Why does inflation hurt people with fixed incomes more than others? Use examples from the Philippines to support your answer.
Answer (2)
Inflation affects everyone, but it hurts people with fixed incomes the most because their earnings do not rise along with the prices of goods and services. When prices go up but your income stays the same, your money loses value. This means you can buy fewer things than before, even if you're still earning the same amount.In the Philippines, many senior citizens receive pensions or benefits from the Social Security System (SSS) or the Government Service Insurance System (GSIS). These pensioners usually receive a fixed amount every month, like ₱5,000 or ₱10,000. If inflation causes the prices of basic needs—like rice, medicine, electricity, and transportation—to rise, their pension won’t be enough anymore. For example, if the price of a kilo of rice goes from ₱40 to ₱50, and a bottle of maintenance medicine goes from ₱800 to ₱1,000, their monthly budget becomes harder to manage.Another example is minimum wage earners who live paycheck to paycheck. Even if their income increases occasionally, it often lags behind inflation. By the time their salary is adjusted, the cost of goods has already risen so much that their real purchasing power has declined. For instance, a worker in Metro Manila earning ₱610 per day might find that even with that amount, it’s not enough to cover food, transportation, rent, and family expenses due to inflation.Inflation also hits rural families hard, especially farmers who earn only after harvest. If prices for seeds, fertilizer, or fuel go up but the selling price of their crops stays low, their net income shrinks. These farmers can't adjust their income easily, making inflation even more painful.People with fixed or slow-changing incomes suffer the most from inflation because their earnings can't keep up with rising costs. This leads to reduced quality of life, increased poverty risk, and social stress—making it a priority issue for both government and society.
Answer:Inflation hurts people with fixed incomes more than others because their purchasing power decreases while their income remains the same. This means they can afford fewer goods and services as prices rise. In the Philippines, many retirees rely on fixed pensions from the Social Security System (SSS) or the Government Service Insurance System (GSIS). For example, if a retiree receives a monthly pension of ₱6,000, that amount may have covered basic needs like food, utilities, and medicine in the past. But during periods of high inflation—such as in 2022 when inflation peaked above 8%—the prices of essentials like rice, cooking oil, and electricity rose significantly, while the pension amount stayed the same. As a result, these individuals had to cut back on spending or rely on family support, making inflation particularly harmful to their financial well-being. Meanwhile, those with flexible incomes, like business owners or workers with cost-of-living adjustments, are often better able to cope with rising prices.
