In early March, Mayte Molina, 34, did a double-take at her higher-than-normal supermarket bill.
Quickly adding how it would offset her weekly budget, she put a handful of her usual items back. Since then, Molina’s daily shopping run has turned into every three to four days to stretch out her family’s grocery money. This is tricky for the mom of six, who says there’s always someone in the family who is hungry.
Despite Molina and her husband Christopher’s dual-income and receiving stimulus and other benefits in the last two years, they’re feeling the pinch of inflation and rising prices.
Before inflation started to take grip, there were hopeful signs that many low-income workers were making financial strides. Now inflation, at a 40-year high, threatens to wipe out those gains.
“Inflation, inflation, inflation is going to hurt the lower-income consumer disproportionately,” said Ellen Zentner, Chief US Economist at Morgan Stanley, during the National Retail Federation’s State of Retail and the Consumer virtual event on March 15.
Inflation places a unique burden on low-income families because their budgets are mostly comprised of necessities like food, gas and utilities. When prices go up, they’re less nimble than more affluent groups to mitigate with extra disposable income. They simply don’t have it.
“When we’re talking about gasoline prices, we think that the burden on lower-income households has basically quadrupled in terms of what they were spending to fill up their gas tanks last year,” said Zentner.
Priscilla Alexander, 24 and a mom of two in Detroit, Mich., is feeling pain at the pump. She changed jobs during the pandemic, increasing her pay by a dollar to $11.50 an hour. But between her work commute, driving her partner to his job and taking her two children to doctor’s appointments, she said, “I can barely keep gas in my tank.”
Many low-income families received significant financial assistance during the pandemic, including rounds of stimulus checks and the short-lived 2021 monthly child tax credit. They also benefited from the tight labor market, making some of the biggest wage gains. But most had to use that money to play catch up.
A J.P. Morgan Chase 2021 study found that while low-income families saw their checking accounts go up after receiving stimulus or the Child Tax Credit payments last year, they depleted those funds at a faster rate than higher-income people. They most likely used the extra cash on groceries and utility bills and to pay down debt. And those with kids spent down that extra money even more quickly.
This was true for the Molina’s during the pandemic. When Christopher was laid off from his hotel manager job in spring 2020, Mayte became the sole breadwinner. But her salary wasn’t enough to cover everything. The family luckily had some savings and received stimulus money to augment Mayte’s pay, $15 an hour plus tips.
“With my paycheck, we weren’t able to pay the rent, food, and bills all on that,” said Mayte. “It’s kind of sad. It set us back but there was nothing we could do.”
Now that stimulus and other benefits have evaporated, low-wage workers are on their own again. Their financial precarity is being weaponized in the partisan debate of who is responsible for and what’s driving inflation.
Economists, like Paul Krugman, don’t doubt that inflation severely impacts low-income workers. But they argue that the way politicians, namely Republicans, and the media weave the inflation narrative distorts the full economic picture. There are bright spots like low unemployment and a faster than anticipated economic rebound. Yet, Republicans drown those parts out by stoking inflation fears and blaming the Biden administration.
Advocates agree that the partisan infighting about inflation detracts from the issue at hand: Rising prices are hurting low-wage workers right now and it’s time to ease that pain. In a Nov. 2021 Gallup poll, 71 percent of respondents, who made less than $40,000 a year, said that rising prices caused their family financial hardship.
Some believe that the answer is to permanently raise wages in the service industry and other low-paying sectors. Cutting hourly pay, on the other hand, due to rising inflation concerns is not a solution.
“People can’t afford the gas to get to work. They can’t afford food to feed their children on the meager tips and wages that they’re getting,” said Saru Jayaraman, director of the Food Labor Research Center at UC Berkeley and president of One Fair Wage. “It’s just not working anymore.”
And now with Russia’s ongoing invasion of Ukraine threatening to drive up costs and lingering supply chain snarls, experts predict that inflation will still go up this year. For how long and how much remains unclear. But in the case of continued rising prices, low-wage workers and their families will feel the brunt of the pressure.
“Honestly, if things keep going up, we might have to get food stamps,” said Molina, who up to this point hasn’t relied on public assistance. “But it’s getting ridiculous to afford milk in New York.”