Black households in the United States experienced slightly higher and more volatile inflation in consumer goods, according to research from the University of California, San Diego’s School of Global Policy and Strategy.
The research, authored by Munseob Lee, assistant professor of economics at the School of Global Policy and Strategy, was published today by the Federal Reserve Bank of Richmond. The study used survey responses from 60,000 U.S. households from 2004 to 2020, finding that inflation was 13 percent more volatile for Black families than for White families.
“More than two-thirds of the difference in inflation volatility can be explained by the fact that Black households are disproportionately more likely to consume goods with volatile prices,” reads the study.
Lee’s study found that Black households began facing higher inflation rates than White households during the Great Recession in 2008. The gap has persisted, although it narrowed after 2014. The gap did not increase further in the early phase of the COVID-19 pandemic.
Black families spent a large portion of their income on essential goods and services, like electricity and wireless phone services, according to Lee. White households spend more on luxury items, such as wine and pet care, which are less likely to fluctuate in price.
It became more difficult for families to use transportation to find essential goods with the rising gas prices, the study found.
Another 2020 study authored by Lee, the "Cost of Living Inequality During the Great Recession"— co-authored with Penn State University professor David Argente, identified three ways people adjust to food inflation, which are shopping at cheaper stores, using coupons, and trading for lower-quality foods.
Several policy implications came with Lee’s findings. First, government agencies should consider measuring inflation by race and income.
“There are no official statistics in the U.S. on inflation rates by any demographic, meaning that estimates of poverty and inequality under the assumption everyone experiences inflation in similar ways can be misleading,” reads the study.
Despite the Federal Reserve's history of fighting against historically high inflation rates, Lee argues that fiscal policy could better serve households with goods or services amid high inflation.
In Lee’s study, race is self-reported by households by one of four options: white, Black, Asian, and other. A little more than 82.2 percent of respondents identified as white and 10 percent identified as Black.
