This article primary addresses Britain and there are differences between Britain and other countries in terms of welfare benefits, but the situation that we are experiencing will also impact people around the world as the prices that are rising are commodities which are in wide usage worldwide. The rising cost of living impacts everyone; but its impact will of course have a greater effect on those that are on fixed incomes (e.g., retired people and those on benefits) and those who have lower incomes and have lower savings to tide them over. Moreover, this increase in prices is expected not to be short-termed but will last longer as there are several things that are happening at the same time and if there is actually insufficient production that will take a bit longer to fix.
We can look at which goods are rising in price in Britain by checking both the Consumer Price Index (CPI) and the CPI-H (which relates to home owners’ costs) and these are due to rising household costs, energy costs, rising transport costs. The Office of National Statistics has tracked this rise clearly.
There are two types of goods whose prices are rising rapidly. On the one hand, there is the increased prices of fossil fuels, specifically oil and natural gas and the other prices relate to primary consumption goods like the price of foods, and clothing. These price rises lower real wages and incomes (what you can buy with these wages and incomes decreases due to increased prices of these good. The rising price of wheat is additional increase that has began more recently and that is due in large part (at least in Europe) due to the Russian invasion of Ukraine as both of these countries are the largest producers of wheat.
The initial increase in the price of fossil fuels essential derives from two things: 1) decreased production during the pandemic; and 2) a breakdown in supply chains. So increased demand for fossil fuels as we come out of the pandemic meant that what was produced last production period which responded to the decrease in demand has allowed producers to increase prices precipitously (obviously, they are trying to make massive profits as well). Moreover, there are time lags in production; producers need to bring plants on line and distribution requires supply chains be in place; while the production of these goods can be increased, it may a bit of time. Meanwhile producers are making bumper profits while people on lower incomes are wondering whether to heat their homes, pay rent or purchase food. Our dependence on fossil fuels means that producers have greater control over pricing (and then there are all the taxes like VAT on fuel) that increase its costs to the consumer. As Christine Berry in The Guardian argues, even though some corporations are facing rising costs, they can decide whether to pass the increase in oil prices and wheat prices onto consumers or to squeeze profit margins; it is pretty obvious that these corps have chosen to pass the increase in costs onto consumers which is pushing them into poverty. Remember, they are in the business of making profit, not ensuring the majority has enough to eat.
The rapid rise in the price of oil and natural gas reverberates throughout the world economy as these are commodities that serve both as intermediate goods in production of other commodities as well as goods used by consumers. By that we mean that oil and natural gas are inputs into the production process of other goods, so an increase in the price of oil and natural could increase the prices of commodities that utilise these goods in production (of course, whether or not that happens, depends on the quantity used and other inputs like labour or other intermediate goods). Also, petrol (or gasoline) is used for distribution of commodities so if distribution costs for goods transport increase, that can and will lead to increases in prices of the goods themselves. In many senses, consumers will be hit by these increased prices throughout the production and distribution process. Moreover, as consumer goods, oil is used for private transport and natural gas is used for home heating.
The use of natural gas for home heating is especially important for those on lower incomes in Britain, as wealthier people use other means for home heating. An additional point that is important relates to where people live. If they are in cities with a large and accessible public transport system (like London), the rising price of petrol will impact them less. If on the other hand, there is limited public transport in your city or you live in a more rural area, then this price rise will obviously impact your incomes more. Certain people are more dependent upon private transport, these include disabled people as accessible public transport is often difficult to find and manage and women with children who drive to get children to school and after-school activities.
In Europe, many countries also purchase natural gas from Russia and Ukraine and sanctions against Russia over the invasion of the Ukraine will also lead to further increases in natural gas prices. So that will further the already rising prices of fossil fuels. For example, while Germany has been shifting over to renewables, it is still largely dependent upon imported Petroleum and Natural Gas from Russia. In 2021, Germany imported 63.7% of its energy sources; 98% of oil is imported (in 2021, Russia supplied 34.1% of crude oil imports, the US 12.5%, Kazakhstan 9.8% and Norway 9.6%) and in terms of natural gas, 95% of Germany's natural gas is imported, (of that, about half is re-exported. 55% of gas imports come from Russia, 30% from Norway and 13% from the Netherlands). Sanctions on Russia will impact German consumers seriously. The rising prices of oil and natural gas will mean that both fracked oil and natural gas will actually become economically viable again; that is, the high price of production through fracking meant that when price of these goods were very high would enable fracking to be economically competitive); expect that corporations producing fracked oil and natural gas will be selling a far greater amount than expected and that there will be increased production of fracked oil and natural gas.
