A new study by the Federal Reserve Bank of New York highlights how surging gas prices are disproportionately affecting lower-income households, exacerbating economic inequalities. The research, released Wednesday, shows that households earning less than $40,000 a year increased their gas spending by just 12% in March, primarily by cutting consumption by 7%. In contrast, high-income households (earning over $125,000) raised their spending by 19% while reducing consumption by only 1%. This stark contrast underscores a "K-shaped economy," where wealthier Americans continue to thrive while lower-income groups struggle.
Core Findings
The study, conducted by researchers Rajashri Chakrabarti, Thu Pham, Beck Pierce, and Maxim Pinkovskiy, reveals that inflation has risen 28% since March 2020, while average hourly earnings have grown only 30%, leaving wages effectively flat. Energy prices have surged 56% in the post-pandemic economy, further straining lower-income families. Federal Reserve Chair Jerome Powell has repeatedly emphasized that inflation disproportionately impacts those least able to afford higher prices.
Broader Economic Context
The "K-shaped economy" phenomenon has been a defining feature of the post-Covid period. Wealthier Americans have benefited from surging asset values in stocks and real estate, while lower-income groups have seen significantly less growth. The study also notes that middle-income households fall between these two extremes. The disparities in gas spending patterns were more pronounced in March 2026 than during a similar price shock in 2022, when government stimulus programs helped lower-income households more.
Policy and Long-Term Implications
The research suggests that the current era of inflation, which has exceeded the Fed's 2% target for the past five years, has deepened economic divides. The study's findings raise questions about the effectiveness of existing policies in addressing these disparities and whether additional measures are needed to support lower-income households during periods of high inflation.