Evidence of Household Consumption Changes Associated with the Global Economic Slowdown1

Abstract:The state tracks income changes between two groups of households, i.e., with incomes at or below and above social minimum during the period 2004-2008. The description of spatial variables accounting for differences across voivodships is followed by the description of differences in expenditures on major foods and food categories illustrating the gaps between two household groups over time. The income disparities have been growing during the period under consideration. Low-income households are relatively more dependent on staples and foods that are less desired from a nutritional standpoint. Results suggest the need for intensification of efforts to prevent the poor household segment falling into permanently poor households with possible detrimental effects for overall competitiveness of the national and regional economies.Keywords: social minimum, regions, food expenditure, staples, non-staples.JEL codes: R11, O12.IntroductionThis chapter examines changes in incomes of two groups of households, those with incomes above the social minimum and those at or below social minimum. The analysis reviews the changes in household incomes between 2004 and 2008, i.e., the period of Poland's membership in the European Union (EU). Although Poland's economy grew at a healthy rate throughout the period, incomes of households in the two groups show a different pattern. Moreover, the regional analysis shows the spatial differences in incomes, while the analysis of expenditure on food expands the insights helpful for broad policy development. The country's competitive position is influenced by business environment conditions. Poor households create demands on government budgets, alter the urban landscape, and establish anti-investment social circumstances.Section 1 reviews the recent economic growth and income changes. The next section defines the household income as used in this chapter. A summary of income growth rate of the average household, the average household at or below the social minimum and a household above the social minimum is found in Section 3 and is followed by Section 4 that examines the spatial income growth differences across 16 voivodships. Section 5 reports on differences in expenditure on selected foods and food categories in two household income groups. Section 6 discusses implications of the study.1. GDP growth and income changesPoland's economy has been steadily growing in the last decade. The value of the GDP in constant terms increased from 797.56 billion Polish zlotys in 2001 to 1.275 trillion in 2008 and 1.413 trillion in 2010 [World Bank 2011]. The rate of growth of real GDP was highly changeable but positive. The rate was 1.44% in 2002 and was the lowest rate of growth between 2002 and 2010. Even in 2009, the year when the full effects of the global financial crisis reverberated across the world, real GDP growth rate was 1 .65% (Figure 1). There was a noticeable increase in the growth rate in 2004, the year Poland became a full EU member. The highest level was reached in 2006 (6.23%) and 2007 (6.79%). The pace of growth slowed in 2008, the year the financial crisis fully revealed itself. More recently, in 2010, the GDP growth rate increased and it is expected to be about 4% in 201 1.From the household standpoint, the growing GDP should be reflected in an increase in income. Although individual households fare differently because the distribution of income is complex and confounded by many factors, in general, household income is expected to reflect the growth of GDP. The purpose of this study is to examine whether the effects of the global financial crisis were experienced at the household level, especially the most vulnerable households, i.e., households with low incomes. The peculiar situation of the Polish economy during the development of financial crisis is reflected in a decrease of the GDP growth rate. However, the economy has not slipped into recession proving that the overall competitiveness of the economy has been (to a large degree) maintained. …