Inequality Widens in July as Inflation Weighs Heaviest on Those Least Able to Cope

Updated: July 27, 2022

The Morning Consult/Axios Inequality Index as of July 2022, based on an average of over 260,000 survey interviews per month.

 

Each month, Morning Consult conducts over 260,000 survey interviews on a wide variety of economic and financial topics, allowing us to precisely gauge how economic inequality is shifting in response to policy developments, business conditions and current events. This data is inputted into the Morning Consult/Axios Inequality Index.

Our economic inequality index is based on four indicators: consumer confidence, employment outcomes, employment expectations and financial vulnerability. When there are larger gaps between income groups on these indicators, the level of inequality rises. A full methodology and explanation of the index is available below.

Inequality Indicators for July

*The Index of Consumer Sentiment is a separate index that captures consumers’ views regarding current and future personal financial conditions and business conditions in the country as a whole. Higher numbers indicate higher confidence.

ANALYSIS OF THIS MONTH'S DATA

The Morning Consult/Axios Inequality Index rose from 5.54% in June to 5.94% in July, with a monthslong decline in consumer sentiment beginning to taper off among wealthier U.S. adults while falling further among those from lower-income households. Overall, the economic mood remains gloomy across the board, as prices continue to rise rapidly and fears of an economic downturn increase.

  • In July, Morning Consult’s Index of Consumer Sentiment among U.S. adults from households with annual incomes of less than $50,000 fell 2.7% from 75.1 to 73.0, while confidence among adults from households with incomes of $50,000 to $99,999 fell 2.1% from 76.5 to 74.9. On the other hand, confidence among those earning $100,000 or more improved 0.9% from 81.5 to 82.2.
  • For much of 2022, inflation and financial volatility have dampened the mood among high earners the most. The sharp decline in U.S. equity prices has reversed somewhat in the past month, helping ease downward pressure on those with higher incomes. However, prices continue to rise rapidly. Ultimately, inflation will weigh most heavily on those least able to cope, as rapid increases in the price of staples like food and housing erode real purchasing power.
  • The labor market, which has been a bright spot for the economy, is also starting to show cracks. In July, the share of U.S. adults who reported lost employment income rose from 10.9% to 11.6%, driven in large part by a sharp rise in lower-income workers reporting losses, which rose from 13.0% to 13.9%.
  • On the positive side, financial vulnerability — as measured by the share of U.S. adults who say they would be unable to cover their household expenses for a full month with savings alone — ticked lower in July. However, 30.9% of U.S. adults from households with annual incomes of less than $50,000 still said they would be unable to get by. Furthermore, less savings and, consequently, fewer alternatives to taking on debt to cover expenses have led lower-income adults to increase their credit utilization in the past year.

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CONSUMER CONFIDENCE

Consumer confidence is measured using Morning Consult’s Index of Consumer Sentiment, which captures consumers’ views regarding current and future personal financial conditions and business conditions in the country as a whole.

LEVEL OF INEQUALITY

The level of inequality in consumer confidence reflects the standard deviation of consumer confidence across low-, middle- and high-income adults.

Employment Outcomes

Employment outcomes reflect the share of adults who experienced a loss of pay or income during the prior month.

LEVEL OF INEQUALITY

The level of inequality in employment outcomes reflects the standard deviation of the share of adults who experienced a loss of pay or income across low-, middle- and high-income adults.

Employment Expectations

Employment expectations reflects the share of employed workers who expect to experience a loss of pay or income in the next four weeks.

LEVEL OF INEQUALITY

The level of inequality in employment expectations reflects the standard deviation of the share of employed adults who expect to experience a loss of pay or income in the next four week across low-, middle- and high-income adults.

Financial Vulnerability

Financial vulnerability reflects the share of adults who say they have only enough savings to cover less than a month’s worth of basic expenses, were they to lose their income.

LEVEL OF INEQUALITY

The level of inequality in financial vulnerability reflects the standard deviation of the share of adults unable to pay their basic expenses for a full month using just their savings across low-, middle- and high-income adults.

METHODOLOGY

Data Collection:

The Morning Consult/Axios Inequality Index relies on Morning Consult’s proprietary survey research capabilities to collect the four data series that feed into the index.

Monthly Sample Size (May 2020 – July 2022)

Index of Consumer Sentiment – 162,457

Lost pay/income tracker – 84,040

Employment expectations – 1,283

Financial vulnerability – 2,200

Index Calculation:

1. Convert daily and weekly values to monthly values. The index averages weekly values for the lost pay/income tracker and daily values for the Index of Consumer Sentiment to produce monthly values.

2. Convert Index of Consumer Sentiment values to net percentages. The Index of Consumer Sentiment is on a scale from 0 to 200 while the other three series are percentages that run from 0 to 100 percent. This difference in units prevents direct comparison of the four components and limits the ability to combine them into a single inequality index. In order to address this issue, the ICS values have to be reduced by 100 and divided by 100 so that they reflect net percentages.

3. Calculate each of the four components. Each of the component series is calculated by taking the standard deviation of the three values across the income spectrum. The resulting values represent the degree of variation or dispersion from the mean among low-, middle- and high-income adults. The higher the component value, the greater the inequality across income groups.

4. Calculate the overall index. The Morning Consult/Axios Inequality Index is an average of the four component values. The higher the index value, the greater the inequality across income groups.

FAQs

1. What is the Morning Consult/Axios Inequality Index?

The Morning Consult/Axios Inequality Index measures economic inequality across income groups on a monthly basis.

2.How does the Morning Consult/Axios Inequality Index define economic inequality?

The Morning Consult/Axios Inequality Index defines economic inequality in terms of consumer confidence, employment outcomes, employment expectations and financial vulnerability, each of which plays an equally important role in capturing the economic experiences of adults across the income spectrum.

3. Why is it important to measure economic inequality?

Traditional economic indicators provide limited insight into the ways in which different groups of adults are experiencing the economy, thereby increasing the risk of economic policies leaving behind certain groups of individuals.

Persistent or increasing economic inequality casts doubt on the fairness of America’s economic system and undermines the sustainability of economic growth.

4. How does the index compare to the Gini coefficient?

Unlike the Gini coefficient, the Morning Consult/Axios Inequality Index does not measure the distribution of income or wealth in the country. Rather, it measures the impact of income differences on driving differences in economic experiences.

5. How are Morning Consult and Axios planning on measuring and analyzing other forms of economic inequality not included in the index?

Morning Consult and Axios are both committed to measuring and analyzing additional forms of economic inequality not explicitly included in the index, including issues related to wealth disparities and intergenerational economic mobility. These additional forms of economic inequality exist not only across income groups, but also by race, ethnicity, gender, educational attainment and parental status, to name a few. Future monthly releases will highlight some of these additional disparities in economic experiences via special reports and analysis.

6. How is the data for the Morning Consult/Axios Inequality Index collected?

The Morning Consult/Axios Inequality Index relies on Morning Consult’s proprietary survey research capabilities to collect the four data series that feed into the index.

7. How should the index values be interpreted?

The values of the Morning Consult/Axios Inequality Index answer the question “how differently are U.S. adults with annual incomes below $50,000, between $50,000 and $100,000 and over $100,000 experiencing the economy?” The higher the index value, the more differently adults across the income spectrum are experiencing the economy.

8. How often will the index be published?

The Morning Consult/Axios Inequality Index will be published on a monthly basis during the last two weeks of the month.

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