Measuring price dynamics from the perspective of the poorest households in Poland

Poland, like many other countries, lacks a price dynamics index tailored to the poorest households. The aim of this article is to develop a Subsistence-Adjusted Price Index (SAPI) – an indicator of the dynamics of the costs of living. SAPI complements the Consumer Price Index (CPI) by enabling a more accurate assessment of the real cost of living faced by the poorest households, while also allowing for regional analysis. The analysis is based on data on the subsistence minimum from the Polish Institute of Labour and Social Studies and CPI inflation data from Statistics Poland covering the period 2006-2024. The analysis revealed substantial discrepancies between the two measures: the cumulative price increase measured by the SAPI amounted to 154.87%, whereas the CPI indicated an increase of only 87.58%. In addition, the SAPI appears to lead the CPI by approximately two years. It was recommended that the SAPI be included in official statistics and adopted as an indexing factor for social benefits, minimum wages and pensions, which could improve the effectiveness of social policy and reduce income inequality in Poland.