So far this year, the uneven growth of the items making up the consumer price index (CPI) has deepened the regressiveness of inflation, i.e., their condition to hit to a greater extent those who allocate a greater share of their income to consumption.
Thus, while spending on food, drink and clothing it accounts for almost half (44%) of the spending of the poorest 10% of householdsin the 10% of the richest families these two items explain less than 20%, less than half.
A recent report by the consulting firm Ecolatina recalls that despite the notable acceleration that inflation had in 2022 (it went from 51% to 95% year on year), the inflationary process has not deepened its regressive bias. In other words, it affected the different socio-economic sectors in a more homogeneous way.
However, So far in 2023, this dynamic has changed and “in each of the first four months of the year, monthly inflation for the bottom deciles has been higher than for those with higher incomes, accumulating 33.1% for decile 1 and 30.7% for decile 10, quite a difference”, according to the consultant’s analysis.
Hence, the inflationary process it has become even more regressive so far this year: inflation of the poorest households is higher than that of households with higher incomes.
What does this answer? Mainly due to higher relative price dynamics of the food: While the General Level of the CPI rose by 32% in the first four months of the year, food and beverages increased by more than 41% (+9 percentage points).
For this reason, food and drink has accounted for nearly half of inflation in the poorest households so far (48.3%) this year, while for the richest decile the incidence was 20.4%. In higher income sectors, inflation was explained to a greater extent by higher increases in Education and Restaurants and Hotels (which stand 9.2 and 3.5 pp above the General Level, respectively), which weigh more heavily in the baskets of the wealthiest families.
In the same sense, the update of public service tariffs (gas, electricity, water and public transport) which has been carried out since the end of 2022 has a regressive component in terms of prices: its consumption is inevitable and represents a greater percentage of spending by low-income households (explains 15% of the basket of the first decile and 10% of the tenth).
“Although the social tariff is operative, to protect families in the first deciles, the “porosity” of the segmentation (families that do not register, lack of implementation) makes it a further problem for some low-income families”, reads the report . details.
Labor income, even more diverse
You can tell from the document that not only has inflation per decile moved unevenly, but that too earned income: In the first quarter, the nominal wage associated with low-income households grew by 1.1 points below that associated with higher-income households. In the interannual variation, the difference is more than 13 points.
Also, compared to Q1 inflation, it can be seen that real labor income is leading the way a loss for the lower 60%, while the last 4 deciles grew in real terms.
“This more favorable result for families with higher incomes is largely explained by the dynamics of public workers -in March their salaries grew by 16.3% per month according to INDEC-. If their performance had been equal to that of workers registered that month (+7.9 %), all deciles would have suffered a real loss of labor income in the first quarter,” he points out.
“As, low-income households have not only been hit relatively harder product of the acceleration of prices, but they were also the worst performers in terms of wages,” he warns. The result worsens if we consider the variation on an annual basis. present a real loss, which rises to almost -5% on average for the lower stratum -represented by the first four deciles- and is placed in the area of -1.3% on average for the higher stratum.
Charles Arterburn is a seasoned business journalist for News Rebeat, where he provides comprehensive coverage of the latest trends and developments in the world of finance and economics.