In the case of inflation, the poor and the middle class are getting poorer and the rich are getting richer. What is the reason?

Question

WindAtMyBack · Accepted Answer

People like to say, "The rich get richer and the poor get poorer". Except that it's not true. The rich get richer The "poor" also get richer. Or at least that's true in the US, and I assume lots of other places. Worldwide the middle class is the fast growing demographic.

The super wealthy are super wealthy because the average person has gotten so rich. Look at Bill Gates for example. Why did he get so rich? Because billions of people had enough disposable income to buy luxuries like personal computers. But ultimately Gates got wealthy because of his stock in Microsoft. The value skyrocketed because so many normal people had enough money to invest in the stock market, which is what ultimately creates the super wealthy.

So basically the super rich are a sign that things are going very well for the average person.

As for inflation specifically, it depends on which aspect of inflation. There are a bunch of different inflation rates, which measure different things. For example Social Security increases use CPI-W = Consumer Price Index - Clerical Worker. The "basket of goods" they use to calculate CPI-W are supposed to be representative of how a lowish income workers spends their money (lowish income, but not poor). So housing and food would carry more weight, than a high income person.

So if inflation hits the housing and food markets particularly hard, then the lowish income people would also get hit harder than others. Someone with an even lower income would get hit every harder, since the percentage spent on food and housing goes up.

Lately that has been the case. Housing and food have skyrocketed. But on the other hand, the lowest wages have also skyrocketed.

In the end, the poor get richer. People today, at all income levels, have a considerably higher standard of living than when I was young. When I was young we had a considerably higher standard of living than when my parents were young.

Anonymous · Accepted Answer

Inflation can affect different socioeconomic groups differently. The perception that the poor and the middle class are getting poorer while the rich are getting richer during inflation is rooted in several factors:

1. Income Disparities: The wealthy often have investments in assets like stocks and real estate, which can appreciate in value during inflation. They can also afford financial instruments that provide hedges against inflation. In contrast, the poor and middle class may rely more on fixed incomes, wages, or savings accounts, which may not keep pace with rising prices.

2. Consumer Spending: Inflation can erode the purchasing power of individuals, especially those with limited disposable income. The poor and middle class might cut back on spending, impacting their quality of life, while the wealthy can better absorb price increases.

3. Policy Responses: Government policies and central bank actions can influence the distribution of wealth. Economic policies that aim to combat inflation, such as raising interest rates, can sometimes have unintended consequences, affecting different income groups unevenly.

4. Asset Ownership: Wealthier individuals tend to own assets that appreciate in value over time, while the poor and middle class may not have the same opportunities for asset accumulation, which can exacerbate wealth disparities.

It's essential to consider that the impact of inflation on different groups is complex and can vary depending on regional and individual circumstances. Policymakers often strive to address these disparities through measures like social safety nets and progressive taxation.

OfMiceandMen · Answer

I think the rich make the rules and that's just how it plays out. The majority of people who are rich like to stay that way, so if they make a product or sell a service, they pay their staff low wages to collect more of the profit themselves.

It's been like that for eons. You may come across some business owners that see the value in treated their employees well, but not often. To the rich, employees are just a pain in the ass revolving door of positions that keep needing to be filled. That's why they employ HR people to take care of that part of the business.

Astarlessnightsky · Answer

Inflation devalues money, eg. when you could buy groceries for a week for 100bucks last year, this year it cost you 102bucks the next year 104bucks.

Problem is: wages usually stay the same (unless you go on strike and get a raise) so if you struggled before, you struggle more and more.

Rich people aren't affected by it (or not as much) because..

... they got so much money, they don't notice some 2%~4% increase in prices.
... they can raise prices for the stuff they sell even more.
... they can fire people to reduce cost for their enterprises.
... they can whine like a little baby and get money from the government.
... they act globaly so inflation in one country doesn't bother them.
... debt get also less, as the money losses value, so they even profit from it (all people do, but most poor and middle class people don't profit as they struggle too much deciding wether they want to pay rent or eat food.)

RavVid · Answer

Mostly people assume the rich get richer. It is not a bad assumption because rich people can adapt to economic circumstances better. Sell in the booms and buy in the crashes. If you don't much money you may be scared to buy in crashes and believe the booms will last for ever.

exitseven · Answer

The poor and middle class have to spend a larger percentage of their income on household goods that have more than doubled in price since Biden became president. Rich people can invest a larger percentage if their income and since interest rates are higher they get greater returns.

pickles77 · Answer

Poor people make money to spend money and rich people reinvest their money to make more money. So the rich always become richer and the poor always give it away. As the consumer we can choose what we are willing to purchase and the rich can also choose there selling price to offset inflation but it all depends what people are willing to put up with. If we don’t buy the prices have to go down

BCA6010 · Answer

"The rich get richer and the poor get poorer" happens all the time no matter what the economy is doing unless you start forcibly taking away wealth. Inflation  always  hurts more the lower your income is.

Joshydavid25 · Answer

I don't think the Middle class and poor are getting poorer.. I think everybody's getting a little richer, and that inflation is a separate thing.. And eventually it makes everybody poorer Except the ultra wealthy..

Anonymous · Answer

Because the poor spend then invest
The rich invest then spend

I'm getting richer every day and nothing makes me sing like inflation because that fattens my pocket
COVID doubled my business and I had to operate via a postal system

BLP11520 · Answer

Wages are not keeping up. Employers are either not giving raises or small ones a that. I know first-hand several people quitting or have recently quit for this reason.

Hispanic-Cool-Guy · Answer

The ultra rich set up the system and exploit those at the bottom.  You hardly become very rich unless you are exploiting others.

Alex8736 · Answer

Politicians forgetting the term WE THE PEOPLE vs "Do as I say not what I do"

ChicoFromThe305 · Answer

Greed is the reason Joanna.

FunkyMonkee · Answer

Greed on the part of democrat leaders.

AngryCarl2 · Answer

Um, it's called Capitalism.

DWornock · Answer

The Federal Reserve owns the USA.

In_Trance · Answer

segregation and control

Harmony1010 · Answer

You have kids?

riverrat3 · Answer

Greed

In the case of inflation, the poor and the middle class are getting poorer and the rich are getting richer. What is the reason?

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