Uneven Impacts Across Society
The cost-of-living crisis, while broadly felt, does not affect everyone equally. Different income groups, age cohorts, regions, and types of workers are experiencing it in markedly different ways. Generally, it has hit the most vulnerable populations the hardest – exacerbating inequality – but the nuances are worth examining:
Income groups: Lower-income households devote a larger share of their spending to essentials like food, energy, and rent, which have seen some of the fastest price increases. Consequently, inflation acts like a regressive tax on the poor. In the U.K., as noted, the poorest fifth of households faced an effective inflation rate several points higher than the richest fifth in 2022 (12.5% vs 9.6%) because basics (heating, groceries) dominate their budgets. For wealthier households, such essentials are a smaller fraction, and they also often had savings or assets as buffers. Moreover, high earners may have more scope to cut discretionary luxuries when prices rise, whereas low earners have no choice but to pay for necessities. This dynamic has meant a sharp rise in poverty and material hardship indicators: e.g., food bank usage soared, and surveys found millions of low-income families skipping meals or unable to heat their homes. Humanitarian groups warned of families having to choose between “eating and heating.” In contrast, some higher-income households, while not happy about inflation, could cope better – some even benefited from higher interest rates on savings or had wage increases through negotiation.
Middle class squeeze: It’s not just the very poor – middle-income working families have also felt a squeeze, especially if their wages didn’t keep up. Many dual-income households that consider themselves “middle class” report that after paying for housing, childcare, food, fuel, etc., they are left with little or are dipping into savings. This is particularly true in high-cost areas (like London, New York, San Francisco, etc.) where even a solid income can be eaten up by rent or mortgage. These households may not qualify for means-tested government aid, so they feel on their own. The phrase “running to stand still” has been used to describe how even wage growth has left middle earners barely treading water after inflation.
High-income individuals: Generally, they have more insulation. They often have investments which, until 2022, grew robustly (stocks, real estate). Even though 2022 saw market dips, many could absorb higher prices by reallocating spending. They might switch to cheaper brands or delay a big purchase, but they’re not choosing between essentials. However, some high earners also saw bonuses or stock-based pay shrink with market downturns, so certain luxuries saw demand drop (for example, luxury real estate cooled in some places as the pool of rich buyers thinned). But relative to others, the wealthy have been least impacted in their living standards. In fact, some benefitted: those owning multiple properties enjoyed rising rents, energy company shareholders got big dividends from windfall profits, etc.
By age: The generational impacts are quite distinct:
- Young adults (20s–30s): They often rent and have lower incomes early in their careers, so high rents and student loan payments are a huge burden. They also may be starting families, confronting those massive childcare costs. This generation is also the one largely priced out of homeownership in many countries, as discussed; a Millennial in the U.K. is half as likely to own a home by age 30 as a Boomer was. So they are paying high rents (making someone else rich) instead of building equity. The cost-of-living crisis has led many young people to delay life milestones: moving out later, marrying or having children later (some citing cost as a key reason). In the U.S., surveys show a significant share of Millennials and Gen Z moved back in with parents or took on side gigs to cope with expenses. On the flip side, the very tight labor market of 2021–2022 was a boon for some young workers who could job-hop for higher pay. But inflation stole a lot of that thunder. Youth have also been active in labor movements (e.g., many strike actions have young leadership) pressing for better pay to meet living costs.
- Working-age (40s–50s): This group often has the highest absolute expenses – raising kids (education costs), possibly supporting elderly parents, mortgages, etc. Many are middle or higher in their careers, so incomes are higher than in youth, but they also are the “sandwich generation” juggling multiple cost pressures. For example, a 45-year-old couple might be paying a mortgage, saving for kids’ college, paying for after-school childcare, and noticing groceries and utility bills sharply up. They might have some wealth or assets, but also big obligations. If wages stagnate, this group feels they are falling behind relative to their aspirations. That can fuel political discontent, as seen in many countries where the middle-aged middle class feels their children will be worse off.
- Retirees (60s+): Impacts vary. Those on fixed incomes (like a pension not indexed to inflation, or just savings) are hurt by inflation eroding their purchasing power. For instance, in the U.S., Social Security is indexed to inflation (with a lag), so retirees got a big COLA (cost-of-living adjustment) of ~8.7% in 2023, which helped mitigate inflation. In the U.K., the state pension had a triple-lock guarantee, resulting in a large increase (over 10%) in 2023, keeping pensioners fairly whole. However, many pensioners have other sources (like annuities or private pensions) that might not fully keep up. And retirees tend to spend a lot on heating (if living in older homes) and medical needs – areas where inflation hit hard. In the U.K., it was noted that those over 80 had a higher effective inflation (15% at one point) due to energy. That said, retirees who own their homes outright were shielded from housing cost inflation and even benefited from rising home values. Some also had significant asset wealth that grew in the pre-2022 stock boom. So within retirees, there’s a split: those with assets fared better, those relying solely on modest fixed pensions struggled (there were stories of elderly people riding buses all day to stay warm and avoid heating bills at home, highlighting extreme measures to cope).
Urban vs. rural: The geography of the cost-of-living crisis is complex. Urban areas usually have higher housing costs, which is a huge factor. So city dwellers, especially renters, felt the housing squeeze more. Big cities also saw sharper inflation in some cases (e.g., rents in New York or London skyrocketed post-pandemic recovery). Rural areas, conversely, often have cheaper housing but longer travel distances – making them more vulnerable to high fuel prices. A person in a rural town might have a lower rent or mortgage, but if gasoline is $5–$6 a gallon, they pay a lot to commute or to access services. Also, rural areas tend to have lower average incomes and higher poverty rates, meaning less cushion. Food and energy inflation in percentage terms hits them similarly, but in absolute terms, rural incomes are lower to start. Some rural areas also have fewer alternatives (e.g., no public transit, few grocery stores to shop around for deals, limited childcare options so parents might pay more or have to stop working). Regional disparities are notable: in Europe, countries like the Baltic states had inflation over 20% (partly due to energy dependency), whereas places like Switzerland had <3%. Within countries, poorer regions often saw a bigger relative shock from energy/food since those loom larger in their consumption.
