In a scorching political season, economists and politicians are at odds over the state of the economy, particularly when it comes to the issue of inflation. While experts argue that inflation is slowing and the economy is improving, many consumers feel the pinch of rising prices on basic necessities such as rent, healthcare, and education. Economists and politicians, who often live in more affluent neighborhoods, fail to see the world through the eyes of the average person, especially those in the middle and lower income brackets.
The Federal Reserve Bank of Atlanta tracks nine different measures of inflation, with growth rates ranging from 2.4% to 4.9%. This diversity in inflation rates reflects the varied experiences of different groups of people, depending on their financial circumstances. For individuals grappling with rising costs of living, such as rent, healthcare, and education expenses, the official inflation rate may not accurately represent their reality.
The disparity between wage growth and cost of living is particularly stark for the median income earners, who are struggling to keep pace with rising expenses. Even when wage growth peaked at 9.1% in 2022, median wage growth lagged behind, leaving many workers feeling financially strained. The graph from the Atlanta Fed paints a clear picture of the income distribution, with the top earners seeing more significant wage increases compared to those at the lower end of the spectrum.
As inflation slows, prices continue to rise, compounding the financial challenges faced by many consumers. Categories of spending retain their previous increases, further burdening individuals who are already struggling to make ends meet. The inability of politicians and economists to address these pressing economic issues has left many consumers feeling disillusioned and overwhelmed by mounting expenses.
The resurgence of credit card debt post-pandemic, coupled with dwindling savings, underscores the financial plight of many individuals. Despite government aid during the pandemic, the economic recovery has failed to reach those most in need, leaving them grappling with escalating costs and stagnant wages. The disconnect between experts’ rosy economic outlook and consumers’ lived experiences highlights the urgent need for policies that address the root causes of economic inequality and hardship.