In Britain, due to the earlier price rise of oil and natural gas last year many smaller providers whose contracts with consumers were based on fixed prices were driven out of business. Many of these companies guaranteed sustainable energy for at least part of the provision. They have been replaced by larger gas and energy providers who are reaping massive profits at the expense of consumers; my energy supplier is now Shell rather than the smaller greener energy supplier I previously had. I didn’t choose Shell and its greenwashing, instead it was assigned to me.
While this would be an excellent time to shift to alternative and sustainable energy sources, and this must be a central political demand; this change in policy by governments is not really happening. It is certainly being discussed In Britain. However, it is production of energy using nuclear power requiring new plants and refurbishment of old nuclear power plants that is being discussed in the House of Commons (and has support from the opposition Labour Party). Nuclear power is expensive, but given the rise in price of petroleum and natural gas and sanctions on Russia, the Tories are advocating increased production of nuclear energy (which they insist is sustainable energy) and there is still no way to deal with the nuclear waste produced in the process.
A cap on energy price rises is an obvious choice, but not one being made in Britain. We should be advocating for increased windfall taxes on the fossil fuel industry (they are making massive profits out of the rise of prices) and for the removal of VAT on natural gas used for home heating which will help consumers cope with the price rise which is eating into the incomes of workers and those dependent on benefits. Given the massive rise in energy prices (and this is only being exacerbated by the sanctions against Russia and the “phasing out” of Russian oil by the British government), so far Rishi Sunak (the Chancellor of the Exchequer) has provided a few measures to help consumers; these include £200 loans (yes, loans) and a rebate on Council Tax Payments worth £150. However, not everyone pays council taxes, older people, disabled people and those with low incomes either are exempt or pay a lower amount (this differs across boroughs in London). The Spring Budget is coming up and people are speculating that a Fuel Duty cut will be added to relief packages relating to rising fuel prices.
The Russian invasion of Ukraine will also have a serious impact on prices for consumers as Russia and Ukraine are two of the largest producers of wheat in the world. A rising price of wheat will have a serious impact on consumers as this is a primary staple in many countries and neoliberalism has created the loss of food sovereignty for many countries making them dependent on import of grain. There are other dominant staple goods (e.g., maize, potatoes and rice) but still a large number of countries use wheat as the primary staple good and hence this will be felt worldwide. While clearly people will substitute other grains for consumption, like oats, rye, and barley (if they can; remember how much was produced last production period will not allow a full substitution by consumers) and in many places in the world alternative staples simply are not available. Moreover, with the shift to other grains, their prices will rise as well, so that is not a solution to the present situation. High levels of poverty exist not only in the global south, increased prices for wheat will significantly affect consumers and production of grains takes longer to adapt due to the nature of agricultural production.
The Resolution Foundation has recently published a report on Living Standards for 2022. It projects:
- “Our preliminary estimate is that the conflict in Ukraine could push peak inflation in 2022-23 above 8 per cent. This could leave the typical real household income for non-pensioners 4 per cent – or £1,000 – lower than in 2021-22. This is a scale of fall only previously seen around recessions.
- Part of this living standards hit comes from the policy of uprating benefits with a lagged measure of inflation: in 2022-23, this will cut the real value of the income provided by the benefits system by £10 billion.
- Real incomes are projected to also fall in 2023-24, by 2 per cent, driven by weak pay forecasts and the end of the Government’s energy bills support package.
- Across the income distribution, real incomes are currently projected to be lower in 2026-27 than in 2021-22, and the period from 2019-20 to 2024-25 is currently on track to be the worst parliament on record for income growth (with a 2 per cent drop in the median, without assuming any impact from the situation in Ukraine).
