2008 June 09 Monday
Rural Folks Hardest Hit By High Oil Prices

Poor folks in rural areas have to drive farther and have less money for gasoline.

The disparity between rural America and the rest of the country is a matter of simple home economics. Nationwide, Americans are now spending about 4 percent of their take-home income on gasoline. By contrast, in some counties in the Mississippi Delta, that figure has surpassed 13 percent.

As a result, gasoline expenses are rivaling what families spend on food and housing.

“This crisis really impacts those who are at the economic margins of society, mostly in the rural areas and particularly parts of the Southeast,” said Fred Rozell, retail pricing director at the Oil Price Information Service, a fuel analysis firm. “These are people who have to decide between food and transportation.”

A survey by Mr. Rozell’s firm late last month found that the gasoline crisis is taking the highest toll, as a percentage of income, on people in rural areas of the South, New Mexico, Montana, Wyoming and North and South Dakota.

To a certain liberal reader who debates with me a lot in the comments: Instead of a simple minded welfare state that simply hands out money to poor people wouldn't it make more sense to offer poor people funding for moves that would put them closer to their jobs? Basically evacuate the poor people out of rural areas to put them nearer factories, slaughterhouses, and other places where they can work. Lower their cost of living.

For poor people in rural areas of colder northern states what would help is moves to apartment buildings in small sized cities. Heating would be a lot cheaper if they shared walls since shared walls reduce heat loss. Also, higher density living would reduce their need to drive to stores.

Americans on average now spend about 4 percent of their after-tax income on transportation fuels, according to Brian A. Bethune, an economist at Global Insight, a forecasting firm. That compares with 4.5 percent in early 1981, the highest point since World War II. At its lowest point, in 1998, that share dropped to 1.9 percent.

The early 1981 peak was very sharp and short-lived as compared to the rise in oil prices we are currently experiencing. Also, oil prices today haven't peaked yet and won't peak for some years to come.

Check out this interactive map of percentage income going to transportation fuel. Those areas with high percentages are going to hollow out as world oil production declines.

The rise in oil prices is even tougher to handle as it is accompanied by a rise in food costs.

"Some Americans have the luxury of an elastic expenditure -- they'll switch to hamburger when the price of higher quality meat goes up," said Kinsey, a professor and co-director of CFANS Food Industry Center. "But, if you're living in poverty to start with, a rise in food cost can be devastating to your lifestyle."

Kinsey found that Americans in the lowest income class (those who earn a household income of less than $10,579) spent an average of 31.5 percent of their income on food in 2005 and 33 percent in 2008, a 1.63 percentage point increase. At the other end of the spectrum, those in the highest income class (those who earn a household income of over $167,525) spent an average of 6.8 percent of their income on food in 2005 and 7.2 percent in 2008, a 0.4 percentage point increase.

Note that food production costs rise with higher energy costs. Peak Oil will make both energy and food less affordable for the poor especially.

Update: These rising food and energy costs come at a time when median income has been dropping.

From the end of the 2001 recession through last year, median household income fell almost every year even as the economy expanded and individual workers became more productive. The most recent official data indicate that in 2006, half of all families made more than $58,407 and half made less. That compares with an inflation-adjusted peak of $59,398 in 2000.

This financial stall marked the first time since World War II that the typical family was worse off at the end of an economic expansion than at the start, according to the Economic Policy Institute (EPI), a left-of-center think tank in Washington, D.C.

"This is the first business cycle on record where the median family income failed to recover its previous peak," EPI economist Jared Bernstein says. "It's been a uniquely disappointing cycle from the perspective of the median-income family."

But rising transportation costs combined with a declining dollar will reduce competition from workers in developing Asian countries. So the big rise in incomes at the top end might moderate as they become less able to shift their labor demand abroad.

Share |      By Randall Parker at 2008 June 09 10:48 PM  Economics Energy


Comments
guest said at June 10, 2008 6:17 AM:

Instead of a simple minded welfare state that simply hands out money to poor people wouldn't it make more sense to offer poor people funding for moves that would put them closer to their jobs? Basically evacuate the poor people out of rural areas to put them nearer factories, slaughterhouses, and other places where they can work. Lower their cost of living.

The article argues otherwise. These are sparsely populated areas where the cost of living is very low but there are few productive jobs (thus commuting costs are high), so working less and living off welfare and food stamps is a sensible choice. Some of these people will move to urban manufacturing centers, but since their productivity is going to be quite low no matter what, it makes sense to let them live in more remote areas if they so choose.

Podunk said at June 10, 2008 11:30 AM:

If you live in a rural area and don't hunt, find or grow lots of your own food, you're crazy. It is better and costs much less than anything from the store even if gas was $0.99 a gallon. But let's be honest about it. It is mostly rural whites who are suffering. And I have no doubt certain groups in this nation are happy about that.

"Basically evacuate the poor people out of rural areas to put them nearer factories, slaughterhouses, and other places where they can work."

Those places hire poor whites these days?

Nervous said at June 11, 2008 6:25 AM:

This is off topic, but everyone should know about this. Black mobs have attacked whites in a MI town:

http://spartanspectator.blogspot.com/2008/06/hunting-season-for-whites.html

I am urging whites to arm themselves and be aware. This kind of thing is going to become pretty common, especially the closer we get to the election.

Ned said at June 11, 2008 12:09 PM:

I used to think that Mount Clemens was a fairly safe area - far enough away from central Detroit to be secure. I guess times have changed. Towns like Mount Clemens used to be the kind of place that middle class folks (black and white) moved to to get away from the free-fire zone that is midtown Detroit. The black population of Mount Clemens was around 20% in the last census. Detroit is a massive sinkhole, still not recovered from the riots about 40 years ago. Factories are gutted, houses are abandoned, stores are closed. It is much closer to Third World dungheaps such as Johannisberg, Lagos or Nairobi than to other American cities. I almost never go there - it's just too dangerous. The Detroit city government is corrupt and incompetent and just sucks money out of Lansing and Washington with little to show for it. The mayor is a completely dishonest buffoon (detroitiscrap.com). I live in a semirural area in western Michigan - very little crime, very few minorities (wonder if there's a connection - nah, just coincidence). I think you are going to have a very tough time getting poor rural folks from Michigan to move to Detroit, even if you let them live there for free (there certainly isn't any new job creation going on in Detroit to lure them there).


Post a comment
Comments:
Name (not anon or anonymous):
Email Address:
URL:
Remember info?

      
 
Web parapundit.com
Go Read More Posts On ParaPundit
Site Traffic Info
The contents of this site are copyright ©