Chapter 1

THE PROBLEM AND ITS BACKGROUND

Introduction

High inflation rate is one of the major problem of

low-income families. Now a days, their everyday life

focuses on how they can find enough money to sustain

their needs. And a statement from International Labor

Organization (ILO) states that the inflation crisis is

lowering the middle class purchasing power and

particularly hard-hitting low-income households.

According to the news article that published by the

Philippine Statistics Authority (PSA).It says that the

inflation for the bottom 30% income households in the

Philippines continued its upward movement as it rose

further to 9.7 percent in January 2023, from the previous

month’s rate of 9.4 percent. This is the highest recorded

inflation rate since March 2009. In January 2022, the

inflation rate was recorded at 4.0 percent.

Low-income families still manage to survive their

everyday lives even though the inflation still continue

to be rising. Their coping strategies are one of the

cause that they are able to manage the pressure of high

inflation. They are surviving each day and keep up with

the changes in our community. The researchers wants to

conduct a study on how the low-income families copes when

the price of their basic needs continue to rise. Their

coping strategies might help other families who do not

know what to do in this kind of situation.

Statement of the Problem

The study generally aims to determine the coping

strategies of low-income families in Barangay Sampaguita

in response to high inflation.

Specially, it sought to answer the following

questions:

1. What are the impacts of high inflation rate to low-

income families?

2. What coping strategies are used by these families to

mitigate the impact of high inflation rate?

3. What policy measures are employed by the policy makers

to mitigate the impact of high inflation rate to low-

income families?

Significance of the Study

Inflation can have a major impact on peoples day-to-

day, as they may find it difficult to afford basic

necessities. As price increase, families must budget for

inflation well. When prices go up, but wages stay the

same, it becomes difficult for people to afford basic

necessities like food and shelter.

In connection with that, this research is

significant to low income families, to all families in

the country and to the future researchers.

For low-income families, this study will help them

to come up with an idea to deal the inflation in our

country. As price increases, low-income families must

learn how to budget for inflation.

 The result from the study could also be used by all

families in our country, for them to be mindful in

spending their money, especially in today’s economy and

have an emerge fund in dealing unexpected events, like a

medical emergency.

And it can be useful to future researchers, this will

undeniably provide bases of information for future

researchers which can motivate them to undertake a

similar study in the field of work.

Conceptual Framework

High inflation rate hits low-income families and

less privilege one the hardest. Low-income families tends

to suffer the most from high inflation more than the

richest on by lowering and straining their consumption

and purchasing habits. Thus, putting the poor in a much

dreadful situation.

Despite that, the low-income families still manage

to survive inflation various measures. These coping

strategies adapted by low-income families helps them in

reducing the effect of inflation to their households.

Figure 1:

Input Process Outputs

 Assessed
 Impacts of  Analysis of coping
high data strategies
inflation through: of low-
rate to low income
income Survey families in
families of Questionnaires response to
Sampaguita high
inflation
 Coping  Reduces
strategies effect of
inflation
 Survival
from the
effects of
inflation

Figure 1 shows the analysis of data through survey

questionnaires connected by inputs and outputs. The input
includes impacts of high inflation rate to low-income
families of Sampaguita, Solana, Cagayan and coping
strategies. The outputs are assessed coping strategies of
low-income families in response to high inflation, reduced
effect of inflation and survival from the effects of
inflation.
 Scope and Delimitation

This researcher will focus on the coping strategies

used by the low-income families in response to high

inflation rates in the Philippines. The study will be

conducted in Barangay Sampaguita, Solana, Cagayan and

will involve 35 low-income families. The research will

focus on the coping strategies employed by these

families, including budgeting, reducing expenses, seeking

additional income resources, and other strategies that

they may use to deal with the impact of high inflation

rates.

The study will not cover the coping strategies used

by middle or high-income families. Additionally, The

study will not investigate the underlying causes of high

inflation rate or macroeconomic policies that may

contribute to inflation.

Definition of Terms

Inflation refers to the general increase of the

prices of goods and services overtime.

 Coping strategies refer to the ways or methods on

how the families respond to inflation such as budgeting,

reducing expenses, seeking additional income resources,

and other strategies.

Low-income families refer to the families that do

not have an enough income, with a budget ranging from PHP

2000.00 below per month.

Purchasing power refers to the amount of goods and

services that the low-income families can buy or it

simply means how much their money can buy.

 Chapter 2

REVIEW OF RELATED LITERATURE

This chapter presents the related literature found

by the researchers from different sources. It highlights

the different aspects: the definition of inflation,

impacts of inflation, and the coping strategies used in

response to inflation.

What is inflation?

Inflation is a widely discussed topic in the field

of economics, and its definition has been the subject of

several studies.

One common definition of inflation is the sustained

increase in the general price level of goods and services

over time. In his article, "Inflation," Gürkan Kumbaroğlu

(2019) defines inflation as "a situation where the prices

of goods and services in the economy increase

continuously and persistently, leading to a decrease in

the purchasing power of money."

Another way to define inflation is as a monetary

phenomenon, where an increase in the money supply leads

to an increase in the price level. In their study,

"Monetary Policy and Inflation Dynamics in ASEAN

Economies," Januar Hakim, et.al., (2021) explain that

"inflation is a monetary phenomenon, which means that it

is caused by an increase in the money supply that exceeds

the growth in real output."

A third definition of inflation is as a result of

demand-pull factors or cost-push factors. According to

the article "Demand-Pull Inflation and Cost-Push

Inflation" by Abhijeet Pratap Singh (2021), demand-pull

inflation occurs when the demand for goods and services

outstrips supply, leading to higher prices, while cost-

push inflation happens when production costs rise,

causing firms to raise their prices.