Employment type: Workers in secure, unionized, or indexed-wage jobs fared better, as they could negotiate or automatically receive inflation-adjusted raises (though often with a lag). For example, union contracts in some sectors included COLA clauses, so those workers’ pay rose somewhat in line with inflation. Public sector workers without such protection often did not – hence strikes by nurses, teachers, etc., who saw, say, a 3% raise against 10% inflation. Gig economy and contract workers often have incomes that are not keeping up with inflation, since rates they can charge (or that platforms pay) haven’t necessarily risen proportionately. Many gig workers also have to pay their own fuel (for rideshare drivers, delivery couriers), so high gas prices hit them doubly – increased operating costs with perhaps only minor fare increases from the platform. Small business owners faced a margin squeeze: higher input costs and sometimes pressure not to raise prices too much or risk losing customers, so many took income hits. In contrast, workers in high-demand sectors (tech in early 2022, or energy industry jobs) might have gotten ahead with bigger raises or bonuses.
Renters vs. homeowners: We covered housing, but to reemphasize: Renters have no hedge against housing inflation, they just pay it. Many homeowners with fixed-rate mortgages actually saw their housing costs fixed while inflation raged (so in real terms their mortgage cost fell). This made homeowners relatively better off during high inflation – unless they had to refinance or were on variable rates (as in the U.K. where many mortgages are 2-5 year fixed, so re-mortgaging in 2023 was extremely costly for some). New homebuyers in the past two years face both high prices and high interest – the worst of both worlds. So there’s a divide even among homeowners: earlier ones locked in low rates and gained equity; recent ones face huge monthly payments.
Families with children vs. without: Families, especially those with young kids, face the triple whammy of housing, childcare, and more mouths to feed/clothe. We discussed childcare costs – that alone can equal another rent or mortgage. If you have two preschoolers, you might be paying the equivalent of a second mortgage in childcare fees. Those without children, or empty nesters, don’t bear that cost. Thus, parents of young kids are often under extreme financial pressure right now, even if they are “middle class” by income. This also intersects with gender – high childcare costs often force mothers (more than fathers) to reduce work or drop out, affecting female labor participation.
Immigrants and minorities: In many countries, immigrant or minority communities have lower average incomes and higher poverty rates, meaning they too are disproportionately hit by rising living costs. They may also face specific challenges like sending remittances (which became costlier in real terms if their local currency fell, etc.) or not accessing all social benefits due to status. There have been concerns, for example, that ethnic minority households in the U.K. are more likely to be in fuel poverty, given income disparities.
In the U.S., inflation actually narrowed some racial economic gaps briefly because low-wage jobs (often held by minorities) had faster wage growth for a period, but that was short-lived as inflation eroded gains. At the same time, Black and Hispanic households typically have fewer assets to hedge inflation (like lower homeownership rates), so they have less protection and are more vulnerable to evictions or financial distress from cost spikes.
The societal effects of these uneven impacts are significant. We’re seeing higher rates of industrial action (strikes) as workers try to catch up with costs. There’s growing political pressure for support (e.g., windfall taxes on energy firms to fund subsidies, calls for minimum wage hikes – both U.S. and U.K. have enacted or are considering substantial minimum wage increases). Social cohesion can be tested as well – when shoplifting of essentials rises (the U.K. recorded a 22% jump in shoplifting in the year to Sept 2022), it’s a sign of economic strain fueling desperation. Charities and community organizations have been stepping in to fill gaps, but many report being overwhelmed by demand (food banks in developed countries have never been busier).
Another angle: Psychological stress and health. Surveys in mid-2022 found the majority of people worried frequently about rising costs (77% of U.K. adults said they felt worried, with 50% worrying nearly every day). This constant stress can harm mental health. Indeed, charities reported people’s mental health suffering; tragically, there have been anecdotes of even self-harm related to financial stress among some youths. Medical professionals warn that when heating becomes unaffordable, cold homes can worsen illnesses; when diets suffer due to food costs, health deteriorates. So the crisis also poses a public health risk, disproportionately affecting vulnerable groups (elderly in cold homes, kids in food-insecure households).
In summary, the cost-of-living crisis is deepening existing inequalities. The pain is sharpest for the poor, the young, renters, those in low-paying or unstable jobs, and families with dependents. Conversely, some segments (wealthier, older homeowners, etc.) are more cushioned – though not entirely immune. This uneven impact has informed calls for targeted relief: e.g., increasing welfare benefits in line with inflation (to protect the poorest), raising minimum wages or tax credits for working families, and giving specific aid like fuel vouchers or food support to those most in need. Many governments have indeed targeted payments to low-income groups (like the U.K.’s £650 low-income payment, or U.S. one-time stimulus checks earlier). Yet there’s debate about whether enough has been done to prevent a lasting increase in inequality.
If the crisis continues without adequate policy response, we risk a scenario where, for a large subset of society, basic living standards regress – more children growing up in poverty, more elderly people in hardship, and a frustrated working middle that feels the system isn’t delivering for them. That, in turn, can fuel populist politics and social unrest, something policymakers are surely aware of. Indeed, inflation’s political impact is well-known; it often spells trouble for incumbent governments. How different groups fare in this crisis will likely shape politics and policy in the years ahead.