Business: How Inflation Helps--and Hurts--the Poor

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Welfare Squeeze. In several respects, however, the Hollister-Palmer thesis remains debatable. Many poor may have obtained their first jobs during the current inflation, but many others have held low-paying jobs all along. There is little solid information on how they have fared. Sketchy federal surveys indicate that wages of variety-store clerks and cleaning women in Atlanta and Philadelphia have risen faster than consumer prices in recent years. Andrew Brimmer, a member of the Federal Reserve Board, suspects that more complete figures—which no one collects—would disclose that the wages of many other poor workers have fallen behind.

There is no guarantee that welfare benefits will continue to outpace price inflation. The inflation-squeezed middle class is raising an increasing clamor about the cost of welfare, and many politicians are listening. In New York City, welfare benefits were cut back by the state legislature an average of 8.5% in July. One welfare rights organization figures that a typical welfare recipient now has only 66¢ a day to spend on food; in Harlem, it costs almost that much to buy a quart of milk and a loaf of bread.

Ghetto Gougers. Many of the poor contend that gouging ghetto merchants have posted bigger price increases than the storekeepers who serve the middle class. "We have our own kind of inflation here," says Mrs. Vivian Taylor, a community worker in East Harlem. "On [welfare] check day, the first and 16th of each month, food prices are up. If 5 Ibs. of sugar was 59¢ the day before, it's sure to be 79¢ on check day." Samuel Meyer, 86, a wheelchair-bound resident of Manhattan's Lower East Side slums, finds food prices up so sharply that he can no longer make his $70-a-month welfare benefits pay for a nightly soup of chicken wings and vegetables. He now makes his soup from vegetables only.

Hollister has lately conceded that inflation may help the white more than the black poor because it is harder for the latter to obtain jobs even in times of labor scarcity. He calculates that 61% annual rate of price increases, which the U.S. exceeded in some months of 1969, hurts poor whites as well.

Despite gaps in their statistics, Hollister and Palmer have swept away some economic cobwebs. Their findings add to the growing body of evidence that the nation's biggest economic dilemma is how to mesh full employment with price stability. The U.S. needs to find a more effective way of aiding its poor than simple economic expansion. The poor's gains may be only temporary, and inflation reduces the living standards of the seven-eighths of the population that do not live in poverty.