Saturday, 25 October 2008

Inflation - what is it really?

Those of us who have to negotiate pay with our employers get very annoyed by the way the government and media confuse discussions about inflation and pay. They try to suggest that measures other than the Retail Price Index (RPI) are relevant for pay negotiations. Particular favourite for the government has been the Consumer Price Index (CPI) which excludes many items which form a substantial part of the cost of living for most human beings.

Ironically, the September figures which recently came out showed CPI actually higher than RPI, but I think it would be a mistake for union activists to chop and change rather than sticking to the idea that it's the real cost of living that matters.

One of the other problems in talking about inflation is that the figures are averages and the experience of inflation by different people varies widely. Current inflation is being driven by high fuel and food costs, which make up a large proportion of spending for those on low incomes, so the inflation experienced by the low paid is much higher than the average. Similarly, if you spend a lot on clothes, luxuries and electronic goods (a pattern of spending more associated with the rich) many of these prices have actually fallen.

Some time ago the Office for National Statistics (ONS) produced a personal inflation calculator, which seemed like a really good idea. Unfortunately, for technical reasons, it was not very accessible - particularly from workplaces where the user may not have total control over how their computer is set up.

I'm pleased to see that the BBC has made available a version of the personal inflation calculator which is much more accessible - though it does still seem to require JavaScript to be enabled in your browser which not everyone will have. Why not get people in your workplace to use it and circulate the results as part of a pay campaign?

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