Here & Now

The Pain of Inflation for People Trying to Make Ends Meet

Frederica Freyberg:

Latest numbers show inflation has hit a 40-year high in the U.S., with inflation jumping to 9.1%. “Here & Now” reporter Nathan Denzin has more on how high costs are hitting Wisconsin.

Nathan Denzin:

People in the Midwest have grappled with higher costs for everything over the last year, as prices increased more than 9%. Low-income families have been hit hardest, as the price of essential products continues to increase. Take, for example, the price of ground beef. That’s gone up from about $4 per pound a year ago to $4.79 a pound today. The price of a gallon of milk has increased from $4 to over $5. Groceries in general have increased 15% to 18%. Price hikes that together take a toll. But high inflation has impacted transportation and energy costs even more. Gas prices have increased dramatically in the last year. Utility costs are also up between 17% and 36%.

J. Michael Collins:

As we talk about inflation, I think sometimes we hear about, you know, the price of houses or the price of big things, but it’s little stuff that really hurts low-income families, and you know, if you think about a extra $2.50 for a gallon of gas or an extra dollar for a gallon of milk, those things just start to add up because you buy them so frequently.

Nathan Denzin:

J. Michael Collins is a professor at the UW LaFollette School of Public Affairs studying consumer decision-making. He says both experts and the public have been surprised at the rapid rate of inflation, especially costs consumers can’t avoid like gas and groceries.

J. Michael Collins:

The problem for low-income people’s budgets is that they’re really good at managing their budgets so they were already sort of right on that line of being able to make ends meet. So it usually means some necessities have to go. It means not buying as much food, not buying the organic food, not buying the fresh food. It’s going to be economizing in different ways.

Nathan Denzin:

While the price of gas increases, vehicle prices have risen over 15% in the last year as well. That can add extra financial strain to households who need a vehicle for work, or for day-to-day activities.

Edmond Shoat, Jr.:

Madison may seem like a small place but it’s kind of big.

Nathan Denzin:

Edmond Shoat, Jr. recently moved to Madison and quickly realized he would need a vehicle to hold a job.

Edmond Shoat, Jr.:

I’m so used to the city life, so I needed a car to move around. Y’all don’t have no trains out here or nothing so I’m like, yeah, I need to get a car.

Nathan Denzin:

However, Shoat, Jr. also quickly realized almost all the vehicles at local lots were unaffordable.

Edmond Shoat, Jr.:

I went to a few car lots. They turned me down, ran my credit score. Most of them wanted ridiculous prices for cars so I’m like, what am I going to do. I just moved out here. So I need a car to move around.

Nathan Denzin:

After some searching, Shoat, Jr. found a program called Work-n-Wheels, which offers zero percent loans for eligible drivers in Wisconsin. With the loan money and his personal funds combined, Shoat was able to find a car.

Edmond Shoat, Jr.:

So I’m like, that’s awesome. I never in my life experienced but it was like a god send, blessing, because I needed my car.

Nathan Denzin:

With a new vehicle, Shoat has been able to pick up multiple jobs to help take care of his young child.

Edmond Shoat, Jr.:

It worked out with me getting to work. It worked out with me trying to get multiple jobs too. Just the city transit, about a 30-minute wait or 45-minute wait, but really if you drive, it’s a 10-minute wait.

Nathan Denzin:

While Shoat, Jr. was able to find a car, others in Wisconsin don’t have that disposable income.

J. Michael Collins:

This winter is going to be a tough one for low-income families because food prices probably aren’t going to start coming down. You know, they’re probably not going to ever come down but they’re not going to be growing as fast over the winter hopefully, but fuel prices, heating in a place like Wisconsin is going to be hard.

Nathan Denzin:

So as governments stare down a winter that will be difficult on low-income families, some tools are being used to drive down inflation. The federal reserve system has implemented a hike in interest rates on loans with the hopes of driving down consumer spending. However, experts like Collins worry about potential stagflation in the U.S. economy.

J. Michael Collins:

Stagflation is really when you have two things happening simultaneously: high prices and high unemployment. Right now we have really low unemployment, almost record low unemployment. People can get jobs if they want them, but that’s resulting in prices getting spurred up. The idea of stagflation is the fed or the government tries to both reduce unemployment and reduce prices at the same time and it’s really, really hard to do.

Nathan Denzin:

To fight rising gas prices, Wisconsin Governor Tony Evers issued an executive order that banned price gouging on gasoline. President Joe Biden has asked Congress twice to suspend the 18 cents per gallon federal gas tax, though that tax is still in place. Despite relatively little action taken, gas prices have dropped in the last month after their peak at $4.92 in mid-June. As for prices in the rest of the economy, time will tell if the government is able to curb inflation.

J. Michael Collins:

We do expect prices to start coming down closer to what wages are doing, but that could take a year and that could mean a tough fall and a tough winter with fuel prices and food prices high and wages not keeping up.

Nathan Denzin:

For “Here & Now,” I’m Nathan Denzin in Madison.

Frederica Freyberg:

With prices continuing to rise, the fed is expected to raise interest rates again next week in an effort to further contain consumer spending.