Confirmed – inflation hits the poor worst

New analysis from the Resolution Foundation shows that inflation for the poorest 10th of households has hit double digits, standing at 10.2%. It is now significantly higher than the 8.7% rate experienced by the richest 10th of households – itself a high level in historical terms. The disparity has widened as poorer households spend a greater share of their income on energy. The 1.5% gap is the highest on record, placing it above the last period of significant food price inflation, in the early 2010s.

Which is, of course, one of the reasons to be against inflation. Because the poor suffer more from it than the richer.

As opposed to a fairly common view out there, which is why not have a bit of inflation if it means that we get to play with more newly minted money?

14 thoughts on “Confirmed – inflation hits the poor worst”

  1. I’d even query the 8.7% rate. For someone like myself where food, energy & fuel expenditure is a relatively small part of my spending compared with services, my personal inflation rate’s in minus figures. Other people are cutting back in that area so less demand & falling prices. If past experience is anything to go by, I won’t move into positive numbers for at least another six months.
    For the poor, inflation always arrives quicker & higher.
    But quelle surprise. Economic policy has long favoured those with assets & debt. At the expense of savers & the working poor. It’s just more of the same.

  2. The bottom 10% as a bloc are different and often brought up to justify caring about the poor and isn’t the situation awful.
    My one and only time I was captured by the Labour Force Survey was during a 4 month period of unemployment living on savings. My tax rate was over 100% of income, as VAT on purchases was greater than a bit of dividend income, but that’s the data they wanted and it feeds into the statistics.

    The Resolution Foundation really should look at inflation for Universal Credit claimants, or at the 10% of the population with the lowest consumption.
    The 10% with the lowest incomes as captured by the Labour Force Survey is borderline useless.

  3. Anyone know what the mean time preference rate for money is? I can find endless articles discussing it & yes I know each individual’s is different. Like inflation rates.

  4. In theory that mean time preference rate should be the interest rate. The real one, not the central bank one. Because that’s what the interest rate is, the expression of the time preference.

  5. Exactly, Tim. But interest rates are not set by people’s time preference. They’re set by governments. So what’s the difference in the figures in numbers? Or is this a number that economists prefer not to collect? I can see why they wouldn’t. It would be a reason for a mass cull of economists.

  6. Possibly something closer to the hurdle rate, or the cost of capital. There are indeed economists who mutter, sotto voce, that these are much closer to real time preferences. 5 to 7%, that sort of level.

    In fact, large parts of the Stern Review are given over to exactly this calculation. Of course he then says that this isn’t good enough, peoples’ actual time preferences shouldn’t be used to guide policy. But that is what his calculation is all the same…..

  7. 5+ is roughly what I suspected. So interest rates less than TP + inflation are a net transfer from savers to borrowers. And they’ve been less for how long? Not surprising we’re in the shit we are.

    Let’s be honest. Macroeconomics, like wider economics, is an interesting & useful subject. But neither can predict with any useful accuracy. As such, your arch enemy Spud is no different from the Nobel prize winners. They’re all fucking useless. The only debate’s about the degree of damage they can cause. So the “reputable” ones get listened to are the more dangerous.

  8. “In fact, large parts of the Stern Review are given over to exactly this calculation. Of course he then says that this isn’t good enough, peoples’ actual time preferences shouldn’t be used to guide policy.”
    So what you’re saying is, as far as Stern’s concerned, ignore the facts when they don’t support the outcome you desire. Or in other words, on that basis the entire Stern Review’s a pack of lies. So why do you give it any credibility?

  9. Because my argument is always “Even if you believe all this then the answer is still…… “

  10. Look it’s a basic principal, Tim. If people are talking bollocks, never discus the thing on the basis of the bollocks. You’re only validating the bollocks.
    That’s how we’ve ended up in the shit over this whole climate change boondogle. The mistake was accepting the principal of the idea on so little evidence, right at the start. Once that was done, there was an incentive to “discover” more & more “evidence”. Because it was rewarded by more research grants.
    Ditto macroeconomists. Why take seriously people who are reliably wrong?

  11. Look it’s a basic principal, Tim. If people are talking bollocks, never discus the thing on the basis of the bollocks. You’re only validating the bollocks.

    This. It’s similar to way tax “avoidance” was increasingly accepted to be a bad thing. Because too many people far too casually ceded the language to those, like spud and others, who had their own political agendas.

  12. Right, PF. The correct response would have been “Then show me the guilty verdicts for tax evasion” Otherwise the debate’s qualitative not quantitative, which is subjective not objective. You will not convince them. They will not convince you. So why bother? It’s a game you can only lose.

  13. “You will not convince them. They will not convince you.”

    You might convince the people they are trying to convince.

  14. Well said, Bongo.
    The bottom “income” decile in all the ONS stuff includes most of the students with no income, only loans, and businessmen (mostly self-employed) with negative income. So we regularly (I suspect invariably) have the amount of money spent on VAT-able items by the bottom 10% exceeding the net aggregate income of said 10%. So it would seem that 10% spent less than nothing on food, rent, public transport, books, newspapers and children’s clothing.

    [Blair, or more probably Brown, decreed that the statistics should exclude students living in halls of residence and servicemen in barracks but include students in digs or flats and servicemen in married quarters, which – purely coincidentally – flattered the economic performance of “New Labour”.

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