Inflation impacts more families less fortunate

L’inflation impacte davantage les familles moins nanties

The increase in the cost of living has hit hardest the households less wealthy than those who have more resources over the past 20 years, reveals a study published on Wednesday.

Taking into account several variables, the inflation rate has been 1.26 times higher for the poorer households, noted the researchers Pierre-Antoine Harvey and Minh Nguyen from the Institute of research and socio-economic information (IRIS), based on data from 1999 to 2019.

This increase is mainly reflected in three items of expenditure, namely food, transport and housing.

In the food sector in general, we note an increase of 63 per cent in the prices, while overall inflation is 40%. As the less wealthy spend 17% of their budget on buying food, compared to 12.5% for the wealthier people, they find themselves more affected by this high inflation.

In transport, inflation overall is 48%, a rate that rises to 92% if one considers only the transit sector, which again is more applicable to households who are less fortunate.

As to the inflation related to the housing, the first tenants and new buyers are more affected than the wealthy, say the researchers.

The data of the pandemic are absent from the study, but Pierre-Antoine Harvey advance that this health crisis will impact the poorest households because of their purchases.

“The negative impacts are greater for these families, because [essentials] occupy a more important place in their expenditure budget. In contrast, the more affluent households spend a greater share of their disposable income for goods and non-essential services, such as leisure, for which inflation is lower.”

Adjustments

Another finding: the use of the average inflation rate as the schedule in the granting of credits of solidarity is “adjusted at a rate that is not high enough to cover the true increase in the cost of living faced by the poorest people,” said Mr. Harvey.

The IRIS is proposed to use an indicator of growth, which would be differentiated according to income levels.

“Rather than maintain their purchasing power, increases in wages or government benefits by the rate of general inflation are depleting the families of the less fortunate.[…]If we don’t adjust enough, we do not protect the purchasing power of poor families,” concludes the researcher.

Inflation from 1999 to 2019 in a variety of sectors

  • Housing: 44%
  • Transport: 48%
  • Food spending: 63%
  • Hobbies: -4%
  • Tobacco products and alcoholic beverages: 116%
  • Education: 62%

The increase in the cost of the basket type from the poorest households (1st and 2nd quintiles) has been in 20 years, nearly 27 per cent stronger than that which affects the 10% of richest families (of 29.7% and 30.2% compared with 23.6%).

Source: Statistics Canada, Survey of household spending, 2017, and custom data.

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