Black households hit harder by inflation, UC San Diego study finds
Black families experience higher and more volatile inflation, impacting prices on groceries and household essentials, according to a report published Monday with research from UC San Diego's School of Global Policy and Strategy.
The study, published by the Federal Reserve Bank of Richmond, looked at inflation for Black compared to white households from 2004 to 2020 and found inflation is 13% more volatile for Black families.
Study author Munseob Lee, assistant professor of economics at UCSD, said Black families spend a larger portion of their income on essential goods and services, such as electricity and wireless phone services, compared to white households that spend more on luxury items less likely to fluctuate in price.
"Black and low-income households are more likely to live in food deserts and have limited access to affordable and nutritious food," Lee said. "As we saw recently, in those areas, retail products became more expensive and shelves in the retail stores became frequently empty because of increased shipping costs and supply chain disruption.
"This volatility makes it more difficult for households to predict and recalibrate consumption and savings," Lee said.
Lee's research suggests income inequality in the U.S. is rising faster than current estimates. His data also revealed that Black households tend to have fewer options when inflation increases. He found white households would shop at less expensive supermarkets and convenience stores; however, many Black households were already shopping at these markets.
Additionally, with high gas prices, it becomes more difficult for these families to use transportation to find essential goods, so if a product is out of stock, it often means low-income shoppers can't buy it at all, Lee said.
The study used survey responses from 60,000 U.S. households from 2004 to 2020 that continually provided information about what products consumers buy and when and where they make purchases. According to the data, race is self- reported by households by one of four options: white, Black, Asian and other. Most households — 82.2% — identified as white and 10% identified as Black.
Last month, Federal Reserve Chairman Jerome Powell said in order to combat inflation, an increase in interest rates was necessary. Lee said while this was certainly a step towards reducing inflation, it was far from the only policy action available.
"It is so true that the Fed should increase the interest rate to fight against historically high overall inflation rates," he told City News Service. "That is an efficient tool to reduce overall inflation, and it will naturally benefit the poor and minority too.
"However, monetary policy is not an efficient tool to address distributional consequences," Lee said. "Therefore, it should be combined with fiscal policy targeting households in need by providing support on necessary goods and services with high inflation, especially because I anticipate that it will take a few months or a year to reduce the inflation."
Lee's research came to several conclusions regarding policy and inflation.
First, government agencies should consider measuring inflation by race and income. There are no official statistics in the U.S. on inflation rates by any demographic, meaning that estimates of poverty and inequality under the assumption everyone experiences inflation in similar ways can be misleading, he wrote.
Second, fiscal policy can better serve households in need by providing targeted support on necessary goods and services with high inflation, such as past-due utility relief, free public transit and child care fee waivers.
"My research shows that income alone may be an incomplete measure to determine if households are eligible for government assistance, such as food stamps," Lee said. "With inflation at its highest level in decades, the poorest communities are bearing the brunt of rising costs."