Lowest income families hit hardest by inflation – here’s why

Inflation has hit the lowest income families hardest since recession because they spend the most proportionally of any income group on utilities, which have shot up in price over the decade.

Lower income families are also likely to have been hardest by inflation since Brexit, due to the rise in the price of food and non-food essential items, which they spend disproportionately more on.

While many ‘big ticket’ items have actually fallen in price over the last 20 years: cars are 12 per cent cheaper today than they were in 1996 (once quality improvements are factored in). This has benefited high and middle-income earners, who are more likely to purchase new cars.

Clothing prices have halved in 20 years, a boost for all households, though the wealthiest have benefited most, since more of their budget is devoted to clothes.

Prices for consumer electronics fell every year for the last 20 years and are now 85 per cent cheaper than they were in 1996 on a like-for-like basis. This has been more of a benefit to lower-income households, who spend proportionally more of their budget on electronics.

In the last 20 years, typical income households have seen:

  • 98 per cent inflation in housing costs
  • 139 per cent inflation in the cost of utilities
  • 89 per cent inflation of holidays costs
  • 47 per cent inflation of transport costs
  • 85 per cent inflation in cost of eating out
  • 45 per cent inflation in cost of health and personal care
  • 49 per cent deflation in cost of clothing and shoes

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