Inflation and the Rising Cost of Identity Affect Consumerism

Aug 2, 2022 | Finance, Our Thinking, Values

By Whitney Donaldson

Those with money to spend are key players in a heavily consumer-centric and consumption-driven society. When inflation throws a wrench in people’s expectations, and everyday routines and habits (especially buying), many are forced to rethink their relationship to the things they own, the things they want, the stores they visit, and the capitalistic system in general.

The current 9.1% inflation rate is making some of the most relied upon goods more and more expensive and out of reach, causing many to make in-the-moment concessions:

  • Buying gas less frequently to lessen the cost impact
  • Eliminating bacon from the shopping list
  • Trading a full gallon of milk for a half gallon
  • Switching to generic store brands

In addition, larger, more infrequent purchases are increasingly not made, a behavior that inadvertently inflames price points. For example, many are holding onto their cars and homes longer because they can’t afford to make a switch. This impacts the inventory for housing and cars, and in turn continues to drive up prices, contributing to even higher inflation.

inflation at the grocery store

Inflation Inequality

But obviously, not everyone is impacted in the same way. Consumers’ income level and specific needs (car, daycare, etc.) play a huge role on the extent to which inflation wreaks havocs on their bank accounts. The highest income earners are continuing to indulge, while lower income earners focus increasingly on what’s needed. Lower income earners are feeling more of the burden; as their dollar covers less fuel, food, and housing, they have already whittled down expenses and are likely going more without some necessities. This continues to expand the gap, in many ways, between the haves and have-nots.

Two examples of inflation inequality include:

  • Fuel prices. The more privileged can invest in electric cars to offset fuel costs (as seen by waiting lists and close to zero inventory available), while those with less income dedicate an even higher percentage of their earnings to gas. Hourly wage workers are adding more hours to their schedule to cover fuel expenses.
  • Housing. Those who owned homes before 2020 have largely been insulated from inflation-driven impacts on housing. If anything, they likely benefited from low interest rates and equity gains, while those who rent or are on the market for a home find themselves particularly squeezed and unable to exit the cycle.

In most economic systems, price inflation impacts more than simply what we can buy or not.  Identity seems to be at the crux of many inflation-driven spending decisions—both tradeoffs and trade ups—confirming or strengthening how people see their role(s) in life and their values. People spend time and money shaping their identities through the brands they’re loyal to, the products they buy, the stores they frequent, and even the way they shop – even if they don’t always realize it. By forcing trades, inflation is forcing our relationship with consumerism to change.

RELATED: Impact of Pandemic Hits Personal Finances

How Inflation Impacts Conscious Consumption

The latest economic and cultural forces have emphasized more conscious consumption where people spend on items and experiences that more closely align with the core values that make up their identity. While some decisions are made for pure survival, people are likely weighing their options according to a core value they hold. Indeed, the cost of not only products and goods are increasing, so too is the high price of identity.

Questions we’re asking as we try to unpack the underlying effects of inflation:

  • What does this mean for individual and collective identities as people reframe their relationship to consumption and redefine their contributions to it?
  • Will our collective purchasing power still be used to represent ‘us’? Will brands continue to be used as badges – will we continue voting with our dollars or using goods and products as a way to signal status, support change, etc.?
  • As we become more conscious in our decisions, will there be a shift in who or what we rely on, e.g. communities, companies, or government?

We’re still in the throes of the inflation crisis, witnessing it all unfold. Only time will tell how the short-term impact of inflation compounded with the lingering effects of the pandemic and wider awareness of social issues will shape the long-term outlook of consumerism in our own system.

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