Economic Tidbits

The Town Mouse and the Country Mouse

The Town Mouse and Country Mouse in Aesop’s fable discovered they lived vastly different lifestyles. The fable was written hundreds of years ago, but the differences in lifestyles between urban and rural America still exist. Because of this, inflation affects rural and urban households differently. An Iowa State University rural sociologist, David Peters, examined differences in the effects of inflation on rural and urban households. He did this by linking inflation rates on specific goods to spending patterns by rural and urban households. Urban households were defined at those in metropolitan areas or those in non-metro areas in cities of 2,500 or more.

Peters says expenses for rural households have risen 18.5 percent this year. Urban households have seen expenses rise 14.5 percent. The difference between rural and urban households is largely due to the costs of fuels and used vehicles. Peters writes rural people “are paying $2,470 more for gasoline and diesel fuels than they did two years ago.” In contrast, urban households have experienced greater increases for rented apartments, housing expenses, and food consumed away from home relative to rural households.

The different effects of inflation on rural and urban households are most evident with discretionary incomes—the dollars remaining after bills are paid. Because rural households have lower incomes, household expenditures make up a greater share of income leaving less discretionary income. Incomes have risen since 2020, but less than inflation. Thus, inflation-adjusted income has declined, meaning less discretionary income remains for households. Peters calculates inflation has cut discretionary income for rural households by 49 percent. Urban households have experienced a decline of 13 percent.

The Country Mouse in Aesop’s fable decides a quieter, rural life is to be preferred. Most rural Nebraskans would probably agree. However, tradeoffs to the quieter life exist and this year the effects of inflation are one of them. To read Peters’ article, go to: https://smalltowns.soc.iastate.edu/wp-content/uploads/sites/163/2022/07/STR1063.pdf

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