What the data actually say about inflation and its consequences.
What the data actually say about inflation and its consequences.
L ast month, Biden White House chief of staff Ron Klain supported the idea that inflation was a “high-class” problem. The data disagree: In September, America’s middle class suffered the most from inflation.
As the chart above shows, inflation’s peak punch hit both the middle and upper middle classes at 5.4 percent. While both suffered the same rate of inflation, those with lower incomes tend to have lesser means of adapting to the increases in consumer prices. The households with the lowest income experienced the lowest rate of inflation at 4.9 percent, and those with the highest income suffered slightly less consumer price inflation than their middle-income counterparts, at 5.3 percent.
These estimates of inflation rates by income are based on data from the U.S. Bureau of Labor Statistics, which runs the Consumer Expenditure Survey. As part of the survey, the agency asks households about both their income and how they spend their money. Each of the survey’s dozens of reported expenditure categories was then matched with as granular and specific a consumer price index as the publicly available data permit. The expenditure category for fresh vegetables, for instance, was matched to the consumer price index specifically for fresh vegetables rather than the “food at home” category that tracks all groceries. In tracking inflation’s biggest victims, these distinctions matter. Higher-income households, for example, tend to spend relatively more on fresh produce rather than processed fruits and vegetables and relatively less on things such as housing. By matching household-expenditure shares that vary across household-income levels to specific price indices, each of which the U.S. Bureau of Labor Statistics reports separately, a consumer price index specific to each income level was constructed.
Pairing each of the dozens of categories publicly reported in the Consumer Expenditure Survey to one of the many consumer price indices maintained by the U.S. Bureau of Labor Statistics does require some judgment. But the top-line results suggest that the approach measures what it’s intended to measure. The overall year-over-year rate of consumer price inflation generated by this methodology for September 2021, 5.3 percent, differs from the officially reported 5.4 percent by only one-tenth of a percent.
Some still perceive public anxiety about inflation as “fear-mongering” on the part of the “business class.” But even officials from the “inflation is transitory” Biden administration such as Treasury secretary Janet Yellen now concede that inflation is likely to persist until at least 2022. If the data for September are any indication, inflation is set to join the cast of characters that have conspired to prevent America’s middle class from gaining ground in the 21st century.