Poor beneficiaries are hit hardest by inflation


Published 7 February 2023 at 09.26

Economics. The grants that go to the poor are more negatively affected by inflation than those that politicians shower on the middle class. It shows a new analysis that Försäkringskassan releases today.

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Several grant types have a built-in protection against inflation, but since the calculation of the amounts takes place with a lag, the protection is weakened with today's high inflation rate.

It mainly affects recipients of benefits from the social insurance who have less financial margins, high support burden and little opportunity to influence one's income, according to Försäkringskassan's analysis.

Approximately half of the benefits in social insurance are to some extent linked to the price base amount, which is added up with inflation. How much different benefits are protected against inflation is determined by how the connection to the price base amount looks like for different benefits – but even a strong connection does not fully compensate for sharply rising consumer prices.

The construction is such that the enumeration takes place once a year, in January, and is then calculated based on the consumer price index for June of the previous year. This means that the real value of the price base amount changes during 18 months, first during the 6 months before it starts to apply and then during the 12 months in which it applies. So the enumeration of allowances has difficulty keeping up with the rapid price development in society that we see today.

Several allowances from social insurance, for example the guarantee allowance in activity allowance and sickness allowance as well as nursing allowance, are completely linked to the price base amount, which means that they are added up for inflation.

Other allowances, for example sickness allowance, parental allowance and temporary parental allowance (vab), are partly linked to the price base amount. The ceiling, or maximum compensation, of these allowances follows the price base amount – which means that people with incomes above the average can receive more in compensation when the price base amount is added up.

Further other allowances are completely unrelated to the price base amount, for example child allowance or parental allowance at basic level. Here, the levels are instead determined by a decision in the Riksdag.