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Inflation has been hard on everyone, and rural America is the next victim as more residents have considered a move to the cities to ease the financial strain.
According to Iowa State professor Dave Peters’s analysis, inflation has profoundly affected rural communities.
Peters found that while rural Americans’ earnings increased by 2.6%, expenses increased by 9.2%.
The report on rural households
Dave Peters’ report indicates that rural Americans feel the weight of inflation more than the rest of the country.
“Rural households are more vulnerable to inflation,” the report said. In 2020, rural household post-tax incomes stood at $58,012.
About 82% of rural incomes went towards expenses, leaving $10,661 in discretionary income for savings and unanticipated expenses.
However, by 2022 expenses rose by 18.5% overall. Earnings were not able to keep pace with inflation, rising by only 6.1%.
The net effect cut rural discretionary incomes by -49.1% between June 2020 and June 2020, reducing the cushion to only $5,426. Expenses now consume 91% of rural take-home pay.”
Read also: Analysts Say a Heavy Recession is Needed to Combat Inflation
Where it hurts most
Peters’ report indicates that rural communities are facing the same problems as people in cities, pointing to fuel prices.
“Mainly, fuel prices, particularly among the farmer and agricultural community,” he explained.
“They really are worried about the price of gas and diesel.”
Last June, inflation soared to a four-decade high, affecting all American households.
According to Peters, travel was one of the primary sources of problems.
“Rural people have to drive long distances for work, for school, for health care, just to get the daily necessities of life like groceries – there is no public transportation,” he elaborated.
Read also: Inflation Is “Unacceptably High” but the White House Retains That the Country Is Not in Recession
Other affected areas
While Dave Peters’ analysis revealed that rural households pay $2,500 more a year for gasoline than they did in 2020, it also showed prices for health insurance, veterinarian care, and fuel to heat homes were rising.
“Most rural homes have to buy tanks of liquefied petroleum or liquefied propane, or they have to get fuel oil,” he added.
“And those have really risen in costs as well; that’s, I think, something like $1,000 more.”
Davis Peters’ warnings
Peters issued a warning, saying that if the prices stayed high too long, it could start a dangerous cycle for some rural Americans.
He says that it will start with people taking from their savings – something that is currently happening.
People will then use their money on essential goods before going into debt on credit cards.
However, Peters expressed greater concern about the idea that rural America will start taking out home equity lines of credit due to the increased value of their homes, especially in the Midwest.
He also warns that such a strategy could backfire.
“That’s particularly dangerous if home prices fall back down and then they’re left with a mortgage that the value of their home doesn’t cover,” said Peters.
Moving into the cities
With factors piling up, Peters speculates that some people will be driven to consider moving closer to cities.
“There are people that I’ve talked to in Iowa and in Nebraska… that are really trying to do that financial calculation,” he said.
“They would love to work and get city wages, but they can’t commute. It’s too expensive with the gas prices. And really, the thing that’s holding them back is the cost of homes.”
“Some people are contemplating moving closer to a city, moving to the suburbs, or moving to a small community 45 minutes from a city,” he added.
“So yeah, it will probably, if it continues, accelerate rural depopulation in parts of the Midwest and Great Plains.”
References:
Inflation is crushing rural America and may even drive people to the cities
Inflation is hammering rural America, report shows
Opinions expressed by NY Weekly contributors are their own.
