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‘Life is Getting More Difficult’: Inflation Inflicts Impossible Choices on Middle-Class Americans

By Kelsey Butler and Katia Dmitrieva

Middle-class Americans, whose rising wages can’t keep up with inflation, are facing tough choices between basic needs. 

Even for the more fortunate ones, like Zoilayne Velazquez, making ends meet is becoming increasingly difficult. The single mother in Westfield, Massachusetts, is now earning $28 an hour in her health care job. That’s up 12% from earlier in the pandemic. But, she says her grocery bill has more than doubled over the last year and summer camp fees for her two young kids have quadrupled.

Photo by Andrea Piacquadio: https://www.pexels.com/photo/selective-focus-photo-of-woman-in-gray-coat-walking-by-store-window-3763124/

First, the 29-year-old cut out her daily coffee at Dunkin’ Donuts and put a moratorium on lunches out at restaurants. Then, she canceled her cable and opted for a cheaper home security system to shave off about $500 a month. Sometimes, she has to pick up more shifts at work, leaving her less time to spend with her kids. 

It’s those types of choices that are making many Americans feel like all the debate over whether a recession is coming or not misses the point. The economy isn’t working for them now. In June, food prices at grocery stores jumped more than 12% from the same time last year, the biggest advance in a generation. Over the same period, gas prices were up more than 40% — also the fastest pace in more than four decades — and rent accelerated at the fastest rate since 1986 in just one month, according to government figures.

“I hope for the best, but I’m expecting the worst at times,” Velazquez, said by phone. “I feel like the more you make, sometimes it’s still not enough.”

The increase in costs is also exacerbating inequality, with those who make less or have unstable employment facing the largest burden. Hispanic and Black Americans are “experiencing more inflation” than their White counterparts because they spend more of their income on the very basics — like transportation and housing — that are increasing in cost the most, according to a June blog post from the New York Federal Reserve. And while most households have added to their savings cushion thanks to fiscal support during the pandemic, the poorest one-fifth of Americans have seen a steep decline.

The consumer price index data released Wednesday show that inflationary pressure will persist throughout the year, and will be tough for the Federal Reserve to tackle.

“For the average, middle-to-low income Americans, life is getting more difficult,” said Gene Ludwig, founder of the Ludwig Institute for Shared Economic Prosperity, an economic research group. In recent months, “it’s been getting worse significantly above expectations.” 

The group found that real inflation for Americans making what it says is a median $52,000 a year is actually 40% higher than government data reflects, since these households spend more of their income on basics that have seen the steepest price gains. 

One-third of Americans said it was somewhat or very difficult to pay for usual household expenses in May, according to a recent US Census Bureau household survey. That’s near the 2020 peak, at the worst of the Covid-19 pandemic.

Even as the unemployment rate hovers near a half-century low, the so-called Misery Index, a blend of inflation and unemployment, is at levels last seen during the worst of the pandemic recession and 2008 financial crisis. 

For the past decade, Byron Bailey, 37, has comfortably supported his wife and four kids in Los Angeles on his salary as a union electrician. He makes $55 an hour, about 70% higher than the average hourly pay in the US. Now, his wife is planning to get a job so they can afford what they usually could on one income. 

“If we want to be in a position to live more comfortably we’re going to need a second income,” Bailey said. His father also had a union job, and Bailey’s mother was able to stay at home. “Now that’s almost impossible on a single income,” he said. 

Now that it’s summer, they’re able to save on gas because they aren’t driving their kids to and from school five days a week. The family was spending $170 on gas every week, double what they paid last year.

Bailey said he’s not worried about staying afloat — for now. There’s a chance his union could strike at the end of the month, though. If he misses pay, “then we will be one of those families that has to make those hard choices, and it’s always frightening to think about,” he said.

For Velazquez, the health care worker, summer camp for her kids — at a price tag of $400 a week — wasn’t in the cards this year. She’s relying on family for child care now, while she picks up shifts as close as she can to home to save on fuel costs.

“It literally pains me to put gas in my car every couple of days,” she said. “It’s ridiculous.”

More stories like this are available on bloomberg.com

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