Subject: Wonkbook: The poor pay more for everyday purchases -- and it's getting worse, a new study warns
From: The Washington Post <[email-masked]>
To: [email-masked]
Date: Fri, 20 May 2016 10:42:05 -0400

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New research suggests inflation in the retail sector varies with consumers' incomes. (Chris Ratcliffe/Bloomberg News)
By Max Ehrenfreund
The poor often spend more on all kinds of things. Households that have less money to spare in any given week, for example, are forced to buy toilet paper and similar goods in small packages, increasing the prices they pay. In addition, poor families must rely on a whole range of alternative financial services, which might charge exorbitant fees and expose customers to serious risks.
New research suggests that these disparities might only be getting worse.
Xavier Jaravel, a graduate student at Harvard University, has been studying the prices people pay in the retail sector -- their everyday purchases at grocery and drug stores. He has found that prices are increasing by more than 2 percent a year on average for goods purchased by consumers with household incomes under $30,000, but by just 1.4 percent annually for those with incomes above $100,000.

While apparently small, that divergence -- if it continues -- would become hugely important in a relatively short period of time. After 20 years, for example, every dollar in the pocket of a poor consumer would be worth just 88 cents compared to what a wealthier consumer would be able to buy with it at the grocery store, given the differences in inflation and in both consumers' preferences.
Jaravel's research is preliminary, and his data includes only information on prices in one sector of the economy, excluding major household expenses outside of retail trade. All the same, the numbers are striking.
Read the rest on Wonkblog. 

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