The Hydra of Inflation has returned almost half a century after being put away in its lair. But how do you fight the dragons of the past with the weapons of the present? For the Economic Analysis Council (CAE) which publishes an in-depth study on the subject on Tuesday, it is necessary to better understand the concrete economic consequences of this phenomenon. Because if the rise in prices slows down – the indicator fell below the 5% mark for the first time in more than a year – it is however called to settle permanently in the economic landscape.
For households, the study emphasizes inequalities in the face of inflation from the point of view of the cost of living. However, far from traditional categorisations, economists explain that these differences are only in small part linked to income, age or place of residence of individuals. “Income explains a small part of the heterogeneity in the face of inflation. Thus, inflation was slightly higher for the poorest 20% of households (6.3%) than for the wealthiest 20% (5.9%) in April 2023”, indicates the study. Similarly, the differences in price increases linked to age are slightly greater for seniors than for young people: the inflation rate is 1.5 points higher for households aged 60 to 74 compared to those under 30 years old.
In fact, “heterogeneity in the face of inflation is stronger within each group, rather than between age groups or types of municipality”, underline the experts. The phenomenon creates diffuse inequalities due to the disparity of consumption baskets. In short, the more food and energy expenditure weighs on a household’s budget, the more it will be a victim of inflation, hence the discrepancy between the feelings of some and the official figures which mask these inequalities.
Not to mention that households are also unequal in terms of the solutions they can put in place to combat the effects of inflation. A good example is fuel consumption. Thus, households that consume the most fuel (often those who need it to go to work) reduce their consumption at the pump less when the price rises than those who already consume little, regardless of their age or level. of income.
For the economic analysis council, these disparities must be better measured by the public authorities. This is why he recommends that the State use new databases such as banking data or even have INSEE work on an annual survey detailing the “family budget”, which would imply giving the statistical institute “additional financial and human resources”. According to the authors, strengthened mechanisms to better understand which households are the most affected by inflation would allow the public authorities to put in place better targeted policies. And to get rid of the sole logic of income which “is not a good marker of the heterogeneity of the shock” caused by inflation. Concretely, on the tariff shield, the main measure to fight against the rise in energy prices implemented in France, the CAE proposes to better target aid by indexing the amounts to the past energy consumption of households.
