We’ve all felt the recent sting of higher prices filling up at the gas station, paying for groceries, or buying Christmas gifts. Inflation hurts us all. But inflation especially hurts those at or below the median American income – many of whom live in rural America.
Statistically, rural Americans are older, sicker, heavier, and poorer than the rest of the country. Moreover, nearly 14.7 percent of rural Americans live below the federal poverty line, whereas 11.3 percent of urban residents do. To a lesser extent, this is mirrored in median household incomes. According to Census Bureau estimates from 2018, rural households earned an average of $49,900, and urban households earned $66,100 — a $16,200 difference.
Inflation's hardships fall hardest on low-income Americans
Gallup recently released a poll showing 45 percent of Americans reported financial difficulties triggered by inflationary price increases. Nearly 1 in 10 respondents described inflation as threatening their current standard of living.
A majority of families earning below $40,000 reported that they experienced some degree of financial hardship this holiday season. Strikingly, 42 percent of these families said they endured “moderate" hardship, and 28 percent—more than one in every four members of this group—said they experienced “severe” financial hardship. Combined, more than 70 percent of respondents in this lower-income range noted some form of financial difficulty due to inflation this holiday season.
By contrast, approximately 47 percent of middle-income households and 29 percent of upper-income households reported similar financial hardships. Data show that Americans with less education and those living in rural areas felt the pinch of inflation most acutely.
Managing higher daily expenses with less income
A recent Bank of America report underlined the growing urban and rural divide in spending power—that is, how much money people have to buy products and services. Over the past year, rural Americans saw their spending power drop 5.2 percent annually, compared with 3.5 percent for urban households.
The Bank of America report also found that energy represents roughly 8 percent of a rural family’s budget, compared with 5.6 percent for urban households. What’s more, rural Americans spend slightly more of their income on food than urbanites–12.5 percent versus 11.4 percent, respectively. Lastly, rural Americans spend more than 10 percent of their income on new and used cars, compared with 5.8 percent for urban residents. Given the longer distances rural Americans travel for work, groceries, and other life events, these statistics matter.
The greater distance required to get around rural America increases how much money residents pay at the pump. That distance also makes transporting non-local food, fuel, and other goods to rural areas more expensive, the cost of which may be passed down to rural consumers. Additionally, rural families tend to have larger homes than city dwellers and, thus, pay more in energy costs to heat and cool them. When combined with the lower incomes of rural Americans, these added costs mean that rural consumers spend a larger share of their budgets on necessary daily expenses. All households need food and energy to maintain their homes, and many Americans remain reliant on personal automobiles. Still, the degree to which inflation affects the financial stability of urban and rural families differs significantly.
Policymakers must remember rural Americans
Recent inflation has increased costs for everyone, but it has hit poorer Americans particularly hard. And though cities hold most of the country’s wealth and consume the most resources, millions of Americans still live in rural areas. Day-to-day logistical factors combined with lower average income make inflationary pressures more acute for rural Americans.
While the high cost of living in cities naturally draws attention to the plight of the urban poor–and rightfully so–Washington should not forget the millions of rural Americans who are also struggling with inflation.