By ReShonda Tate, Defender News Network
With prices hitting the highest rates the United States has seen in more than 40 years, black families are bearing the brunt of inflation. Researchers say black families will suffer the most because they lag behind their white counterparts in income, wealth, financial savings and home ownership. However, with smart planning, families can ride the wave of rising inflation with minimal impact.
A study released by the Federal Reserve Bank found that basic necessities such as groceries, electricity and wireless phone service account for a larger share of black families’ budgets. Black households also spend more of their income on goods and services with prices changing more often, the study found.
Munseob Lee, an economist who co-authored the study, said many black Americans also live in food deserts and pay higher prices for groceries at convenience stores. Inflation only raises the price of these convenience store products and forces black shoppers to travel farther for groceries, which means they are subject to rising gas prices, he said. -he declares.
“If prices paid by white households increase by 7% year-on-year, our calculations suggest that they can be expected to increase by 7.5% for black households,” the study notes. of example.
A devastating disparity
The disparity leaves many black people without funds to help offset rising consumer prices and puts greater pressure on their monthly income, economists say. Some economists worry that if lawmakers don’t act quickly to fight inflation in other ways, black families could be forced to go without necessities as the threat of another recession looms.
“It’s going to be extremely devastating,” said William Darity Jr., a professor of public policy, African American studies and economics at Duke University. “People will have to make very, very tough decisions about whether or not they should buy medicine or buy food or forgo paying for their utilities. This will have adverse effects on people’s well-being.
Darity said the country’s wealth gap has made it difficult for black families to maintain financial savings or transfer wealth across generations, as many white families have been able to. He said racist policies such as redlining and depriving former slaves of the lands they were promised have historically left black Americans behind.
How Inflation Hurts Black America
Minimum wage workers are poorer. Wages are rising at their fastest rate since the 1980s, but they are still not keeping up with inflation. With prices rising so rapidly, minimum wage workers are poorer than they have been in decades. According to the US Bureau of Labor Statistics, 3% of minimum wage workers were black Americans in 2018.
Inflation tends to hurt workers. Black Americans make up 13% of the US workforce, according to the US Bureau of Labor Statistics. As inflation rises, black America is hurt.
Inflation inequalities reinforce economic disparities. With inflation inequality, prices can rise faster for those with lower incomes. In low-income areas, goods experience rising prices because there is no incentive for innovation and competition to bring prices down.
Fewer opportunities to become a homeowner. Economists say home ownership is an important way to help close the racial wealth gap. Black home ownership fell to 43% in 2017, wiping out all the gains made since the Fair Housing Act was passed in 1968. Now, due to inflation, the statistics will be even more dire. With the home sales boom slowing and house prices rising, new homes are unaffordable for many people.
Median household wealth
Blacks – $24,100
Whites – $188,200
Blacks – 42%
Whites – 73%
*Data courtesy of the Brookings Institution
Dealing with inflation
If rising costs are hitting your budget, here are some tips to help you cope.
Mind Your Money
Knowing how much you spend each month is essential. Take the time to write down how much you spend day to day. This will help you see what’s coming in, what’s going out, and what unnecessary expenses you could cut.
Budgets often reveal expenses that can be eliminated entirely or impulse expenses that can be avoided through planning. When it comes to cutting expenses, evaluate every item you buy and ask yourself, “Is this an item you need or want?” »
Save, even if it’s $5
The more you can reduce non-essential expenses, the more you can save. It’s not possible for everyone, but Gene Natali, co-founder of Troutwood, an app that helps people create financial plans, says budgeting is ideal to save enough to cover basic necessities. for three to six months.
Programs such as America Saves, a nonprofit campaign of the Consumer Federation of America, can help create a roadmap. Keep an eye out for monthly fees or service charges that could eat into your savings. But don’t limit your options. Online banks sometimes offer better rates than traditional banks.
Consolidate and curb lending
As interest rates rise, experts recommend consolidating your loans into one fixed-rate loan and, if you can, paying off as much of your debt as possible. But paying off your existing debt is easier said than done. The Federal Trade Commission’s consumer advice guide to “getting out of debt” can help you develop a plan. With high interest rates, now is also not the best time to take out new loans for big expenses like cars, although experts recommend that if you need durable goods like vacuum cleaners, stoves or dishwashers, you buy them as soon as possible to avoid future price increases.
Since the pandemic, many companies have updated their relief policies and become more flexible with users, according to Kia McCallister-Young, director of America Saves.
Calling monthly service providers to negotiate bills — whether it’s utility, phone, cable, Internet or car insurance — can lead to significant savings, McCallister-Young said. Individuals can ask for the best rate, any available discounts, rebates or coupons may result in a reduction in the monthly fee. If a supplier competes with other businesses, there’s an even greater chance of getting a discount, she added.
Check out federal programs such as the Low-Income Home Energy Assistance Program, which helps cover bills, and Lifeline, which can help pay phone bills.
Change grocery store
Grocery shopping with a meal plan, buying generic rather than branded products, or buying in bulk are some of the Consumer Federation of America’s recommendations.
“A lot of stores have price matches, so if you show them a competitor is selling the same product at a lower price, they’ll match that,” McCallister-Young said. “You also want to look at the stores closest to you, so you don’t spend the extra money you would save on gas.”
Get community help
If you are food or housing insecure, look for nonprofits or community organizations near you. From housing assistance and food banks to help with utilities, nonprofits across the country can help. National organizations such as Feeding America host food banks in all 50 states.
What is the Inflation Reduction Act?
Senate Democrats recently passed the Cut Inflation Act of 2022 to combat the rising costs of inflation. Vice President Kamala Harris cast the deciding vote for the 755-page legislation, which included a failed provision proposed by Sen. Raphael Warnock (D-GA) that would have capped the cost of insulin products at $35 per months for those with private insurance.
Essentially, it is not a bill for 2022, but rather for 2023 and beyond, according to economic officials. This is to help the Federal Reserve fight persistent inflation.
“Although imperfect, the Inflation Reduction Act is a step forward. It is troubling that seven senators blocked the cap on insulin costs for people with private insurance. Although diabetes affects far too many black Americans, the Cut Inflation Act will allow the government to negotiate prescription drug prices, continue to subsidize Obamacare and invest in clean energy,” said the NAACP in a statement.
Yet despite the bill’s rocky journey and numerous compromises, some victories have a direct impact on African Americans.
Reduce the cost of prescription drugs
In the area of health reform, the bill aims to make prescription drugs more affordable, but there are some limitations. The federal secretary of health will be able to negotiate the prices of certain expensive drugs for Medicare each year. But it won’t impact all prescription drugs or all patients, and it won’t take effect soon. Negotiations will take effect for 10 drugs covered by Medicare in 2026, increasing to 20 drugs in 2029.
Fight against climate change
More than $300 billion would be invested in energy and climate reform, the largest federal investment in clean energy in US history. This includes addressing environmental racism in communities of color.
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