How does inflation affect low-income families differently from high-income families, and why is this important for public policy?
Answer (1)
Inflation affects low-income families more severely than high-income families because they spend a larger portion of their income on basic needs like food, transportation, rent, and utilities. When prices rise, these families feel the impact immediately, and they have fewer resources to adjust or save.For example, imagine a minimum-wage earner in the Philippines earning around ₱610 per day. If the price of rice increases from ₱40 to ₱55 per kilo, the effect is significant. The family may need to buy less food, cut back on school supplies, or skip meals just to pay for electricity or transport. On the other hand, a high-income family may not feel this change as much because they spend less of their total income on basic needs. They can absorb the price increases more easily or shift spending to cheaper options.High-income earners also tend to have assets like property, stocks, or business investments that can increase in value during inflation. These assets can protect them from losing purchasing power. In contrast, low-income families often hold their savings in cash, which loses value during inflation.This difference matters a lot for public policy. The government must think carefully about how inflation hits the poor. That’s why programs like Pantawid Pamilyang Pilipino Program (4Ps), fuel subsidies for jeepney drivers, or cash aid (ayuda) during high inflation are important. These help low-income groups cope with rising prices and avoid falling deeper into poverty.In short, inflation widens the gap between rich and poor if the government does not intervene. That’s why policies that protect vulnerable groups are needed during times of high inflation.
