Inflation

Feeling the squeeze: Workers' living standards in the economic crisis

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Working class living standards are being seriously hit as the economic crisis worsens. As inflation rises and wage repression continues, households' real disposable income is falling. Laura Cooke and Kevin Devine unpick the latest statistics that show the scale of the squeeze

For the first time in over 30 years the real disposable income of British households is falling, and the degree to which this is happening is increasing as inflation continues to climb. The Office for National Statistics reports that real incomes fell by 0.8 percent in 2010, which is the highest fall in real disposable incomes since 1977. In the first quarter of 2011 it reports incomes fell by 2.7 percent, over three times this amount, confirming that money pressures are growing.

Food prices leave many hungry for change

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Global food prices are once again rising sharply. The UN Food and Agriculture Organisation's monthly index of agricultural commodity prices rocketed upwards by over 30 percent in the last six months of 2010.


Biofuels crop

Prices now surpass the levels seen at the height of the 2007-8 food crisis. Back then it led to over 30 countries being hit by unrest linked to the soaring cost of food, from Haiti to Bangladesh.

Sugar and meat prices are at record levels, while cereal prices are back at the levels of 2008. Last year saw European wheat prices double, US corn prices increase by more than 50 percent and US soybean prices rise by over 30 percent.

Why the price indexes miscalculate the cost of modern life

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The cost of living rose at an annual rate of 2.2 percent in January if you believe the government's Consumer Price Index (CPI).

This is the rate newspapers and TV report and on which the Bank of England bases interest rate policy. But it is fiction as far as reflecting the rising prices faced by working class households.

For a start, the CPI excludes mortgage payments and council tax. A second official inflation measure, the retail price index excluding mortgage interest payments (RPIX), also ignores such costs but hit 3.4 percent in January. This is sometimes referred to as the underlying rate of inflation, presumably because it is closer to the truth.

What's behind Brown's pay freeze?

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As public sector unions organise to resist Gordon Brown's pay freeze Kevin Devine asks what lies behind the government's obsession that higher wages cause inflation

Gordon Brown was more direct than usual in his response to a parliamentary question on the possibility of negotiations in the postal dispute. But he didn't say he welcomed the prospect of talks. "We must... tackle inflation, and people have to accept settlements that will ensure that inflation is low in the years to come," he said. "All workers should look at pay settlements as a means by which we can conquer inflation."

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