Inflation Helps the Poor

In a study sponsored by the University of Wisconsin's Institute for Research on Poverty, economists Robinson G. Hollister and John L. Palmer pose the counter-intuitive argument that inflation can actually be beneficial to the poor. Their research shows that given a welfare income, the typical rise in welfare dispersements matches the rise in inflation. This analysis was further justified by calculating a new index based not on purchases of the middle class but by expenses incurred by those under the poverty line. However, those facts merely establish that life does not change during inflation. Hollister and Palmer's thesis states that when inflation creates a labor shortage, full-time jobs open for people willing to accept lower wages that would normally be working either part-time or not at all. Unfortunately, their findings show that these benefits are only temporary, lasting until the inflationary period decelerates.

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