- Looking at relative poverty, absolute poverty and overall inequality, the most pronounced projected changes are large falls in 2020-21 followed by large rebounds in 2021-22 as benefit boosts were withdrawn.
- The prevalence of absolute child poverty is projected to be higher in 2026-27 than in 2019-20, with a large rise between 2020-21 and 2022-23 even before we consider the impact of the war in Ukraine.”
As is always the case when prices of primary goods rise, some people will be more affected than others. As is always the case, it is those with precarious and low incomes that are more deeply affected. Already reports of disabled people becoming indebted due to rising energy prices due to specific needs associated with their impairments and are necessary costs (not luxuries) that require additional energy compared to non-disabled people like clothes washing, electric wheelchair charging and oxygen machines. The rising prices of energy mean less available for things like food and housing. Already facing rising costs and debt due to care charges imposed by local councils on Care and Support, the increase in energy prices only makes the situation more precarious for disabled people who are already consistently facing greater poverty as the figure below from The Joseph Rowntree Foundation 2022 Report on Poverty (full report) shows.
Women
Price rises affect women more strongly than men. In order to understand why the impact of rising prices impact women more, there are some stylised facts that we need to have a grasp to be able to see what is happening:
Wages and Incomes
Wages for women in traditional women’s paid work are lower on average than wages received outside those segmented labour markets in which women’s labour is dominant.
This is caused by several things:
First, women’s labour which is done at home for free due to social oppression is viewed as unskilled labour rather than requiring a diverse level of skill. As such, women’s traditional labour and the sectors of employment where it is in use are devalued. For service production: this is due to the fact that production of surplus value in these sectors does not occur (this involves the production of socially necessary labour time with surplus value essentially not produced). What labour is used is consumed in the production process and to make profits (which are transfers of revenue in this situation). In agricultural and industrial sectors, surplus value is produced; but again, the roles of women in these sectors are normally in traditional women’s work and this is devalued. Women’s labour in industrial sectors is still subject to a high level of sweating as the textile industry has various types of techniques of production in use.
Second, women working in the informal labour market in traditional women’s world (e.g., as personal cooks, cleaners, nannies, etc.) are in a situation where there is not a regulated labour market subject to even basic labour law (and also there are no pensions).
Because women have lower wages, women are more dependent upon benefits to supplement their income. Changes in benefits (like Universal Credit) which impact negatively on accessing benefits impact on women more strongly than men. Austerity hit women predominately with 83% of austerity falling on women.
Third, our lower wages mean lower pensions as pensions relate to what you earn; the basic state pension in Britain is one of the lowest of OECD countries. The changes introduced which increased the age where women could access their pensions for women born in the 1950s (WASPI women) meant that women that were planning to retire could not do so and were forced to work longer than they had planned. From the Joseph Rowntree Report on UK Poverty in Britain, we can see that while pensioner poverty had decreased, it had begun rising in 2007-8, then was stabilised and has now started rising again. Retired women are facing greater poverty than men over all the period under examination.
The Pandemic
The second stylised fact that needs to be taken into consideration in order to understand the specific situation for women being far more vulnerable to price rising is the direct impact of the Pandemic on women.
Women predominately work in Key Industries and could not work from home which was the case for those in white collar jobs and tech jobs. Their children were still able to access school directly along with children in special needs education.
Younger women with lower income were impacted differently if they were employed in retail work (not food production). Those who were able to get furloughs, of course, saw a decrease in wages as furloughs did not cover all wages. Those unable to get furloughs and who lost their jobs relied on UC with £20/week uplift.
Those women that did not work in key sectors and whose children were at home due to the lockdowns meant that these women became responsible for childhood education and childcare. It has been reported that during the pandemic, women predominately wound up doing educative work while male partners did care that was associated more with relaxation activities.
Due to children being at home and not in person schooling, and not working in key sectors, more women were forced to give up their jobs to care for their children. This occurred because men’s wages are higher in general, women are seen to be primarily responsible for child and caring responsibilities and it was they that left employment to do these tasks at home. This is completely social rather than having to do with something related to women’s natural roles.
