High incomes benefit more from anti-inflation measures than lower incomes. The Momentum Institute, which is close to the trade unions, came to this conclusion after analyzing the distributional effect of measures such as the brake on the electricity price, valorisation of social benefits and the abolition of cold progression. Low-income households in particular are affected by inflation and therefore need more help.
According to Momentum’s calculations, a household in the bottom fifth of income will be supported by a total of EUR 454 per capita in 2023. For a household in the top fifth of income, on the other hand, that is 749 euros. Not only are low-income households particularly affected by inflation, but a general increase in demand is also a driver of inflation. If the Momentum experts have their way, it would be more important to fund the necessary aid for poorer, higher-income households from the rich, corporations and top earners.
While the planned brake on electricity prices will relieve all households to about the same extent, the elimination of cold progression will benefit the higher incomes considerably more. According to the calculations, a household in the lowest income fifth saves about 80 euros per capita, while a household in the richest income fifth saves almost 440 euros. From a distribution policy standpoint, the elimination of cold progression is “worse than the infamous watering can,” said Momentum chief economist Oliver Picek.
Pay raises and pensions are especially important
For low-income households, the three measures don’t offset inflation, and one-off benefits will die out this year, Picek said: “That’s why significant wage and pension increases are all the more important to absorb the additional costs for households due to inflation. ” The economist can also make a lot of profit on a gas price brake based on the German model.
Source: Krone
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