About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

1 How Inflation Has Affected Households at Different Income Levels since 2019 1 (September 22, 2022)

handle is hein.congrec/hwinhs0001 and id is 1 raw text is: Summary Inflation affects households differently depending on the mix of goods and services that they consume and the income that they have available to pay for that consump- tion. In this report, the Congressional Budget Office examines how inflation has affected households at differ- ent income levels and compares inflation since 2019 with the growth in household income over the same period. For this analysis, the agency used data about households' consumption in 2019, before the coronavirus pandemic. To focus on the effects of changes in prices, CBO held quantities of consumption constant by considering an average bundle of goods and services purchased in that year by households in each quintile (or fifth) of the income distribution. CBO used two measures of income: market income and income after transfers and taxes. Market income consists of labor income, business income, capital income, and other income from non- governmental sources.1 Income after transfers and taxes accounts for additional factors such as cash payments from the government (or transfers) and federal taxes. Both measures were adjusted to remove the cost of health care benefits that people receive from the government or their employer because CBO does not have comparable data about prices, quantities, or subsidies for such benefits. CBO found that the effects of inflation have changed over time and varied by income group and income measure. The two income measures have followed different paths. Total adjusted income after transfers and taxes increased more than prices in 2020 and 2021, but such income is projected to fall in 2022 in real terms (that is, after the effects of inflation are removed), primarily because temporary fiscal policies related to the pandemic ended. 1. Capital income is income that is derived from capital rather than labor. Examples include stock dividends, realized capital gains, an owner's profits from a business, and the interest paid to holders of debt. By contrast, total adjusted market income increased more than prices in every year of the 2020-2022 period, CBO estimates. Using adjusted income after transfers and taxes to mea- sure the effects of inflation, CBO found the following: From 2019 to 2022, the share of such income that households would use to pay for their 2019 consumption bundle decreased, on average, for households in every income quintile because, over that three-year period, such income grew faster than prices. In 2022, as inflation accelerated, the outcome differed from the outcomes in the previous two years. The share of such income that would purchase a 2019 consumption bundle increased, on average, for households in all income groups, primarily because temporary federal fiscal policies enacted in response to the pandemic ended, reducing households' income. The outcomes differed for households in some quintiles when adjusted market income was considered: Since 2019, the share of such income that households would use to purchase a 2019 consumption bundle has increased for households in the lowest income quintile because prices have grown faster than their income, on average; that share decreased for all other households, whose income gains outpaced price increases. In 2022, the share of such income that would purchase a 2019 consumption bundle increased for households in the second, middle, and fourth quintiles because prices rose faster than their income; that share decreased for households in the lowest and highest income quintiles, whose income grew faster than prices. The changes in those shares reflect the combined effects of inflation on the cost of consumption and changes in Notes: All years referred to are calendar years. Numbers in the text, tables, and figures may not add up to totals because of rounding.

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Already a HeinOnline Subscriber?

Log In

profiles profiles most