Inflation Inequality in South Africa

The inflation crisis of 2008 drew greater attention to the varying experiences of inflation in South Africa and,in particular, to the fact that different groups within society may have significantly differing inflation experiences. The groups may be defined according to income level, but may also be categorised according to demographic, labour market and other characteristics. The first aim of this research is to investigate differences in the inflation rates experienced by different types of households. Instead of using income/expenditure to group households, various labour market and household structure characteristics are used. The groups analysed include grant recipient households, unskilled worker households, unionised worker households and households with children. Significant differences between the group-specific and all urban inflation rates may suggest the need for using group-specific price indices in applications where the purchasing power of these households is to be preserved. Secondly, the paper investigates the extent to which the all urban inflation rate is representative of individual households, using household-specific inflation rates. The paper analyses the distribution of household-specific inflation rates relative to the all urban inflation rate, as well as the relationship between the level of the overall inflation rate and the dispersion of household-level inflation rates.