The disparities between rich and poor in the face of inflation

Rich and poor are not equal in the face of inflation.

The prices of goods and services consumed by the poorest households have risen faster over the past 20 years in Quebec than those of the wealthiest households, reports a study released on Wednesday by the Institute for Research and Social Information. -economic (IRIS).

The increase in the cost of living faced by households of two or more people from 1999 to 2019 was 29.7% for the poorest fifth and 30.2% for the next quintile against only 24, 8% for households belonging to the group of the fifth richest and 23.6% for the 10% of the wealthiest.

This inflation gap of 5 to more than 6 percentage points between the 40% of the poorest and wealthiest families is due to the fact that the two groups do not consume the same things and that the prices of some have increased more than the price of others, explains IRIS.

This is particularly the case for food expenditure, the price of which has increased by 63% in 20 years and which accounts for, on average, 17% of all spending by the poorest against only 12.5% ​​for the richest.

The same phenomenon also occurred, but backwards, for leisure activities, the prices of which have not increased, but fallen by 3.4% for 20 years, much to the delight of the wealthiest who devote 7 , 7% to 8.2% of their expenses compared to only 4.9% for the poorest.

An imprecision fraught with consequences

These differences are completely erased in the usual statistics on the evolution of the consumer price index (CPI), observed in a telephone interview at Duty Minh Nguyen, associate researcher at IRIS and co-author of the study, with Pierre-Antoine Harvey.

This is a problem because it prevents us from seeing a widening of inequalities between rich and poor, but not only, says the political scientist. The CPI is often used as the basis for calculation or justification in fixing all kinds of things on which low-income households directly depend, such as the minimum wage and the amount of certain social transfers. “If we underestimate the rise in the cost of living they face, they find themselves doubly penalized. “

The differences in the composition of shopping baskets between the rich and the poor are not the only blind spot on the reality of the latter, reports the IRIS study. Seeking to reflect as faithfully as possible the changing consumption habits of Canadians, Statistics Canada periodically adjusts what it puts in the basket of goods and services whose price it reports each month, for example, changing the relative weight granted the costs of a fixed telephone line and a mobile telephone service, or taking into account not only the prices displayed on the main street, but also in electronic commerce.

Unlike the wealthiest, the poorest households seem to adjust their preferences for goods and services based, in particular, on their price developments, substituting those whose cost increases most quickly with others for prices. more stable or declining.

“It can also be a form of impoverishment that goes undetected,” notes Minh Nguyen. It is unlikely, for example, that the decrease in the relative weight of food expenditure in the budget of these families is because they suddenly choose to eat less. Rather, one might think that the increase in food prices will force, for example, people to buy less meat and eat more pasta. “

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A COVID-19 effect

The current environment will do nothing to fix things, the other co-author of the IRIS study, Pierre-Antoine Harvey, said in a statement on Tuesday. “The explosion in food costs expected in the coming months due to the COVID-19 crisis is likely to affect the poorest families greatly. “

The two researchers do not conclude that the usual measures of inflation in Canada and Quebec are incorrect, but rather incomplete. Governments should, they say, take into account that the price increases are stronger for the poorest households when calculating measures for them, such as the Solidarity Credit. Conversely, they could also take into account the lower inflation enjoyed by the wealthiest in fixing their last tax bracket.

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