INEQUALITY/ECONOMY: New report reveals 3 million more in poverty, higher price increases for low income families

November 5, 2019

Report underscores ‘inflation inequality’: how low income families have been facing significantly higher cost of living increases than the wealthiest Americans

***READ THE REPORT HERE***

***Press conference call to discuss report today at 10:30am ET – RSVP here***

Washington, DC – Today, Christopher Wimer and Sophie Collyer from the Center on Poverty and Social Policy at Columbia University along with Xavier Jaravel of the London School of Economics, in partnership with the Groundwork Collaborative, published a new report that upends the conventional view of inflation rates and poverty in America and reveals that there are 3.2 million more Americans living in poverty than official numbers suggest. The report also outlines how inequality is causing the cost of living to increase faster for low income families and that real household income for the bottom 20% has declined by more than 7% from 2004 to 2018, rather than the 1% decline reported in official statistics. 

“Given strong evidence that low-income families in America are paying higher prices and living in poverty in higher numbers than official metrics account for, this is a major problem,” said report co-author Christopher Wimer. “I’m hoping that this new report will help policymakers understand the reality of the economy for low-income workers and will help them understand how inequality is impacting inflation and poverty rates in ways that need to be addressed.”

“Too many politicians and political pundits have been claiming that the economy is working well for everyone when in reality, it’s only working for the wealthiest among us while working families are getting squeezed,” said Sapna Mehta, Associate Director of Policy and Research at the Groundwork Collaborative. “This paper confirms what we’ve been saying, that skyrocketing inequality has undermined the strength of our economy and finds that working families are literally paying the price for government inaction.”

Groundwork Collaborative will be distributing this report to members of Congress, Congressional staff, and members of the Administration.

Key findings from the report include:

  • Skyrocketing inequality in recent decades—driven almost exclusively by soaring incomes for the wealthiest Americans—has undermined the strength of our economy and our democracy.
  • New research shows that income inequality itself is causing prices to rise more quickly for people at the bottom of the income distribution than at the top, a phenomenon known as “inflation inequality.”
  • This means that we are underestimating the true levels of income inequality and poverty, since both are measured using uniform inflation rates that do not account for the faster price increases faced by poorer and middle-income households.
  • Because income inequality is causing prices to rise faster for low-income people, there are at least 3.2 million additional people in poverty in 2018 than the official metrics suggest. That’s more than the entire population of the state of Iowa.  
  • Household income, adjusted for inflation and inflation inequality, for the bottom 20 percent declined by more than 7 percent from 2004 to 2018, rather than the 1 percent decline reported in official statistics. As a result, income inequality between the top and bottom quintiles grew by more than 20% (a 35% increase from the official statistics).
  • Working families are really getting squeezed. The average middle-income household lost about $1,250 in 2018 due to higher prices caused by inflation inequality. More than one-third of adults cannot afford a $400 emergency and are one health scare away from financial ruin. That $1,250 could have been used to pay for prescription drugs, pay off credit card debt, or save for retirement.
  • While incomes for low and middle-income families declined, incomes for the rich continued to grow, widening the gap between the rich and everyone else.
  • This new inflation inequality means that working families are bearing the brunt of income inequality both in terms of stagnating wages and higher prices.  In other words, they are at a double disadvantage when it comes to their “real” income growth.   
  • But income inequality isn’t a fact of nature. It’s the result of deliberative policy choices and policymakers can choose to make different choices.  Policies that reduce income inequality and put working people first—like raising the minimum wage to $15/hr and higher marginal tax rates at the top—could also reduce inflation inequality, resulting in lower prices, and higher “real” income growth for working families

About the Groundwork Collaborative

The Groundwork Collaborative is an initiative dedicated to advancing a coherent, persuasive progressive economic worldview and narrative. We are committed to collaborating with a diverse array of partners to advance an economic system that produces strong, broadly shared prosperity and abundance for all people, and not just a wealthy few. Our work is driven by one core guiding principle: we are the economy.

We work with economic policy experts, progressive movement leaders, and activists on the front lines of progressive causes in communities across the country to:

  • Develop and advance a progressive economic worldview.
  • Collaborate and foster new ideas, and develop new pathways to share information.
  • Break down issue silos, support and amplify each other’s work, and show up for one another on critical economic issue campaigns.

Learn more here: https://groundworkcollaborative.org

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