Additionally, inflation can also be described as a

measure of the rate of change of the price level over

time. In "Inflation Measurement and Policy in Turkey,"

Ahmet Faruk Aysan and Mehmet Selman Çolak (2015) state

that "inflation is typically measured as the percentage

change in the consumer price index (CPI) over a period."

Finally, inflation can be viewed as a relative

increase in prices between different countries or

regions. In "Global Inflation Dynamics in the Post-Crisis

Period," Adina Ardelean and Galina Vereshchagina (2020)

explain that "inflation can be different across countries

due to the different economic policies, structural

features, and shocks affecting them."

Impacts of inflation

The impact of inflation can be significant and far-

reaching, affecting not only individual consumers but

also businesses and entire economies. One of the most

significant impacts of inflation is its effect on

economic growth. As stated by Chaudhry et al. (2019),

high inflation rates can reduce economic growth by

increasing uncertainty and reducing investment. Moreover,

inflation can lead to a decline in the purchasing power

of consumers, leading to a decrease in demand for goods

and services. This can ultimately result in a slowdown of

economic activity.

In addition to its impact on economic growth,

inflation can also affect income distribution. According

to Rajan and Zingales (2006), high inflation can lead to

a transfer of wealth from creditors to debtors. This is

because, during periods of inflation, the real value of

debt decreases while the real value of assets remains the

same or increases. This can lead to a redistribution of

income and wealth, with debtors gaining at the expense of

creditors.

Furthermore, inflation can also affect investment

decisions. As noted by Boulila and Trabelsi (2020), high

inflation rates can lead to a decline in investment, as

investors may become hesitant to invest in a volatile

environment. This can ultimately result in lower economic

growth and reduced job creation.

Another impact of inflation is its effect on

financial development. According to Demir and Cicek

(2020), inflation can hinder financial development by

reducing the effectiveness of monetary policy and

increasing uncertainty in financial markets. This can

lead to a decline in the quality of financial

intermediation, which can have a negative impact on

economic growth.

Finally, inflation can also have an impact on the

overall welfare of society. As stated by Caner and Yucel

(2014), inflation can lead to a decline in the standard

of living for individuals, particularly those with fixed

incomes. Moreover, high inflation can lead to a loss of

confidence in the currency, which can ultimately result

in a decline in the economy's overall performance.

Coping strategies used in response to inflation

Low-income families are often the most affected by

high inflation rates, as their limited resources are

stretched even further by rising prices and also because

a large part of their income is allotted to their basic

necessities such as foods and shelter. To cope with this

financial strain, low-income families rely on a variety

of coping strategies.

Coping strategies are behavioral and cognitive

tactics used to manage crisis, conditions, and demands

that are appraised as distressing (Pudrovska, 2007).

These are actions taken under stressful situations in

order to adapt to the changes. The impact of inflation to

low-income families give rise to the implementation of

coping strategies as an attempt to deal with the

situation. According to Rubinlicht (2011), Richard

Lazarus and Susan Folkman theorized that coping could be

divided based on its function, into problem-focused

coping and emotion-focused coping.

Problem-focused coping involves handling stress by

facing it head-on and taking action to resolve the

underlying cause (Raypole, 2020). some problem-solving

coping strategies includes reducing spending or

consumption where households restrain and cut their

expenses on commodities. In short, families resorted on

consuming lesser amount of goods. Furthermore, coping

strategies adapted by households consist of increasing

income by working harder and buying cheaper goods as

substitute.

Emotion-focused coping strategies defined by Des

Marais (2022) involves managing your emotional response

to situation instead of trying to solve the problem

itself. In addition, emotional-focused coping strategies

includes effort to regulate emotions and reduce stress

associated with poverty were also employed by low-income

consumers (Grahem, et.al., 2017). few of these include

distancing, acceptance and discipline.

Some low-income families resort to cutting down

their household expenses. In their study on inflation

coping strategies in urban Ethiopia, Tafere and Worku

(2019) found that households reduced their food and non-

food consumption to cope with the high inflation rate.

The authors noted that some households even skipped meals

to save money.
 Moreover, low-income families may opt to increase

their income by engaging in informal activities such as

street vending or providing services like tailoring. This

finding was reported by Chikanda (2017) in her study on

how Zimbabwean urban households coped with inflation. She

observed that informal activities were a source of income

for many households during periods of high inflation.

In addition, low-income families may resort to

borrowing money from friends and family or taking out

loans to supplement their income. In their study on the

impact of inflation on poor households in Nigeria, Oni

and Oyeleke (2018) found that households borrowed from

informal sources and took out loans from microfinance

institutions to cope with inflation.

Similarly, some low-income families resort to

changing their consumption patterns by switching to

cheaper alternatives. In their study on the impact of

inflation on the food consumption of low-income

households in Uganda, Asiimwe et al. (2016) found that

households substituted expensive food items with cheaper

alternatives.

Lastly, low-income families may resort to using

their savings or selling their assets to cope with high

inflation. In their study on the impact of inflation on

household welfare in Pakistan, Rehman et al. (2020) found

that households used their savings to cope with the

inflationary pressures. Some households even sold their

assets such as livestock or jewelry to meet their

expenses.

In conclusion, low-income families employ various

coping strategies in response to high inflation. These

strategies include cutting down expenses, engaging in

informal activities, borrowing money, changing

consumption patterns, and using savings or selling

assets. These findings have important implications for

policymakers and practitioners in designing interventions

to support low-income families during periods of high

inflation.