Low income earners bear the brunt of price increases

Low income earners have been hit the most by prices increases than their high income counterparts, an analysis of the Poverty Datum Line and the Consumer Price Index shows.

For the past three months, the Poverty Datum Line (PDL) has been increasing at a much faster pace than the Consumer Price Index (CPI) and this, according to analysts, shows low income earners are hardest hit by price increases.

For August, the monthly PDL increased by 10.7 percent from the July figure while the CPI or Inflation for the same comparable period was up by 8.44 percent.

This, according to economist John Robertson, means low income earners are bearing the brunt of price increases more than middle or high income earners.

“The PDL purchases are typically the more basic or down-market items that lower-paid shoppers would settle for to meet real requirements that exclude higher-cost luxuries (which are included in the calculation of Inflation),” Robertson said in a note.

“The valuation each month in dollars of the standard shopping basket of goods measured by the PDL table has regularly shown a slower annual rate of increase than the CPI calculations as the CPI does allow for some spending on up-market products.

“However, this year, the PDL dollar figures have shown annual percentage changes that exceed the CPI percentage changes in May, July and August, while the February figures were almost the same.”

Robertson said, the predicament for low income earners is worse than what the PDL shows as they are now resorting to reduced package sizes that are however more expensive that normal sizes.

“Many formal retailers have been resourceful enough to reduce package sizes to keep some of their goods within reach of their customers’ more cautious spending, but statistically the cost per kilogramme of a tray of smaller packets that add up to one kilogramme will add up to more dollars than used to be paid for the one-kilogramme pack,” Robertson said.

It is believed that the PDL price statistics do not draw on informal sector prices that, however, accounts for the bulk of consumers in the country.

According to the renowned economist, the unit sizes, packaging standards and many other variables would make data collection very cumbersome, but it has to be admitted that the informal sector accounts for the survival of a great many Zimbabweans, buyers and sellers, whose challenges are seldom captured in official statistics.

“The PDL survey team will continue recording the cost per kilogramme and will not try immediately to adjust for a change in consumption habits. These revisions do happen, but usually after several years have caused the need for adjustments to many items.”

The plight of employees has been exacerbated by the fact that wage payments are not keeping up with the sharp monthly increases in costs while the black market exchange rate dominated the price-setting habits of retailers.

On falling turnover many employers, including Government, have not been able to step up wages to match the monthly increases in costs.-ebusinessweekly.co.zw