Poor saddled with higher inflation rate

Inflation hits mostly the most vulnerable classes because of their specific patterns of consumption, a study published yesterday by the Bank of Greece concludes. «The Redistributive Effects of Inflation in Greece» by Stavros Zografakis and Theodoros Mitrakos, economists at the central bank’s Economic Research Department focuses on inflation during the period 2000-2004, a time when the inflation rate, although rising faster than the European Union average, was at its lowest since the early 1970s. Still, the rise in the prices of individual goods and services, along with the different class patterns of consumption, acted as a redistributive mechanism in favor of the rich and at the expense of the poor, the unemployed, the poorly educated and pensioners. Zografakis and Mitrakos argue that, until early 2004, the economically weakest faced higher inflation than others. This is because these people spend proportionately more on food, drinks, housing and tobacco than others. During the period in question, the prices for these goods and services rose faster than average inflation. Specifically, among the poorest 25 percent of households, inflation was 0.3 percent to 0.5 percent higher than the average inflation figure, as published by the National Statistics Service (NSS), for most of the period examined. In 2000-2003, while the average inflation rate stood at 3.3 percent, for the poorest households this figure rose to 3.7 percent. By contrast, during early 2004, poor people’s inflation was 0.3 percent lower than average inflation, due mainly to cheaper fruits and vegetables. Another finding of the study is that the inflation rate faced by large social groups, such as wage-earners in general, blue- and white-collar workers in the public and private sectors, differed only slightly from average inflation, with the deviation ranging from 0.16 percent less to 0.12 percent more than average inflation. Zografakis and Mitrakos conclude that inflation raised slightly the incidence of poverty and, more importantly, exacerbated inequalities. They conclude that this justifies government intervention in favor of the poor.