Share of Americans Experiencing ‘Severe’ Hardship From Inflation Hits Record High: Gallup

People shop for groceries at a supermarket in Glendale, Calif., on January 12, 2022. (Robyn Beck/AFP via Getty Images)

A record-high share of Americans have told polling firm Gallup that they’re experiencing hardship from inflation that is so severe that it’s impairing their ability to maintain their current standard of living.

Gallup’s most recent poll on the duress of inflation felt by American families showed that a majority (55 percent) said in November that rising prices have caused them some financial hardship, though not enough to jeopardize their living conditions.

That’s down slightly from 56 percent in the prior measurement taken in August, but up from the two prior readings of 49 percent in January of this year and 45 percent in November 2021.

At the same time, the share of Americans who said inflation has caused them “severe” financial hardship—understood as serious enough that it has affected their ability to maintain their current standard of living—rose to 13 percent in November. That’s the highest reading to date, with the prior ones coming in at 12 percent in August, 9 percent in January, and 10 percent in November 2021.

Gallup first started asking the inflation-related questions in a poll in November 2021, so the data series is relatively short and doesn’t capture previous inflationary spells.

“The fact that Americans’ self-reports of financial hardship are leveling off rather than declining is likely a reflection of just how much prices have risen over the past year, and how much further inflation needs to subside before most Americans no longer feel burdened by it,” Gallup said of the survey’s findings.

Two other records fell in this edition of Gallup’s inflation poll. Both the share of lower-income and upper-income Americans reporting some financial hardship rose to their highest levels in the brief history of the data series.

Vast Majority of Lower-Income Americans Experiencing Hardship Due to Inflation

Gallup said 77 percent of lower-income Americans reported in November that price increases had caused them financial hardship. That’s up from 74 percent in August, 66 percent in January, and 70 percent last November.

The share of upper-income Americans expressing the same view has risen steadily, from 28 percent last November to 32 percent this January, 40 percent in August, and 42 percent in November, the highest reading to date.

The share of middle-income Americans reporting financial hardship due to inflation edged down from 63 percent in August to 60 percent in November.

Inflation in the United States, as measured by the Consumer Price Index (CPI), eased to an annualized 7.7 percent in October, down from 8.2 percent in September, according to the latest data from the Bureau of Labor Statistics (BLS).

Some analysts argue, however, that the BLS understates the true pace of inflation, citing factors like a lag in housing costs being reflected in the government’s CPI measure.

Alternative Inflation Measures

An alternative CPI inflation gauge developed by economist John Williams, calculated according to the same methodology used by the U.S. government in the 1980s, puts October’s inflation figure at an annualized 15.9 percent, more than double the official figure.

Williams views the current BLS methodology for calculating inflation as a flawed measure of how members of the general public experience changes in their cost of living.

“Individuals look to the government’s CPI as a measure of the cost of living of maintaining a constant standard of living, as well as measuring that cost of living in terms of out-of-pocket expenses. Without meeting those parameters, an inflation measure has limited, if any, use for an individual,” Williams wrote in a note elaborating on his theory.

“Where the CPI at one time met those parameters desired by the public, government efforts turned the CPI away from measuring the price changes in a fixed-weight basket of goods and services, to a quasi-substitution-based basket of goods, which destroyed the concept of the CPI as a measure of the cost of living of maintaining a constant standard of living,” he said.

Williams’s alternative CPI gauge has its critics. This includes economist Ed Dolan, senior fellow at the Niskanen Center, who, for example, said in a detailed blog post that while he backs Williams’s view that the current BLS methodology understates inflation, he believes Williams’s numbers are “implausibly high.”

Dolan argues that due to a range of factors, a more plausible rate of inflation could be arrived at by subtracting 2.45 percentage points from Williams’s number, which would put October’s inflation rate at a still-high 13.45 percent.

Williams said he doesn’t believe the government is deliberately falsifying inflation data to mislead the public. Rather, he thinks the BLS has adopted a methodology that understates the inflation rate in order to reduce inflation-indexed transfer payments such as Social Security benefits.

The BLS has issued a detailed defense of the way it calculates inflation (pdf), in which it disputes claims that it undercounts inflation while acknowledging that the CPI “is not, and can never be, a perfect index” and that the agency “must always be working to enhance” the measure’s accuracy.

What Caused Inflation to Soar?

There’s been much debate about what caused the recent inflationary wave that has swelled into a cost-of-living crunch for many American households.

Some—including many members of the Biden administration—have chiefly blamed supply-side constraints like pandemic-related supply chain disruptions. Others—including many Republicans—have pointed the finger at unprecedented levels of fiscal spending and the Federal Reserve’s ultra-easy money policies that sent demand soaring.

There also have been heated discussion about the persistence of inflation, with initial views that it would be transitory gradually giving way to the obvious reality that inflation has become far stickier and more difficult to quell.

A team of economists, including one from the Federal Reserve Bank of New York, said in a recent study (pdf) that between 2019 and 2021, inflation was mostly caused by a stimulus-fueled surge in demand.

Julian di Giovanni, the New York Fed economist and one of the study’s co-authors, explained in a blog post that 60 percent of the inflationary bout was due to a jump in demand associated with federal stimulus.

While supply-side constraints, such as labor shortages and supply-chain bottlenecks, have also contributed to pushing inflation higher, di Giovanni said these were “made worse by the push arising from increased demand caused by very expansionary fiscal and monetary policy.”

In the face of persistently high inflation, the Fed has embarked on an aggressive monetary tightening cycle, raising interest rates at the fastest pace since the 1980s.