Income Level and Inflation Strain in the United States: 1971–1975

Walter F. Abbott

American Journal of Economics and Sociology, 1981, vol. 40, issue 2, 97-106

Abstract: Abstract. Estimates of net inflationary effects in the United States from 1971 to 1975 are attempted by income level. The central concept is inflation strain, or the difference between the percentage change in prices and incomes as a percentage of change in incomes. Trends in prices are derived from United States Bureau of Labor Statistics data on lower and higher family budgets, admittedly subject to significant error, but the best we have. Equivalent income trends are estimated from data reported in the P‐60 series of the United States Bureau of the Census. Two findings are indicated. The first is that both higher and lower budget families experienced inflation strain, although the strain, of course, was substantially greater for lower budget families. The second finding is that the primary source of strain for the lower budget families was food, whereas the primary source of strain for the higher budget family was taxes, both income and Social Security taxes. The richer are getting poorer more slowly than the poor. Limitations of the techniques and data are analyzed.

Date: 1981
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