The Impact of Inflation on the Purchasing Power of Government Employees: A Field Study in Al-Muthanna Governorate

Abstract

This study examines the impact of inflation on the purchasing power of government employees in Al-Muthanna Governorate, focusing on the effects of rising prices on real income, consumption patterns, and saving capacity. To analyze this relationship, the study adopts a descriptive-analytical approach, drawing on inflation data and the Consumer Price Index, in addition to field data collected from a sample of government employees. The findings reveal a statistically significant relationship between rising prices and declining purchasing power, with the extent of the impact varying according to monthly income levels. Rising prices of essential goods and increasing living costs have emerged as major sources of pressure on employees’ ability to meet their basic needs and set aside part of their income for savings. An analysis of inflation rates in Iraq during the period under study indicates that inflation increased in the earlier years, followed by a relative slowdown in subsequent years. However, a decline in the inflation rate does not necessarily mean that prices return to their previous levels; rather, it indicates a slower pace of price increases. Consequently, employees may continue to face high living costs despite the relative improvement in inflation indicators. In light of these findings, the study recommends that changes in price levels be taken into account when formulating wage and salary policies, with particular attention given to low- and middle-income groups through the development of policies and measures aimed at improving living standards and strengthening purchasing power. It also emphasizes the importance of considering the economic circumstances of these groups when designing social support programs, given the increasing cost-of-living pressures they face as a result of rising prices.