Uneven Playing Field
Americans of all demographic groups have noticed the higher prices on products and services over the past years as the pandemic-era inflation took its toll. But young and low-income Americans are disproportionately affected by higher inflation, according to a report from the Federal Reserve Bank of New York .
Forced to Rent
The housing market has posed a challenge for many Americans. Those wanting to buy face tight inventories, high interest rates, and in certain places steep competition. But it’s not much better if you rent, because rents have been going up, too.
Overall, housing costs have outpaced overall inflation this year. In October, these higher costs boosted inflation to 3.4% year-over-year for the lowest 40% of wage earners, compared with the overall consumer price inflation rate of 3.2%. For households whose breadwinners were less than 25 years of age, inflation was 0.35 percentage points higher than the overall number.
Disappearing Purchasing Power
These differences might seem small, but they compound year over year and erode the purchasing power of Americans who are already in trickier financial situations. And while inflation has greatly improved from the highs of last year, it’s still higher than what is deemed ideal by the Fed.
Low-income earners are in a particularly tough spot, with higher prices making it harder to save. Meanwhile, those on tighter budgets don’t always have the option to cut back by swapping out pricier products for cheaper ones, leaving them to feel the full force of the inflation we’re all witnessing.
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