New CPI just a start
www.chinaview.cn 2007-02-07 09:28:58

    BEIJING, Feb. 7 -- The introduction of a specially compiled consumer price index (CPI) for low-income families is welcome. It may help clarify the gap between the generally low level of inflation and the increasing price pressure felt, especially by the poor.

    To make the new CPI a truly useful tool for policymakers to gauge the actual impact of rising living costs on the poor, the compilers need to do more than exclude cars from the sample basket of consumer goods.

    Reportedly, Jiangsu and Zhejiang, two rich provinces in eastern China, recently took the lead in releasing local CPIs for the urban low-income group. The new CPI in Jiangsu indicated that last year consumer prices for urban residents in the bottom 20 percent of the income range was 0.4 percentage point higher than the provincial CPI of 1.6 percent.

    The conclusion surprises no one. Given their limited income, it is understandable that poor households will be more affected by price hikes in food as a percentage of income.

    What's important is that the new CPI provides a clearer picture of how low-income families fared in the past year when inflation seemed to remain low.

    A better understanding of the living conditions of low-income families is vital for policymakers struggling to narrow the country's growing wealth disparity between rich and poor.

    It is only an initial step to increase the weight in the index of basic necessities that account for a much larger portion of household expenditure for the low-income group than those with higher incomes.

    To allow policymakers to respond more promptly and effectively to the needs of the poor, the new CPI should mirror the actual cost of important public goods like education and health care for low-income families.

    One of the key public complaints about the new CPI was that it failed to reflect the soaring costs of housing, education and healthcare.

    Though buying new houses can be left out of the price basket for the low-income group for the time being, the public goods of education and healthcare are needed by people in all income brackets. Even a small change in education fees or healthcare expenditure can be a hardship for low-income groups whose budgets are already stretched tight.

    The statisticians need to do more to make the new CPI truly reflect the cost of living for the poor.

    (Source: China Daily)

Editor: Jiang Yuxia
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