Inflation: Older people and low-income people hit hardest by rising rates

Canada is experiencing a rate of inflation not seen since 1983, but economists say not everyone experiences it the same way.

Canada’s inflation rate – an increase in the cost of goods and services as measured by the consumer price index – hit 7.7% in May, according to Statistics Canada, due to a combination of rising cost of living, supply chain issues and the Russian invasion of Ukraine.

According to economists Rachel Samson and Kevin Milligan, the intensity with which each person feels the effects of an increasingly expensive basket of goods and services depends on their level of income, the goods on which they spend most of their its budget and overall financial vulnerability. Samson is vice president of research at the Institute for Research on Public Policy and Milligan is a professor at the Vancouver School of Economics at the University of British Columbia.


Canadians whose household budgets are mostly spent on necessities like food and shelter are hit the hardest by short-term inflation, Samson said. Compared to 2021, the cost of food in Canada increased by 9.7% in April and May, while the cost of housing increased by 7.4%, according to Statistics Canada.

“In large cities, about 60-70% of low-income renters spend more than 50% of their pre-tax income on rent. This leaves little room for additional food costs,” Samson told in an email Friday, adding that low-income people who must drive to work face additional short-term challenges with the rise in gasoline prices.

Among the most vulnerable low-income people, Samson said, are working-age adults with disabilities who struggle to afford basic necessities without the pressure of inflation, as well as visible minorities, who they experience higher poverty rates compared to the general population.

“The poverty rate among visible minorities is almost double that of non-visible minorities,” she said. “For some ethnicities, it’s triple that of non-visible minorities.”

Milligan, who specializes in labor economics and the economics of children and the elderly, expressed concern that anyone dependent on fixed sources of income, such as retirement pensions or disability benefits, do not increase with the cost of living.

“For people on pensions, some of those pensions aren’t even adjusted for inflation. It’s pretty common in the private sector,” Milligan told in a phone interview Wednesday.

“But even those like public pensions that are indexed to inflation, the cost of living updates for those pensions tend to lag a bit. It reflects what happened six months ago or a year ago, not what is happening today.


Since inflation can raise the price of virtually any good or service, Milligan said its effects affect many segments of the population, from students to homeowners. For example, students, like other people whose budgets are mostly allocated to housing, are affected by rent increases.

“I know here in Vancouver, rents have gone up significantly over the past year, and that will affect students for whom it’s a big chunk of their budget,” Milligan said.

Miligan said families are vulnerable to changes in the cost of food and fuel, the latter of which rose 48% in May from a year ago. Anyone who consumes gasoline, natural gas or propane is affected by energy prices, which rose 34.8% in May from a year ago, according to Statistics Canada.

Samson noted that homeowners may also be sensitive if inflation persists and leads to a recession.

“Homeowners who have stretched out to buy a home could be squeezed by rising debt interest payments and falling home values,” she said.

Samson and Milligan are split when it comes to single working adults. Because this group tends to have a higher incidence of poverty and less access to benefits, Sampson said single working adults are vulnerable to the effects of short-term inflation.

While Milligan acknowledged that single adults are affected by inflation, he said they can respond more flexibly than students, seniors or families. For example, if they want and can, they can undertake extra work to supplement their income, if work is available.

“They have a little more flexibility to work a little more, to take overtime, to try to earn a little more income,” Milligan said. “That’s why this group in general might be a bit more capable of handling things.”


Samson, whose organization is concerned with influencing public policy through research, says governments should examine who is most vulnerable to inflation and develop policies targeted at those individuals and households, while increasing benefits. existing.

“General measures such as cutting gasoline taxes are not effective because it is unclear how much of the tax cut will go to consumers, and it benefits high-income consumers,” he said. she stated.

“Measures such as those implemented in Vancouver that subsidize e-bikes for low-income people, or subsidized transit passes for minimum-wage workers, may be more effective.”

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