The separation between paid work outside the home and unpaid work inside the home was broken down due to lockdowns. The ideological argument that work done at home is “not work” was demonstrably demonstrated to be false that separation between paid and unpaid labour was broken down.
The loss of jobs during the pandemic and the reduced income has led to increasing evictions after the prohibition of evictions during the pandemic was eliminated, often these evictions were of single mothers with children (this is the case in two areas near where I live) and especially single mother of colour with children; we need to ascertain if this is a general trend since the restrictions on eviction were lifted by the government.
Social Reproduction and Caring
The primary role of women in social reproduction and caring is the third influence that needs to be considered if we are to understand the impact of rising prices on women.
Women are still predominately responsible for social reproduction. This does not only refer to the personal physical reproduction of children; we need to take into account that women are predominately still responsible for childcare, early childhood education including socialisation of children, cleaning the family home, cooking for the family and providing a place for relaxation for working members of the family as well as children.
Women are also those predominately responsible for caring for members of the family that are temporarily unwell as well as disabled people in the family. Even when women have infirmities themselves, they also are responsible for the support and assistance for disabled family members. The collapse of social care in England and Wales both in terms of quality and quantity available has led many women to leave work to ensure that needed support and assistance for family members in need of support and assistance to be able to live independent lives is provided. The pitiful carer’s allowance is no replacement for wage income; we need to discuss this more.
Should women that leave work to support and assist disabled people in their family and extended families be paid an allowance comparable to wages? What we need to do is fight for a social support system for disabled people that ensures independent living as its goal. A massive transformation of the current system is required which institutionalises and excludes disabled people towards one located in communities in which disabled people are treated inclusively and determine what their needs are for independent living. If the situation in social support changes, more women would not feel the necessity of doing support and assistance themselves. We cannot duck this issue and need a serious discussion around.
Due to our caring responsibilities many women work part-time (often in several) jobs around schooling and available care provision provided by the state (if family members live in the same home). Many women are unable to work due to these responsibilities; this penalises them under the Universal Credit system of social support.
We need to separate the care of children from support and assisting disabled family members as these are different roles. In the situation of caring for children below school age, we need to be campaigning for free at the point of demand childcare for all women and this needs to be separated from being in paid employment and it must be available throughout the 24-hour period so that women can work full-time as well as enjoy different activities besides caring for their children; book clubs, a night out without having to be accused of child abandonment.
Those most disadvantaged by the current system are obviously single mothers whose caring responsibilities cannot be shared with partners. They are more dependent upon community and family support. The absence of additional income and the inability to work due to caring responsibilities especially for young children below school age, means that they often get caught in the benefit cap which is part of Universal Credit which means that the amount they can get as benefits is lower.
Government Social Policy
Universal Credit (UC) is the benefit system in Britain. It is based on a presupposition that those that are not working should not get a level of benefit support that equals what could be made as wages; so, there is a penalty for those not in employment as it is assumed that people that are not working do not want to “contribute to society”, they are indolent, lazy, breed too much, and as such are voluntarily unemployed rather than being unemployed due to inability to work due to the nature of the capitalist system itself.
As such, a benefit cap exists which gives the maximum level of benefits you can receive if you are not working. If you enter employment, you can get more in benefits as a reward for “contributing to society.” This benefit cap relates directly to housing benefits which are an important cost that must be paid. Built into the system is a 5-6 week delay from application to receipt of benefits; the government has allowed people to take government loans for that period; however, what this does is leaves people in debt which must repaid to the government. Given the low level of benefits, that repayment decreases these benefits even more.
The amount that you can get as benefits if you are not working includes a 2-child maximum amount received for child support since 2017; if you are not working and have more than 2 children, you do not get extra benefit support for that 3+ child. This has led to rising absolute child poverty and regular dependence on food banks (before and after the pandemic) and women (especially single mothers) unable to survive on benefits with the benefit cap. Needless to say the government has not provided free childcare on demand to allow women to enter employment. Additional issues with UC which directly impact women relate to benefits paid directly to major wage earner in the household (invariably male partners); this can be changed but many women do not know they can do this.
