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2019-11-05 — theatlantic.com

``In an era of wild inequality, sputtering wages, and rising rents and health-care costs, the American working class has had one consistent financial respite: "stuff," broadly defined, is cheap. Sure, workers might not be able to afford a decent apartment, a college education, or sufficient elder care for an infirm relative, or to ever, ever get sick. But burgers, leggings, yard tools, bicycles, dishes, smartphones, soda--these items have become less expensive, thanks to big-box stores and internet retailers and imports from abroad.

Or perhaps not. A new analysis from a prominent group of economic researchers suggests not only that rising prices have been quietly taxing low-income families more heavily than rich ones, but also that, after accounting for that trend, the American poverty rate is significantly higher than the official measures suggest. Call it "inflation inequality," a subtle, pernicious way that the fortunes of the rich and the poor have diverged.

... the London School of Economics found that from 2004 to 2015, the prices of the products purchased by the bottom income quintile increased faster than the prices of the products purchased by the top income quintile. As a result, low-income families experienced an annual rate of inflation conservatively estimated at 0.44 percentage points higher than that of high-income families... such changes compound over time, wedging apart the welfare of struggling households and flourishing ones. Rich families get competitive prices on organic groceries and athleisure and better-and-better electronics; poor families end up paying more for worse-quality alternatives.

Jaravel suggested a mechanism behind the finding: Rising wealth and income inequality mean that richer people have ever more disposable income, creating a market incentive for retailers to cater to the needs of lawyers in Chicago and tech analysts in Boston over child-care workers in the Mississippi Delta and part-time retail workers in California's Central Valley.

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Accounting for differential changes in prices would bump up the 2018 poverty rate by 8 percent--adding 3.2 million people to the ranks of the officially poor, and 836,000 people to the ranks of those in deep poverty. According to standard government measures, the real household income of the bottom quintile fell 1 percent from 2004 to 2018; using the new, inflation-sensitive accounting, it fell more than 7 percent... "It's not just that inflation is not uniform across income groups," says Michael Linden of the Groundwork Collaborative ... "It's that it's not uniform across income groups because of inequality itself."

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