Census and WaPo at Odds Over Effect of Inflation on Low-Income Families
As I read Dean Baker’s perspective on Low Income families, I find it hard to believe. The market in the Southwest has dried up due to high prices and interest rates. One or the other has to be lower to attract buyers. Builders have not lower prices and bank rates have remained high. One builder was complaining of a lack of interest in a rate at 6%. Coupling to a higher price this is very true.
It is also taking anywhere from 6 to 12 months to build a home. You could have closed in November of last year at which point pricing was increasing again as was interest rates.
“Census and WaPo at Odds Over Effect of Inflation on Low-Income Families,” Center for Economic and Policy Research, Dean Baker
It is getting almost as bad as propaganda from an authoritarian regime. We keep hearing major news outlets tell us that inflation is whacking lower-income families. The Washington Post did it yesterday in an editorial demanding more rate hikes from the Fed to throw people out of work.
Lower-income people, like everyone else, are paying more for food, gas, and rent. The argument is that these items are a larger share of the budget of lower-income people, so they are hit harder by inflation than higher-income households.
The problem with telling this simple story is that wages have been growing most rapidly at the bottom end of the wage distribution, substantially outpacing inflation since the start of the pandemic. Also, in a tight labor market, more people are likely working in many households. They are also more likely to be able to find a job that has lower commuting costs or might allow them to work part-time to deal with childcare or family needs.
One way to assess how these things balance out is to look at what has happened to homeownership rates. More homeownership is not always better, as some of us warned during the housing bubble years, but people who have the option to buy a home generally choose to do so.
Contrary to the propaganda here and here coming from the media, homeownership rates have actually risen rapidly since the pandemic for households with incomes below the median, as shown below. (The big jump in 2020, which was partially reversed, is likely due to a skewing in responses, as the pandemic sent response rates plummeting.)
Homeownership rates have also risen for Black and Hispanic households and those headed by someone under age 35. It is more than a bit bizarre that the media have been almost uniformly insisting that these are horrible times for lower-income people despite data that say the opposite.
demanding more rate hikes from the Fed to throw people out of work.
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do not be misled! it is not the fed Governors who are at fault. it is the broken system of Taxation which gives the wrong incentives, and certain other things; but F-Governors are left with the task of putting a Band-Aid on the system, poorly designed by Congress.
here is what went down. Congress has allowed fractional Reserve banking to generate more credit thus inflation then congress turns to the FED governor to say you control inflation with high interest rates, controlling inflation is your mandate.
then Congress creates low income families by giving tax breaks, tax shelters to the excessively wealthy. many of these excessively wealthy people don’t even live in this country don’t even fight for this country when there is a war.
then Congress gives more power to labor unions who drive up wages for the lucky people who get a fat labor union job because they are not ethnic people. more inflation
then Congress spends too much money on their cronies, the cronies who buy them votes, people like the intelligentsia who get free college education which is not available to the ethnic. more inflation
when Congress is in session no American is safe.
~~Mark Twain~
Justin:
Nice text book rendition.
You come to AB spouting oblique commentary. It is difficult to take you seriously. At one time I delete one comment of yours as it appeared to be in Russian or partially so. Portions of the commentary arrive oddly worded.
You put me in a situation as to whether to take you seriously or not. So, I don’t.
It also depends on how you define “lower income” families. Bottom quintile for the nation overall? Two bottom quintiles? Even I don’t usually bother to look up what those numbers are, and what the numbers mean depends on location as well as dollar income.
CA has higher housing and gas prices for half a century or more. We also have a minimum wage that is $14 for the smallest businesses, and we don’t have a special “tipped” lower rate. Our minimum has been going up for the last several years, and after next year it will be indexed to inflation, so the effect of inflation on the bottom of the “lower income” working families will be offset to at least some extent.
Lower income families have managed to survive inflation before. In the 70’s and 80’s the lower income segment was not likely to have a union contract with COLA, and the minimum wage was minimum survival even when it did get bumped up regularly. The gas crisis meant no gasoline period, not just high prices. And prices and interest rates started jumping at the same time then too. From a lower starting point, but doubling in less than 2 years too, at least mine did. Price, not rate.
It may have different causes and play out differently this time, but it was just as big a problem for the lower income segment the first time around. With any luck at all, it won’t last quite so long this time.
CA has higher housing and gas prices for half a century or more. We also have a minimum wage that is $14 for the smallest businesses,
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~~JaneE~
during times of inflation minimum wage regulation his pro-cyclical which makes life worse for the poor people. do you see how this works?
it creates more inflation, but if they we are honest and sincere Congress would give us maximum wage regulation which is Contra cyclical. maximum wage regulation prevents the wealthy from bidding up prices Out Of Reach for poor people, dis-inflationary.
shifting taxation from regressive sales tax and regressive income tax to a more progressive tax on real property will decrease the price of property since property owners would be selling off their extra land for building houses thus making homes more affordable
i don’t think the pandemic increase in Homeownership Rate Among Households with Income Below the Median is due to a skewing in responses.Some portion of the people working in industries that were shutdown during the q1/q2 2020 lockdowns were homeowners, at a rate higher than those who were below median income in q4 2019. When their income went to $0 because their industries were shutdown, their income became “below median”. Thus, home ownership rates among this cohort increased
i would expect home ownership rates among those with below median income to increase over time with an aging population and baby boomer retirements. as people retire, they have less income. recent retirees likely own homes at above average rates, and their mortgages are more likely to be paid off or be at lower monthly payments, they don’t need above-median income to pay the mortgage anymore.