Importantly, there is a lag in adjustment of benefits to inflation (based on the CPI). This will affect women more than men due to their dependence on benefits; so while there is a cost of living increase built into the benefits system, this is only done once a year in April comparing prices in April 2021 to current prices based on the CPI. The difference between last April and this April is 3% increase in the CPI and as such, the increased benefits already are far too low as the CPI increases have reached over 6%. According to the Institute for Fiscal Studies:
“The pattern of rising inflation would mean a 3% real cut in benefits year on year (even before accounting for the removal of the temporary £20 per week uplift in Universal Credit, and the equivalent in Working Tax Credit, back in October). Increasing working-age benefits and Pension Credit for those over state pension age by 6%, instead of the default 3.1%, would cost an additional £3 billion in 2022-23. On average it would mean preventing a £290 real fall in benefit income year on year for the 10 million households in receipt of these benefits (excluding those receiving only Child Benefit). This need not mean a permanent increase in benefit expenditure: the government could uprate benefits by a smaller amount in April 2023 than it otherwise would, leaving the long-run size of the benefit system unchanged. Uprating the State Pension by the same 6% rather than 3.1% would increase the cost by a further £1½ billion.”
During the Pandemic, on 20th of March 2020, the government created a £20/week uplift in UC which was incredibly important in helping people survive during the pandemic if they lost their jobs or were not in paid employment. However, this was never applied to legacy benefits that many disabled people (in and out of work) depend on. The elimination of the uplift by the government in September is a significant decrease in income for people who are out of work (and will not be replaced by the rise in minimum wages passed by the government if you are out of work). The government removed this £20/week uplift at the end of September; this move impacted 6 million benefit claimants removing £1,040 per year; to soften the blow, Sunak reduced the taper rate of UC which relates to how much of worker allowances they get from 63p to 55p on the pound so people would lose less benefits when they found work above the work allowance.
Two other recent government policy changes have been undertaken to address the low level of wages and to cover the costs of the funding of the National Health System and the creation of social care.
The first was an increase in the national “living” wage from £8.91 to £9.50 per hour; this amounts to a 6.6% increase. The government has raised the ridiculously low minimum wages for 21-22 years from £8.36 to £9.18 per hour and has increased wages for 18-20 year old, 16 17 year old and Apprenticeship wages. However, this only impacts people that are in paid work.
The second policy announced was to raise National Income Contributions to cover the costs for the proposed Health and Social Care Bill. This is an increased cost for those in employment as this increase is taken out from wages. This, of course will impact lower earners more than higher earners (they pay a larger amount of their overall contributions as there is a cap to contributions for higher earners). Those in self-employment cover their own contributions to NI with no added contributions by employers. This means that the tendency which we have seen that long-term contractual jobs are decreasing in favour of self-employment as well as sub-contracting means that this increases the amount paid to NI. This increase in NI will probably further this trend in employment which is a drain on wages of these types of workers.
Impact of rising prices on women (and everyone)
The Women’s Budget Group examined the impact of government policy changes and rising inflation on households to ascertain how the government policy changes in the Autumn 2021 budget impacted men and women differently. As said above, women’s wages (both in the same work, so equal pay for equal work) and comparative worth (where women’s work in segmented labour markets is compared to similar forms of labour done by men) are lower than men. They are more dependent upon benefits to supplement their income. Changes in benefits affect women more than man. Finally, while changes in prices will affect men and women, there are certain price changes that affect those on benefits, like women and disabled people more.
The first thing they examined was the impact of both inflation and benefit and tax changes on average household income, looking at different types of households. They concluded that inflation had a far great impact on average household incomes as opposed to benefit and tax changes, but we can see that the loss of the £20 uplift significantly affected single parents (especially women) far greater.
The next thing they examined was the impact of tax and benefit changes on average household income independently of prices. We can see very clearly that single mothers were deeply impacted by the loss of the £20 uplift in universal credit.
