More than six in 10 or 63 per cent of Canadians belonging to low-income households are worried about the impacts of inflation on food, housing and other expenses, a recent report by Statistics Canada has found.
The report published Wednesday also found nearly 44 per cent of Canadians in 2022 were “very concerned” about their ability to meet daily expenses. The study used data from multiple sources, including the Canadian Income Survey and the Survey of Financial Security.
“This is hardly a surprise,” said Christopher Ragan, economist, and director of McGill University’s Max Bell School of Public Policy. “Prices are rising the same amount whether you are rich or poor. But of course, if you are a lower-income family or a lower-income household, those rising prices hurt more.”
Headline inflation peaked at 8.1 per cent in June of 2022, with the most recent figure for December showing annual price hikes have cooled to 6.3 per cent.
To make ends meet, 19 per cent of low-income Canadians in 2022 reported that they had to often borrow money from friends or relatives or take on more debt. This compares to two per cent of those who were not low-income, according to Statistics Canada.
Canadians with the lowest income were also “more than three times as likely” — 17 per cent versus five per cent — as others to report that they would possibly obtain food or meals from a community organization over the next six months due to soaring costs, the survey found.
However, according to Ragan, this is not solely due to inflation.
“Even in the absence of inflation, we deal with this issue because we’ve always had low-income households,” said Ragan.
“This is not a new problem,” he said. “I would not say we necessarily have the perfect set of income supports for low-income families.”
But Ragan noted that inflation is only making it harder for low-income families.
“We’ve got to not only think about programs that are targeted at helping those low-income families, but also think about how to reduce inflation itself,” he said.
“You’ve got the central bank trying to reduce inflation through its policy approach. And you’ve also got some governments, provincial and federal, helping out low-income households by giving them targeted tax cuts or sometimes they send them a check in the mail. Different approaches, of course, with different governments. But that’s all an understandable way to deal with the problem of inflation,” said Ragan.
According to Statistics Canada, in 2019, the median after-tax income for families in the lowest income group was $21,000. This was one-third of the median for all groups ($62,900) and seven times lower than that of families in the top quintile ($146,000).
The agency also noted that the major source of income for most low-income families was government transfers (62 per cent), followed by wages and salaries (27 per cent) and income from self-employment (seven per cent).
By comparison, the major source of income for all other groups who weren’t considered the lowest income was wages and salaries (68 per cent), with government transfers accounting for nine per cent, according to Statistics Canada.
Additionally, the survey found that single parents, divorced people and First Nations living off-reserve were most likely to be in the lowest family income bracket.
According to the agency, in 2019, around 5.1 million Canadians lived in families with the lowest income, representing 14 per cent of the total population.
Living with low income was a reality for 32 per cent of single parents with children, the agency said, making it four times greater than couples with children (eight per cent).
On the other hand, divorced Canadians (30 per cent) were more than three times as likely as married Canadians (nine per cent) and those living common law (eight per cent) to be in the lowest income bracket.
For First Nations living off-reserve, 28 per cent were living in the bottom income quintile, compared to 14 per cent of their non-Indigenous counterparts, the agency found.
“The last couple of years has been a bizarre year for economic events. And so, we had a big burst of inflation,” Ragan said.
According to Ragan, the Bank of Canada has been mostly successful at keeping inflation at almost exactly two per cent on average, but because of the COVID-19 pandemic and the war in Ukraine, inflation has gone up.
Ragan said that the issue is not just impacting Canadians. Central banks are on the job, and not just in Canada — the Bank of England, the Federal Reserve in the United States and the European Central Bank are all trying to cool inflation, he said.
“All of these central banks are doing roughly the same thing, which is trying to slow down the growth of the economy to try to take a little bit of that inflationary steam out,” he said.
Ragan noted that central banks will take a little time before they are actually able to reduce inflation —something that people need to keep in mind.
“We should probably cut them a little bit of slack. But they are on the job and I think it’s going to work.”
— with files from Craig Lord