BEYOND SIMPLE INFLATION: WHY THE MIDDLE CLASS PAYS THE HIGHEST PRICE

Abstract

Who suffers most when prices rise? Conventional wisdom suggests the poor bear the heaviest burden of inflation, but new evidence from Armenia tells a different story. Using detailed price data across 12 major spending categories, this study reveals that middle-income households experienced the highest price increases over 2019-2025, facing 49% cumulative inflation compared to 38% for low-income and just 27% for high-income families. The middle-class inflation penalty intensified during global supply chain disruptions, with transport costs rising 133% and housing expenses climbing 120%. This combined pressure threatens Armenia’s democratic development, as middle-class stability traditionally supports democratic institutions. These findings challenge standard inflation-targeting policies that focus only on average price changes while ignoring how different groups experience vastly different economic realities. Armenian policymakers need new approaches protecting the middle class through targeted interventions while redesigning social programs to account for group-specific price pressures.