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Monday, July 15, 2024

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Canada has a cost of living crisis — but there are solutions

Grocery prices are, in the main, not spiralling upward, writes David Olive, but are stuck nearly 40 per cent higher than they were three years ago. Richard Lautens/Toronto Star file photo

In just three years rent and groceries are up nearly 40 per cent. There are solutions to Canada’s sky-high cost of living, writes David Olive, but the problem will not go away on its own.

To understand the new populism that has begun to drive our politics, visit the supermarket.

Prices are no longer spiralling upward. But neither, in the main, are they coming down to pre-pandemic levels. Not even close. Prices are still stuck at the elevated levels to which historically high inflation rates pushed them.

They haven’t even returned to where they were three years ago, as I learned from pricing a basket of 18 household items I selected for comparison with March 2021, exactly three years ago.

The items in my basket of produce, packaged foods and other household staples were priced at a total of $82 in March 2021, according to StatsCan

Today’s Walmart price for that basket is $113.32, a 38.2 per cent increase in just three years.

Food costs should be falling by now

Compare that with the increase of only 8.2 per cent in average weekly pre-tax earnings in the past three years. The latest Canada’s Food Price Report, published in December, forecasts an increase of up to $701 this year in the average family of four’s annual food bill, or a total of $16,297.20.

That is reported as relief from 2023’s $1,065 jump in food prices. But a further hike of $701 is no relief at all, when food costs should be falling by now, not still rising.

Meanwhile, Rentals.ca reports that asking rents this month for two-bedroom Toronto apartments average $3,287, an increase of almost 38 per cent from March 2021.

Three years later, the average asking rent for a two-bedroom Toronto apartment on Rentals.ca is $3,287, a near doubling in basic shelter costs. 

“If you were only to look at macroeconomic metrics, Canada’s situation would be the envy of most of the world,” economist Armine Yalnizyan, Atkinson Fellow on the Future of Workers, told me.

But “the two things that no household can duck — shelter and food — are significantly more costly today than before the pandemic began.”

Urgency of the cost-of-living crisis is lost on politicians

Yet there is a sense among the leadership class of politicians and business executives that Canada’s economic conditions compare well with other countries and are set to improve. That is, the urgency of the cost-of-living crisis is somewhat lost on them.

After all, they say, the decades-high interest rates that have held back economic growth are expected to start declining this year.

The national jobless rate, at 5.8 per cent in February, is lower than the 6.5 per that many economists expected by now. And with inflation at 2.8 per cent in February, down from its 8.1 per cent peak in 2022, victory on that front is at hand.

Yet, in a Leger poll released this month, 70 per cent of Canadians surveyed agreed with the statement that “It feels like everything is broken in this country right now.” 

The cost-of-living crisis has triggered a widespread anger that has manifested in a craving for new leaders, in Canada, the U.S. and Europe.

Canadians are not accustomed to sustained high prices

Populist leaders, that is, with no solutions to the crisis, who instead use phoney issues like the revenue-neutral carbon tax to inflame the angst.

But the populists’ message is trumping that of establishment leaders who fail to grasp the reality that Canadians simply aren’t accustomed to sustained high prices.

How could they be, when the inflation rate averaged only 1.7 per cent in the decade prior to the pandemic? And inflation averaged only 2.0 per cent in the three decades before 2019, the last pre-pandemic year.

For anyone coming of age after 1990, today’s high cost of living is a wholly new and disturbing experience. That covers the entire Millennial and Gen Z generations.

And for older Canadians, the double-digit inflation of the 1970s and early 1980s is a vaguely recalled nightmare that was expected not to recur.

It would be convenient if a mere change of leaders would end the cost-of-living crisis. But as sure as gravity is here to stay, acute economic discomfort will remain long after changes of government.

There is a new model of economic governance

Unless, that is, Canada adopts a new model of economic governance.

We must accelerate construction of affordable housing; raise minimum wages; and properly fund food banks that now turn away customers for lack of supplies due to sharply higher demand.

But the new model would also strengthen the social safety net with universal basic income (UBI) and “living wages,” which pay workers according to the cost of living in their localities.

We know from pilot UBI projects here and abroad that UBI holds promise of providing a guaranteed income to households that is sufficient for families to live in relative comfort

And there already are 620 Ontario employers paying a living wage, which for Toronto is calculated at $25.05 per hour, compared with the Ontario minimum wage of $16.55.

Bottom line: The cost-of-living crisis is real, will not go away on its own, and threatens to stoke social unrest. And there are solutions to it, for the grassroots and official leaders bold enough to embrace, promote and enact them.

David Olive
David Olive
  David Olive is a business and current affairs columnist at the Toronto Star. In books, blogs, magazine features, newspaper articles and speeches, Olive has covered the global business, economics and political science for 32 years.
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