Skip to Content

Who is most hurt by inflation?

Inflation has been on the rise globally, hurting consumers and changing spending habits. As prices rise, purchasing power declines and consumers must make difficult choices on what to buy or forego. But inflation does not impact all groups equally. Here we explore which groups tend to be most negatively affected by high inflation.

Low Income Households

Inflation hits lower income households the hardest. Those with lower incomes spend a larger portion of their earnings on necessities like food, housing, transportation and healthcare. When the prices of these goods rise rapidly, it takes up a larger share of their budgets. Wealthier households have more room in their budgets to absorb higher prices on essentials before feeling strained. Low income households quickly run out of room and may need to make very difficult tradeoffs.

Food and Gas Prices

Two areas where low income families feel inflation acutely are food and gas prices. These households spend a larger portion of their budget on groceries and driving to work than higher earners. Rising food and gas prices quickly lead to financial stress for low income families. Some must choose between putting food on the table, getting to work, or paying other bills. There are few good options.

Rent Increases

Many low income households also rent their housing. When rents rise quickly in an inflationary environment it also hits these families hard. Since shelter is a necessity, rent increases force difficult tradeoffs in household spending. Some may need to move farther away from jobs, commute longer distances, or sacrifice food and healthcare to pay rent.

Those on Fixed Incomes

Another segment hit hard by inflation are retirees and others living on fixed incomes. When inflation is high, the buying power of fixed income sources like Social Security, pensions, annuities, and savings accounts declines substantially. Someone living solely on Social Security would have seen their monthly check buy a lot less as prices spiked in 2022. With little ability to increase incomes, rising costs quickly eat into the budgets of fixed income households.

medical costs

Retirees tend to spend more on healthcare than other groups. Medical care inflation has consistently exceeded overall inflation for many years. So when general inflation rises, medical price increases hurt fixed income seniors the most. More of their budgets get consumed by surging healthcare costs, leaving less for food, housing, and other needs. Cost related non-adherence to medical treatments also increases.

Depleting Savings

Another way high inflation hurts seniors is depleting the buying power of their savings. Someone living partly off interest income sees that income lose value as prices rise. Seniors also tap savings and retirement accounts more. But the same sized withdrawal buys fewer goods and services. Rising inflation can threaten to prematurely deplete a retiree’s nest egg.

Savers and Investors

Beyond retirees, high inflation also hurts those relying on savings accounts, fixed income investments and pensions. When inflation outpaces interest rates and returns, the real buying power of this income declines. Someone living off fixed income investments finds their standard of living reduced as that income purchases fewer goods and services.

Interest Rates Lag Inflation

Interest rates on savings accounts tend to lag behind inflation. This steadily erodes the real return and buying power of savings. Investors turn to higher return assets to try to offset inflation. But these carry more risk. And returns may still fail to keep pace with rapid price increases, slowly eating away at principal.

Unexpected Costs

Another way inflation impacts savers is increasing the cost of unexpected expenses between paychecks. Many depend partly on savings to cover unplanned costs like car repairs or medical bills. But with inflation high, those costs will be higher while savings earn little. This increases the odds of debt or hardship during emergencies.

Government Benefits Recipients

Recipients of government assistance and benefits also disproportionately feel the impact of high inflation. Programs like Social Security, Medicare, Medicaid, SNAP/food stamps, disability payments, and housing assistance provide essential support for many vulnerable groups. But when inflation rises, the real value of benefits declines substantially.

Benefit Increases Lag

While many government benefits increase with inflation, those increases tend to lag meaningfully. They may only be adjusted once per year and utilize inflation measures from months earlier. When inflation accelerates quickly, benefits can lose buying power. This leaves recipients unable to afford basic needs.

For example, the 2023 COLA increase for Social Security payments was 8.7%. But inflation in 2022 exceeded that amount. So the buying power of those benefits still declined, hurting seniors and disabled recipients.

Struggling to Make Ends Meet

Declining real benefits force impossible choices for recipients already living paycheck to paycheck. Some must choose whether to pay for food, rent, medicine, and other basics. High inflation pushes more people onto government assistance while eroding its real value for those already dependent. This increases hardship and debt for society’s most vulnerable.


Inflation does not impact all groups equally. Lower income households, those on fixed incomes, savers, and government benefit recipients tend to be most negatively affected. Their limited budgets give little room to absorb across-the-board price hikes before facing hardship. While no one likes high inflation, some segments of society can endure it far less. Those struggling paycheck to paycheck get hit hardest.