As Inflation Hits Home in Yakima Valley, YVC Economics Instructor Says It May Hit Rural Areas Hardest | Business

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While inflation is a complicated issue debated around the world by economists, politicians and CEOs, its effects are dealt with daily by the people of Yakima Valley.

In fact, it can be argued that inflation affects rural residents more than residents of large cities, for several reasons, Hector Saez-Nunez, an economics professor at Yakima Valley College, told the Yakima Herald-Republic.

“Rural populations have lower incomes than city dwellers. Therefore, they can least afford higher prices,” Saez-Nunez said. “This is especially true for Latinos, Native Americans and other people of color because they have lower incomes.”

Rural residents tend to have larger and older homes than urban residents, requiring more energy to cool in the summer and heat in the winter, Saez-Nunez said. Inflation affects these energy prices like any other commodity.

And because rural residents travel longer distances, usually without using public transport, they are hit hard by rising fuel prices, he added.

The Federal Reserve announced year-on-year inflation rates of 7.5% last month, the highest level in four decades. This percentage, known as the Consumer Price Index, measures the change in prices of products that Americans typically buy or have to pay for, Saez-Nunez said.

“There is no CPI calculation specifically for central Washington,” he added. “Actually, the CPI is a city-centric measure; more people live in urban areas of the United States, where incomes are higher. Therefore, the CPI samples more people in urban areas.

Local impact

Although CPIs are not available for Central Washington or the Yakima Valley, they are available by region, and the Western United States had a slightly higher 12-month Consumer Price Index of 7.7 % in January 2022, according to the US Bureau of Labor Statistics.

This probably comes as no surprise to anyone who has been to a gas station, grocery store, or restaurant recently.

Several business owners declined to talk about inflation when contacted by phone or email by the Yakima Herald-Republic this week, but Chris Brown, president of Wray’s Marketfresh IGA sites in Yakima and Selah, said price increases are hard to miss across all businesses.

“We’ve been dealing with it for a few years,” Brown said. “It’s mostly meat and produce that has gone crazy over the past two years, but now we’re seeing it with groceries – canned and packaged goods. They face freight issues and other challenges – we see this throughout the store. »

While Brown and his employees hear a lot of grumbling customers, he said most understand that inflation is something beyond the control of local business owners.

“We sometimes get a few comments, like ‘Wow, that’s expensive’, but not a huge number,” he added. “I think everyone understands (inflation) is something we all face.”

The rising prices we’re seeing in stores and other local businesses stem more from economic supply than from the drastic increase in demand, noted Saez-Nunez, who holds a doctorate in his field.

“Companies are struggling to produce, as they struggle to source imported inputs from abroad,” he said. “Many overseas input-producing enterprises have been shut down by COVID-19.”

Transportation and shipping

Saez-Nunez also noted the effect of the pandemic on transportation, which has caused shipping delays for companies that no longer have large product inventories.

“Large shipping containers have left China and other parts of Asia to deliver personal protective equipment to parts of the world that don’t have much to sell in Asia,” Saez-Nunez said. “So the shipping containers are stuck there.”

When it comes to food, the pandemic and resulting transportation issues aren’t the only issues affecting price increases.

For example, hay prices have skyrocketed in recent years due to persistent drought conditions in the western United States, which affects the cost of livestock, Saez-Nunez noted.

Regarding the situation at Wray’s and other Yakima retailers, Brown noted that a lack of available workers and the configuration of Washington state’s minimum wage are causing employers to pay more for labor. , and these additional costs are reflected in the prices.

Federal statistics show wages are rising nationwide at the fastest rate in at least 20 years, The Associated Press reported earlier this month, which may prompt companies to raise prices to cover higher labor costs.

Saez-Nunez said the biggest “winners” from inflation have been energy companies, large commodity conglomerates selling basic necessities and pharmaceutical companies.

“Amazon made a killing, as did Pepsico and Procter & Gamble,” he added.

Seniors on fixed incomes tend to fare worse than working-age consumers, whose wages will in theory rise with prices.

“Retirees who rely on Social Security receive a cost-of-living adjustment, but for many, Social Security was never enough (to cover expenses),” Saez-Nunez said. “Wealthier retirees might fare better.”

Agriculture

Finally, Saez-Nunez said farmers and those in the agriculture industry face a mixed bag of impacts from high inflation. While they may receive higher prices for crops at harvest, the costs of producing those crops, from labor to supplies, are also higher.

“Price increases can affect producers more than consumers, like a spike in fertilizer prices,” he said. “These increases may be passed on to consumers, but the effect is less because they are diluted in more goods.”

Saez-Nunez said he looked at the producer price index, which, like the CPI, is also generated by the Bureau of Labor Statistics.

“It should be noted that the prices of chemicals used in agriculture have increased dramatically, by around 50% in 2021, after having slightly decreased in 2020,” he said. “Agricultural machinery prices have come down somewhat, partly because farmers are reluctant to buy new equipment.”

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