost $300 extra per month, according to a Moody's Analytics analysis.
But not everyone is feeling the squeeze of higher prices to the same degree, according to a Wells Fargo study.
Middle-class Americans are experiencing the effects of inflation more than lower-middle class or upper-middle class Americans. One reason that might be is the skyrocketing cost of gas and cars. "For the middle class, a larger share of their budget goes toward gasoline," says Peter Mueser, a chancellor's professor at the University of Missouri who studies labor economics.
Gas prices have gone up 38% since last year, according to the CPI. "Poor people are much less likely to have cars, so gasoline doesn't affect them as directly," Mueser says.
"The very wealthy, they may drive as much as the middle class, but a smaller share of their total income is spent on things like gasoline. For middle-class [Americans], it's a larger share of income, and for lower-class Americans it might be nothing at all."
The gas bill for someone in the upper-third of income distribution might have doubled, in other words, but this cost could still be a smaller proportion of their income than someone in the middle class who is spending less on gas.
When it comes to cars, the price of new and used cars rose. However, top earners usually buy new cars, and those prices rose 14% from last year, according to Kelley Blue Book. Middle-income consumers are more likely to buy used cars, and those prices rose 28%.
Those in the lower income bracket were least likely to buy a vehicle at all.
Asian Americans have seen the most modest rise in prices at 5.6% while Latino and Hispanic Americans have seen the most drastic rise in prices at 7.1%.
This, according to the study, has to do with class and the types of purchases Latino and Hispanic consumers are making.
By Courtney Stith
"Hispanic and Latino income is similar to that of middle-quintile consumers, but an even greater share of spending is directed toward vehicle purchases (particularly used autos) and gasoline prices, leading to the highest rate of inflation of any sub-groups we analyze," the study states.
Still, Mueser says, those who are in a lower socioeconomic class are not having an easy time.
When inflation is high, he notes, "people who have less savings who are spending a larger share of their income each month" on essential purchases will have to make difficult decisions on what to cut from their spending.
"Almost everything that happens is harder for people at the bottom of income distribution," he says.
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