The Consumer Price Index surged 6.2% from October 2020, leading to the highest inflation rate since 1990. This increase may prove to affect UCCS students and recent graduates.
Congestion in the supply chain, limited production and the labor shortage has contributed to the inflation rate, leading to higher housing, food and energy costs. Inflation concerns the currency’s buying power and reflects a rise in price for commonly used goods.
Tatiana Bailey is the director of the UCCS Economic Forum in the College of Business. She said two primary inflation mechanisms would affect students — the rising cost of goods and less buying power from entry-level positions.
Bailey said that the rising inflation especially affects students who are in the lower-income brackets. She said, “A 6.2% inflation rate is pretty high for somebody who’s on a fixed income, or who is in a low-income bracket as most students are.”
The three major commodities that affected inflation were housing, energy and food. Bailey said, “We’re edging towards $1,500 per month for renting an average two-bedroom apartment in Colorado Springs, and we’re only about $150 to $200 less expensive than Denver.”
She warns students who are transferring to the workforce soon to be prepared to face the consequences of inflation.
Bailey explained, “Let’s just say you’ve got somebody who’s graduating in December, and they’re looking for a job starting in January. Well, typically, they’re going to come in at an entry-level, right? And let’s just say that their entry-level position is $50,000 a year. Decent starting salary, but if you think about it, 6% of that off the top is coming off just because of the price increases.”
Bailey advised students to prepare to enter the workforce by making themselves as employable as possible. She recommended students use UCCS and community services to review their resumes and take internship and volunteer opportunities for experience.
The cause of inflation is multifaceted. Bailey explained that a combination of increased demand and limited supply and the ongoing labor shortage are to blame for the price increases.
She said that once the pandemic began, prices decreased since there was limited demand. However, once stimulus checks and other government programs began distributing money to citizens, there was a surge in demand. Since production was limited due to restrictions, prices began to increase.
The recent bottlenecks in the supply chain have affected prices, even for U.S.-based businesses, since many of the materials they use are imported from overseas.
However, Bailey credits the labor shortage as the most concerning factor, as she believes it will ensure the inflation rate remains above the average of 2%.
“[The labor shortage is] the one that I’m more worried about because if we don’t have enough workers, upward pressure on wages is going to continue, and wages are sticky,” she said.
The labor shortage is not just due to low wages but also due to the skill gap in critical fields. Bailey publishes an economic dashboard each year for the Pikes Peak region where she lists the top ten available jobs every year. She found that the same jobs remain on her list each year.
“We have hundreds and hundreds, sometimes even 1,000s of the same jobs open over and over and over again, month in, month out. And why? Well, because we’re not training people for the jobs of today. And that alone has created a shortage and that skill gap that I’m talking about.”
Bailey continued, “So that labor shortage, I believe, is the main reason that we’re not going to go back down to one and a half percent inflation anytime soon.”
She said a critical way students can help with inflation is by participating in the workforce. This will help alleviate some of the stress businesses are experiencing and benefit the student with the current higher wages.
“Participating in the labor force not only helps the labor force as a whole and the business, but it also helps the student because right now, guess what, wages are a lot higher. And particularly in hospitality,” Bailey said.
Until the supply and labor shortage issues are resolved, Bailey expects inflation to stick around.