A recent study from Iowa State University (ISU) Extension shows rural households are disproportionately affected by inflation, and disposable incomes have shrunk this year.
The study shows disposable incomes for rural households—those in nonmetropolitan areas in towns with fewer than 2,500 residents or in the open countryside—decreased 49.1 percent from $10,661 in 2020 to $5,426 in 2022. About 82 percent of rural incomes went to expenses in 2020, rising to 91 percent in 2022, and earnings rose by only 6.1 percent during the same time period.
David J. Peters, ISU Extension rural sociologist and professor, told Iowa Public Radio it’s a significant drop, which means people in rural communities are less prepared to cover unexpected expenses.
“(You may have) a health care issue that costs extra money. You get a reduction in your hours or have a big home repair that you didn’t plan for,” Peters said. “Any kind of these unexpected expenses—that’s (less than) $6,000 to cover that.”
The study showed the most significant expense for rural households has been the increase in gasoline and diesel fuel. Rural people paid $2,470 more in fuel expenses than they did two years ago. Fuel costs rose by $839 in 2021, then by an additional $1,632 by June of 2022. Home heating fuel and propane gas also rose by $434. The cost of owning a home, including mortgages, insurance and maintenance, rose by $398. Electricity rose by $311 since 2020, with almost all price gains happening this year.
Urban residents—those living in a metropolitan area or in cities of 2,500 people or more—saw a less significant drop in disposable income. Urban disposable income dropped 13 percent from $16,414 in 2020 to $14,270 in 2022. During those two years, expenses rose more slowly at 14.5 percent, but earnings for urban workers rose by 8.6 percent. The biggest increases for urban residents were for rented and owned housing, gasoline, electricity, prepackaged and processed foods, and eating out at restaurants.
“Overall, inflation has severely reduced the disposable incomes of rural Americans, while the impact on urban households has been less severe because of higher incomes,” Peters wrote. “This means that rural families have less money to save for their retirement or their children’s college—both needed for the future economic security of themselves and their children.”
The latest Bureau of Labor Statistics Consumer Price Index showed the inflation rate increased 9.1 percent from a year ago, and the food index was 10.4 percent higher than the previous year.
The study noted the rate of inflation is dependent on the region. The northeastern U.S. had slower price gains of only 7.6 percent. Meanwhile, the southern U.S., particularly Louisiana and Texas, had an inflation rate of 10.6 percent. The study noted inflation was also a problem in the West but did not give a figure.
Peters wrote the current wave of inflation is worrisome due to how long rural households can withstand inflationary costs.
“If they’re for the long-term, then this becomes a big crisis for rural households,” Peters said. “That disposable income cushion makes them really vulnerable to debt and bankruptcy.”
Peters stated that low-income and retired people are vulnerable to the added expenses, which puts them at risk of increased debt. — Charles Wallace, WLJ editor
