How can inflation increase income inequality in a country like the Philippines?
Answer (1)
Inflation can increase income inequality because it affects poor and rich people very differently. In a country like the Philippines, where many families already live below or near the poverty line, rising prices can make it much harder for low-income families to survive, while wealthier households can often protect themselves from inflation or even benefit from it.First, poor families spend most of their income on necessities like rice, electricity, transportation, and school expenses. When inflation causes prices of these basic items to rise, the poor have no choice but to reduce their consumption or borrow money just to meet their needs. For example, if a family earning ₱10,000 per month sees their grocery costs jump from ₱3,000 to ₱4,000, they may have to cut back on food or medicine.Meanwhile, richer families usually have investments like land, real estate, stocks, or businesses. These assets often increase in value during inflation, so the rich not only protect their wealth—they may even grow it. They also have access to financial tools like time deposits, mutual funds, or inflation-protected securities that are not available or affordable for most Filipinos.Another issue is that wage increases often lag behind inflation. Minimum wage workers might wait months or years before the government approves a wage hike. By that time, prices have already gone up significantly. This means their real income (or the value of their salary) has dropped, widening the gap between the poor and the rich.In rural areas, inflation also affects farmers and fisherfolk, who often sell their products at low prices but buy necessities at high prices. Without strong government support or subsidies, they suffer the most.In conclusion, inflation hits low-income groups the hardest and rewards those with financial assets. Without targeted government action, inflation deepens inequality, making it harder for poor Filipinos to escape poverty.
