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Lower-income households were hit hardest by inflation – but still gained purchasing power
Lower-income households were hit hardest by postpandemic inflation, but their wage gains made up for it by the end of 2024, according to new research from the Federal Reserve Bank of Cleveland.
Households in the bottom 40 percent of the income distribution gained roughly 4.5 percentage points of cumulated purchasing power from January 2019 through 2024. That statistic factors in that they spend more of their income on items that saw large price increases during that period, such as food and housing.
Households in the middle 40 percent faced lower inflation but also saw lower wage gains. They also gained about 4.5 percentage points of purchasing power.
The top 20 percent gained about 3.5 percentage points of purchasing power, despite facing the lowest inflation rate of the three groups.
“Despite experiencing disproportionately high inflation during the postpandemic disinflation period, the bottom 40 percent have also experienced high absolute and relative wage growth,” the authors write.
Read the Economic Commentary: Did Inflation Affect Households Differently? A Look at the Postpandemic Inflation and Wage Growth Dynamics
More on inflation: The Center for Inflation Research
Federal Reserve Bank of Cleveland
The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.
The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.
Media contact
Chuck Soder, chuck.soder@clev.frb.org, 216.672.2798