The economic effects of the COVID-19 pandemic will not end soon and will have a negative impact particularly among Latino and African-American communities, both in the short and medium term, due to the costs of basic products and the consumption of energy and gasoline.
Inflation advances to its highest level in 40 years, going from 6.8% to 7%, due to the increase in household expenses, reducing salary gains.
The Bureau of Labor Statistics reported Wednesday that its inflation measure increased 5.5% in December, the fastest increase since 1991.
“The Consumer Price Index (CPI) showed that the energy index has risen 29.3 percent in the last year,” said Antonieta Cadiz, managing director for Latino Engagement at the Climate Power organization. “Specifically, in December the electricity index rose 0.3 percent, the same increase as in November.”
He added that this impacts all Americans, but for so-called communities of color the effect is greater.
“In the middle of winter with record temperatures and winter storms affecting the national territory, these increases will have a negative and disproportionate impact on the economy and quality of life of Latino households, who have an average load 24% higher than white households nationwide. ”, He warns.
The economist Alfredo Romero, associate professor in Economics at North Carolina A&T State University pointed out that the problem with inflation is that wages do not increase with prices, hence the direct impact on families.
“The problem is that you cannot anticipate by what percentage (inflation) will rise and it disproportionately affects different economic groups,” he warned.
Romero emphasized the increase cited by Cadiz in both electricity and gasoline.
“For Hispanic households, where the highest percentage of their budget is energy, then it means that either you are going to have to lower the thermostat or you are going to have to stop buying other things that are necessary for your subsistence or your well-being“Lamented the expert.
The federal government reported increases in the prices of cars, gasoline, food and furniture.
A medium-term problem
Inflation has become the main threat of economic recovery amid the coronavirus pandemic.
“Inflation is a surprise to the general public, as much as it was to the Federal Reserve,” acknowledged Romero. “The idea is that this inflation was going to be temporary … we can abandon that idea, it is not temporary”.
The economics expert added that Latino communities are already seeing the first effects, due to the increase in the basic food basket, such as meat, but that impact will be like a domino effect, since pockets will have a gradual damage.
He noted that eThe rise in prices will force families to take short-term measures, such as avoiding the consumption of certain products, such as soybeans are used instead of buying meat or chicken or people prefer to consume more rice or potatoes, but the problem with energy is there is no way to substitute and its cost is higher.
“You are going to stop buying things that are very expensive,” said Romero about a first reaction from the public. “But there is no substitute for being hot, there is no substitute for fire, there is no substitute for heating. Of course, you will have to continue consuming it and that is why the level of thermal insecurity in our communities is so high ”.
There are other effects of inflation, such as cuts to investment in services that help improve the competitiveness of the new generations, in addition to accentuating economic differences between social groups.
“There are people who are going to have to cut extracurricular activities for their children so that they are well or simply be able to go to school with a full stomach and with the required school supplies,” he said. “There is an impact in the short term with the rise in prices, but families will have an effect in the medium term and when interest rates rise and rents rise there will be an effect … that is why we say that this recovery will accentuate the economic differences between those who have and those who don’t ”.
President Joe Biden faces social and political pressure on inflation, as Republicans have maintained their criticism, despite the fact that it is a worldwide phenomenon.
However, in an official position, President Biden spoke of “a reduction significant “ that the economist Romero said he did not see.
“We are making progress in slowing the rate of price increase,” stated the Biden Administration. “At the same time, this report underscores that we still have more work to do, with price increases already too high and squeezing family budgets.”
Asked about that position of Biden, the economist dismissed that optimism: “I’m trying to see what you mean.”
“I do not see that inflation stops being a problem, until the issue of the pandemic is eliminated,” added Romero. “70 percent of the change in these prices is directly linked to the supply shock due to the pandemic and that is a global phenomenon.”
Romero pointed out that it is most likely that the Federal Reserve will increase interest rates on credit cards, which will have an effect on families, especially if there are not good levels of savings.
“Most likely, families have increased the use of credit cards, because with low interest rates there is more opportunity to withdraw them, but at the moment the interest increases, your interest payment to your cards will go up too ”, he advanced.