So far this year, the uneven growth of the items that make up the Consumer Price Index (CPI) deepened the regressivity of inflation, that is, its condition of affecting to a greater extent those who allocate a greater proportion of their income to consumption.
Thus, while spending on food and beverages and clothing represents almost half (44%) of the expenditure of the poorest 10% of households, in the richest 10% of households these two items explain less than 20%, less than half.
A recent report by the consultancy Ecolatina recalls that despite the notable acceleration of inflation in 2022 (from 51% to 95% year-on-year), the inflationary process did not deepen its regressive bias. In other words, it affected the different socio-economic sectors in a more homogeneous way.
However, so far in 2023 that dynamic was altered and "in each of the first four months of the year monthly inflation for the lowest deciles was higher than for those with higher incomes, accumulating 33.1% for decile 1 and 30.7% for decile 10, a difference not minor", according to the analysis of the consultant.
In this way, the inflationary process has become even more regressive so far this year: the inflation of the poorest households is higher than that of those households with higher incomes.
What does this answer to? Mainly due to greater relative dynamics of food prices: while the CPI General Level climbed 32% in the first four months of the year, food and beverages increased by more than 41% (+9 percentage points).
For this reason, food and beverages accounted for almost half of the inflation of the poorest households (48.3%) so far this year, while for the richest decile the incidence was 20.4%. In the higher-income sectors, inflation was explained to a greater extent by the greater increases in Education and in Restaurants and Hotels (which were 9.2 and 3.5 p.p. above the General Level respectively) that have a greater weight in the baskets of the richest households.
Similarly, the update in the tariffs of public services (gas, electricity, water and public transport) that has been carried out since the end of 2022 has a regressive component in terms of prices: its consumption is unavoidable and represents a higher percentage of the expenditure of low-income households (it explains 15% of the basket of the first decile and 10% of the tenth).
"While the social tariff is operational, protecting families in the first deciles, the 'porosity' of segmentation (households not registering, implementation failures) makes this an additional problem for some of the lower-income households," the report details.
Labour income, also more disparate
The document shows that not only inflation per decile moved unevenly, but so did labor income: in the first quarter the nominal wage associated with lower-income households grew 1.1 points below those linked to those with higher incomes. In the year-on-year variation, the difference is more than 13 points.
In addition, when compared with inflation in the first quarter it can be seen that real labor income carries a loss for the poorest 60%, while the last 4 deciles grew in real terms.
"This more favorable result for higher-income families is largely explained by the dynamics of public workers – in March their salaries grew 16.3% monthly according to INDEC. If their performance had been equal to that of the workers registered that month (+7.9%), in the first quarter all deciles would have suffered a real loss of labor income," he says.
"In this way, lower-income households were not only relatively hit harder as a result of the price acceleration, but they were also the ones that had the worst result with respect to wages," he warns. The result worsens if the year-on-year variation is considered. In this case, all sectors except the richest present a real loss, which climbs to almost -5% on average for the lower stratum – represented by the first four deciles – and is located in the zone of -1.3% average for the highest.