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Food inflation and the minimum cost of living

Food inflation and the minimum cost of living. Donald Hirsch Head of Income Studies Centre for Research in Social Policy. Recent cost of living rises. The past two years. Food prices: up 17%. CPI: +6% RPI: +4%. July 2007 =100. Recent cost of living rises. The past two years.

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Food inflation and the minimum cost of living

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  1. Food inflation and the minimum cost of living Donald Hirsch Head of Income Studies Centre for Research in Social Policy

  2. Recent cost of living rises The past two years Food prices: up 17% CPI: +6% RPI: +4% July 2007 =100

  3. Recent cost of living rises The past two years Food prices: up 17% Cost of “minimum” basket: up 11% CPI: +6% RPI: +4% July 2007 =100

  4. Annual inflation rates 1998-2008 Food Minimum basket RPI CPI

  5. Price movements 1987-2008 RPI Minimum basket Food prices 1987=100

  6. Price movements 1987-2008 RPI Minimum Basket Food prices 1987=100

  7. Wage effects of food prices? • Low pay more concentrated in catering, restaurants and hotels than in food retailing • Distinguish low earnings from low wages

  8. Low food prices: a blunt instrument • Benefits shared with the better off • Hard to engineer a lower relative costs of living for people on low incomes. Food just a quarter of spending.

  9. Alternative approach • Rather than aiming to keep food prices low, make social policies sensitive to their effects • Part of price index for “minimum” basket • Implications for benefits, minimum wage, wage-enhancing policies

  10. Would this feed inflation? • Part of a structural adjustment in prices • Help correct relative price shift penalising poor • May help redistribute inflation impact to a “visible” index

  11. Centre for Research in Social PolicySchofield BuildingLoughborough UniversityLoughboroughLeicestershireLE11 3TUTelephone: +44 (0)1509 223618crsp@lboro.ac.ukwww.crsp.ac.uk

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