Inflation still high for elderly and poor

By Yoon Ja-young

The government has been concerned with low inflation over the past few years, but it doesn’t affect all citizens the same way. A report showed that the low inflation benefited relatively wealthy people while senior citizens and the underprivileged suffered higher inflation.

According to Hyundai Research Institute, inflation for the households in the bottom 20 percent income bracket stood at 1.1 percent last year. Those in the top 20 percent income bracket, however, had only 0.4 percent inflation.

The different inflation rates are based on the fact that income and age determine where people spend their money.

For instance, for those in their 60s or older, food accounts for 24 percent of spending. Food prices rose 16 percent between 2010 and 2015, which is much higher than the overall 10 percent inflation during this period.

Then come housing, utilities and energy fees which took 18 percent of the total spending. Their prices also rose much more than the overall inflation, marking a 16 percent rise.

“Consumer prices rose 0.7 percent in 2015, marking the smallest increase since the statistics office started compiling the data,” said Baek Da-mi, a research fellow at the institute.

“However, as the prices move differently for each of the many items, inflation that consumers actually feel can vary according to their income, family size, age, etc,” she added.

The researcher pointed out that inflation during the past few years moved in favor of the high incomers while adversely affecting the less privileged.

Those with low income were highly affected by rising prices of alcohol, cigarettes and food. Cigarette prices rose by 2,000 won per pack last year following the government’s tax hike, which led to a 50 percent rise in prices of liquor and cigarettes on the inflation index. They take 1.9 percent of spending in low-income households, while the ratio is only 0.9 percent for high-income households.

Meanwhile, those in the higher income bracket enjoyed falling transportation costs ― inflation in transportation reversed by 7.8 percent in the aftermath of the global low oil prices.

The researcher showed concern that low inflation wouldn’t lead to better consumer sentiment as many people don’t take it as low.

“There should be efforts to stabilize food prices to lessen the burden on low-income households,” she said, pointing out that the low oil prices benefited high incomers rather than low incomers.

She also recommended developing more diverse indexes to better reflect actual consumption in Korean households. Japan, for instance, issues an inflation index for retired senior citizens.