The rise in wages for low-income Americans is no match for the rise in US gas prices

Inflation has been a one-two punch for Americans. Russia’s invasion of Ukraine disrupted global oil markets sending gasoline prices skyrocketing. As the average price reaches $4.32 per gallon this week, Americans have cut back on travel, and even started paying for gas in installments.  At the same time, rents are steadily increasing as people return to cities driving up demand and rents to record heights. In cities like New York and Miami, rents went up 25% or more within a year.

The hardest hit are the roughly 53 million low-wage workers earning around $24,000 annually. For them, this is just the latest round of price hikes that have seen their purchasing power plummet in the past year. While hourly wages rose 5% in 2022, the growth hasn’t kept up with inflation. A new analysis from The Urban Institute, a policy think tank, shows rents in the typical metropolitan area went up 15% this year compared to a year prior. Even before the conflict in Ukraine, gas prices were up nearly 30% from February 2021.

Today’s gas crisis highlights structural challenges

Yonah Freemark, a senior researcher at Urban Institute who compiled this data, points out low-income Americans have the fewest options for housing and transportation. People living in poverty are more likely to rent their homes than own, and are less likely to live in an area with robust public transportation.

“The problem with both rent and gas is the extreme variability in price,” says Freemark. “For people who are low-income especially, that variability can mean the difference between being able to go to school and work or not, or the ability to live in their community or being forced out and displaced. Policymakers need to figure out a way to reduce the variability of these costs, and two good ways to do that are rent stabilization policies and better public transportation options.”

Shortterm fixes are possible. Freemark suggests emergency rent assistance, rent control, and expanded federal housing subsidies. For transportation, public transit agencies can cut fares (a step New Zealand recently took) and states have proposed suspending fuel taxes (although industry analysts say most of these savings won’t reach the public).

Lasting solutions mean policy changes. Taming gas price volatility, argues Freemark, will require a major reorientation of US policy and infrastructure away from cars and towards an embrace of public transit. Stabilizing housing prices means building more housing to meet increased demand. While this is no easy feat — housing construction costs went up 15% last year — economists and housing scholars largely agree that changing zoning and land use laws to allow for more housing density can spur construction and increase the overall housing supply in US cities.

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