Facts: Reimbursements, grants and price base amounts
The price base amount is used when the levels of certain insurances in the social insurance are to be set.
The guarantee compensation in activity and sickness compensation and nursing allowance is calculated each year with the price base amount according to how inflation according to the measure CPI looked the year before.
Other allowances such as sickness allowance and parental allowance are partly calculated with inflation due to an allowance cap. The ceiling is moved up by the price base amount if inflation rises. This means that people whose income exceeds the ceiling receive more compensation when the price base amount is increased.
Child support or parental allowance are examples of allowances that have no protection against inflation. If these allowances are to be increased, the Riksdag must make a decision about it.
Source: Försäkringskassan
The so-called price base amount, which controls the level of, for example, student funds, guaranteed pension and sickness benefit, is calculated every January in line with inflation.
In a normal year, when inflation is stagnant or rising at a leisurely pace, the benefits are protected against rising prices. Namely, it is the inflation rate in June that determines what the increase in the price base amount will be at the turn of the year.
But inflation is now rising so fast that the increase does not cover the entire price rise, according to a new analysis by the Swedish Social Insurance Agency.
“The enumeration takes place with a certain delay and with this very high inflation that we have today, the enumeration does not keep up,” explains Ulrik Lidwall, analyst at the insurance fund.
— Now the compensations have time to erode before a new price base amount comes into effect.
Determined in June of the previous year
In 2022, the inflation rate was 8.7 percent in June, compared to the same month the year before.
In December 2022, the inflation rate had risen to a whopping 12.3 percent, compared to the same month in 2021.
When this year’s price base amount was introduced in January, its value had already fallen by just over 6 percent, according to Ulrik Lidwall.
“We will see where that reduction in value ends with continued inflation during the year,” he says.
At the same time, all compensation and salaries are affected by the fact that inflation is now taking a bite out of our wallets, says Lidwall.
— Before there is time for a new salary negotiation and a possible new salary, the one you have has time to decrease in value.
The rate of inflation in November 2022 according to the measure CPI. Hardest with warranty compensation
Even if social benefits were raised by a historically significant amount in January, many people will live in continued higher financial uncertainty in 2023, according to the Social Insurance Agency.
It will be hardest for single people with children and people who live on allowances at guarantee level, says Ulrik Lidwall.
“They also have more limited margins from the start,” he says.
Households that receive benefits but also work and receive a salary are also negatively affected by inflation but, according to Försäkringskassan’s analysis, still have greater opportunities to influence their financial situation.
— Otherwise, the high inflation is unfortunate because it makes us all poorer, so we have to hope that it won’t last long, says Ulrik Lidwall.