The WBG report concluded the following:
“Women’s Budget Group calculations show that none of the changes announced in the 2021 Autumn Budget, including the rise in the minimum wage and changes to UC rules for those with earnings, are sufficient to compensate people on average for the loss of the uplift, the increase in National Insurance Contributions (NICs) and the rise in inflation.
The projected rise in inflation to 4% average in 2022/23 will deliver the biggest hit to household incomes.
Further, for households with someone in employment, the rise in the minimum wage is not sufficient to offset the effect of the rise in NICs, leading to lower disposable incomes even without the effects of inflation.
For such households if they are on Universal Credit, on average, the change in UC rules to allow a greater proportion of earnings to be kept counteracts the loss of the UC uplift.
But for households without anyone in employment the change in UC rules does not affect them at all and therefore does not offset the loss of the UC uplift (they are unaffected by the rise in NICs and in the minimum wage too). These are generally the poorest households, whose members’ caring responsibilities, illnesses or disabilities are the reasons why they are not in employment. Women are more likely than men to be in these situations.”
In many senses this could be predicted. Inflation is causing the greatest hit to household incomes; much of this data comes from the period before sanctions on Russia due to invasion of Ukraine which will continue to drive up both oil and natural gas prices and the rising price of wheat and other necessary consumption goods caused by the invasion of Ukraine by Russia as well as the sanctions on purchase of Russian goods.
If households have 2 earners, they will lose money due to higher contributions to National Insurance tied to the Health and Social Care Act. Families with no earners that are dependent on benefits will lose income due to the removal of the £20 uplift in universal credit. Couples experience the great loss due to NI increase and increases in income tax, but if they are both in paid employment, they benefit from the minimum wage increases. For those with children, there is a gain from the UC taper and work allowances and that is especially important for single mothers and disabled people (if they are on UC rather than Legacy benefits) as work allowances only apply to those with children and disabled people; but these groups have also lost the most due to the end of the £20 uplift. On balance, since both increases in the minimum wage, the changes in work allowance and the UC taper only affect those in employment. So, those that gain from increased minimum wages, UC taper and worker allowance only includes those in employment and those gains are often offset by the increase in National Insurance.
Conclusion
We are awaiting the Spring Budget which is due on the 23rd of March in a period with rising inflation which is undermining real wages. Given the stagnation in nominal wages in Britain which has occurred over a long period of time following the introduction of austerity after the crash in 2007-8. The impact of inflation is actually driving people into further poverty and debt, especially those that are dependent upon benefits to bolster their incomes like women and disabled people. Those with debt (unless they are on fixed rates of interest) will face higher repayments as the interest rates are increasing, which will further add to the worry that many people have with a rising cost of living. What can we expect from Rishi Sunak as we face the biggest increase in cost of living in decades? … probably not much … but we’ll see soon.
Attacks on wages and work benefits are continuing with the use of fire and rehire of workers by corporations; the sacking of workers and then rehiring them at lower levels of wages and benefits or even worse their replacement by a workforce that is non-unionised and willing to work at lower wages from employment agencies (like the sacking of 800 maritime workers by P&O) should not be legal, but it is (although even members of the Tory government are a bit upset by this action by P&O).
Agency workers are also fighting back; many workers in the NHS were privatised and the 17% difference in salaries between NHS public sector workers and those that forced to become agency workers doing the same work have won a strike against SERCO and Barts Hospital Group and have been brought back into the NHS. Others have won pay parity. These are major victories for workers and hopefully a start to redress privatisation of public services.
However, as Christine Berry argues, the reasons for the crisis in the cost of living can be linked to the short-term issues like supply chains and the Russian invasion of Ukraine, but the reality is that this problem was a creation of government policy. It stems from the financialisation of necessary goods, like housing, private equity investors in childcare, private equity investment in social care, and the privatisation of essential goods like water and electricity. Financialisation and privatisation have enabled profits and rents to be the determinant of the delivery of essential commodities and services. The priorities of corporations for profits and investors for rents have come into conflict with the delivery of necessary goods and services and this is a government policy decision deriving from neoliberal ideology and this makes this a problem with capitalism itself.