Why are fixed-income earners more affected by inflation, and what can be done to protect them in a high-inflation environment?
Answer (1)
Fixed-income earners are people who receive a regular, set amount of money, such as minimum wage workers, pensioners, or government employees with no yearly salary increase. They are more affected by inflation because their income does not automatically increase when the cost of living rises.Imagine a retiree in the Philippines who receives a monthly pension of ₱6,000. If inflation causes food prices to rise, the same ₱6,000 can now buy less rice, vegetables, and medicine. Unlike someone whose income is based on sales, commission, or business profit (which may grow with inflation), fixed-income earners have no immediate way to increase what they earn. Their purchasing power goes down, making it harder to meet basic needs.In a high-inflation environment, this can lead to serious hardship. For example, in 2022, Filipino pensioners and minimum wage earners found it harder to afford groceries due to price spikes in meat, oil, and vegetables caused by fuel price hikes and typhoons. Students from fixed-income households may also struggle more—affording school supplies, transportation, or even food becomes more difficult.So what can be done to protect them?Cost-of-living adjustments (COLA): Government and employers can offer COLA, which increases wages or pensions based on inflation. In the Philippines, COLA is sometimes included in wage orders set by regional wage boards.Targeted subsidies: The government can provide cash assistance to vulnerable groups. For example, the “Pantawid Pasada” program gives fuel subsidies to jeepney drivers during oil price hikes.Inflation-indexed savings plans: Programs like Pag-IBIG MP2 Savings or SSS Flexi Fund can offer better returns than regular savings, helping savers stay ahead of inflation.Food and utility support: Cheaper NFA rice, senior citizen discounts, and free public health care reduce the burden of rising prices.Protecting fixed-income earners ensures that inflation doesn't increase poverty and inequality. A just and responsive system should support those least able to protect themselves during economic shocks.
