Background According to Oglesby (2007), inflation is the rise in price of goods and services. In any country inflation reduces the spending power of the citizens. For the period 2002-2011 inflation in Jamaica average 11. 24%, (Statistical Institute of Jamaica STATIN, 2011). Standard of living in Jamaica has been on the decline over the past decade as this can be associated with the increase in inflation, (BoJ – Statistical Digest 2005).
This for the most part have affected low income earners specifically those earning minimum wage or less, for example, unskilled workers, domestic workers, and store clerks. It has become extremely difficult for individuals to provide the basic necessities for their families much less to afford entertainment. The average increase in minimum wages move from one thousand eight hundred dollars ($1800) in 2002 to four thousand five hundred dollars ($4,500) in 2011, (Ministry of Labour & Social Security 20011).
This does not offset the increased costs faced by this group, while at the same time some receive no increase and others became unemployed. Inflation reduces the purchasing power of the consumer because of the devaluation of the local currency. One manifestation of this is the introduction of the new Five Thousand Dollars ($5000. 00) note. As the Jamaican dollar devalues, low income earners have to make more sacrifices and survive on less because the cost of goods and services has increase exponentially. The current market price of one US dollar to Jamaican currency is 89: 1 respectively.
Jamaica has being facing several external shocks such as surging oil prices and the removal of trade from the banana industry by Europe, inflation due to high food-prices, unprecedented increases in oil prices, and Domestic and External Public debt (Statistical Digest 2006) Quality of life is threatened by inflation making basic food, healthcare and education more difficult to access, this causes the morale of some to diminish. The advancement of Jamaican children, who are the next generation of leaders, is hindered by lack of the ability of their parents to provide for their education, causing many to turn to crime and violence.
In interviews and group discussions, conducted by Mogensen (2008), adolescents and youths involved in organized armed violence, community members and leaders listed the following causes for gang membership and youth involvement in violence in Jamaica. These are lack the of money and employment opportunities; few educational opportunities; idleness (nothing to do); lack of community support and counseling; attraction of ‘gangster lifestyle’ and the influence of a popular culture glorifying violence, etc.
As a future economist it is in my interest that there is the need for the Jamaican Government and the opposition to work together to combat the inflationary issues grappling the country to move forward to achieve vision 2030 and better the standard of living for the more vulnerable. Problem Statement Standard of living has been on the decline over the past decade and can be associated with inflation which has significantly affected the lives of low income earners in Jamaica. Purpose of the study The purpose of this study is to examine effect of inflation on the standard of living among low income earners in Jamaica between 2002-2012
Subtopics 1) Examining the type of inflation that affects low income earners 2) Establishing the factors that influence low standard of living among low income earners 3) Determining the relationship between low standard of living and inflation 4) Determining the inflation rate between 2002-2011 Significance of the study The findings from this will research assist policy maker in making decisions on the ramification of inflation and its ability to adjust the lives of those in this target group.
It will also seeks to give ways to better the standard of living for low income earners as well as the country on a whole. Business owners can see it fit to use this when deciding the most suitable products and services for this market, based on the effect of inflation on disposable income. It should also help to educate others on the inflationary factors affecting their ‘standard of living’ and what role they play in contributing to these factors. Reference Bank of Jamaica (BOJ) statistical Digest 2005 Bank of Jamaica (BOJ) statistical Digest 2006
Ministry of Labour & Social Security Website retrieved September 9, 2012 from http://www. mlss. gov. jm/pub/index Mogensen, M. (2008). Children In Organised Armed Violence Retrieved September 8, 2012 from http://www. coav. org. br/publique/media/Report%20Jamaica. pdf Oglesby, D. (2007). INFLATION AND INVESTMENT. Concise Encyclopedia Of Investing, 38-39. Statistical Institute of Jamaica Website Retrieved September 9, 2012 from http://statinja. gov. jm/CPI The Impact of Inflation on the Standard of Living among Low Income Earning Jamaicans in the Last Decade