Tuesday 27 June 2017

Low incomes hit hardest by inflation

The authors of the report, Brian Colgan and Tim Callan (pictured), said it was important to work out how price rises affected different sections of society
The authors of the report, Brian Colgan and Tim Callan (pictured), said it was important to work out how price rises affected different sections of society
Charlie Weston

Charlie Weston

Low-income households were hit hardest by price rises during the austerity years.

Spiralling rents have had a disproportionate impact on poorer households, a report by the Economic and Social Research Institute (ESRI) concluded.

Other groups benefited from mortgage costs coming down, after the European Central Bank cut interest rates.

Those with tracker mortgages saw monthly repayments fall dramatically. Even variable rates have come down from the highs they were at during the earlier period of the downturn. However, variable rates remain way above trackers.

But this did not help retired people who generally do not have mortgages. The ESRI said retired households experienced higher average inflation in the 2009 to 2014 period.

Low and high-income households buy different baskets of goods and services.

As a result, the rates of inflation for low and high-income households can differ from inflation as measured by the Consumer Price Index, which is based on a basket of goods averaged over all households, the report found.

There were big rises in fuel and electricity prices and alcohol and tobacco during the period 2003-2014.

But households with children experienced lower inflation than the average during the austerity years, the ESRI found.

This is because they have higher levels of homeownership and benefited from lower mortgage rates.

The study, called 'The Distributional Impact of Inflation: 2003-2014', found that low-income groups are more likely to rent, while high-income groups were more likely to have a mortgage.

Differences in the inflation rate for renters and for those with mortgages help to explain the differences in overall inflation experience for both high and low income groups.

The authors of the report, Brian Colgan and Tim Callan, said it was important to work out how price rises affected different sections of society.

Irish Independent

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