Making life truly affordable requires more than lowering inflation

Rosanna Tamburri and Shaimaa Yassin | November 3, 2023

Since the House of Commons returned for its fall sitting, affordability has topped the agenda.  

The government introduced the Affordable Housing and Groceries Act to spur construction of new apartment buildings and increase competition among grocery retailers, and also increased the amount of low-cost financing available to developers and builders of rental units.  

Canadians, particularly those with lower incomes, are hurting and politicians are finally getting the message. Although the inflation rate has moderated in recent months, prices remain at high levels and the rise in the prices of groceries and shelter continues to outpace headline inflation. 

But tackling inflation alone won’t be enough to make life affordable for many Canadians. Almost seven million people — including 1.8 million children — faced food insecurity in 2022, up from about six million in 2019.  

The health consequences extend beyond poor nutrition. Studies show food-insecure households spend less on other essential needs such as housing, transportation and medicine. 

What should be done?  

For starters, the federal government should move ahead with its long-promised reform of employment insurance. Ottawa has pledged to modernize the program to reflect changes in the labour market and to cover a greater proportion of workers but Canadians are still waiting. 

Under the program’s current eligibility rules, a claimant must have worked between 420 and 700 hours in the preceding 12 months, depending on where they live, to collect benefits. A grocery store clerk in Corner Brook, Nfld. requires 490 hours to qualify while her counterpart in Toronto requires 665 hours. 

Those who do qualify receive payment equivalent to 55 per cent of previous earnings. That same Toronto grocery store clerk who works full time and earns the minimum wage would receive $1,456 a month on EI — in a city where the average rent for a vacant one-bedroom apartment is $2,541.  

A 2022 IRPP commentary called for a uniform 420-hour eligibility requirement across the country, as was the case during the COVID-19 pandemic, as well as increasing the earnings replacement rate to 60 per cent.  

Canada’s expanding safety net should be expanded further 

Although it has remained quiet on the EI front, the federal government has moved to expand Canada’s social safety net, including the introduction of the new Canadian dental care plan, a $10-a-day child-care program, a proposed Canada disability benefit and a one-time grocery rebate. This is a good starting point, but it’s not enough. 

As well, under the terms of its supply-and-confidence agreement with the NDP, it has pledged to introduce legislation this fall to implement a national pharmacare program 

The dental care plan is the biggest expansion to public medicare in 50 years. It is being rolled out in phases starting with children under 12. The government estimates that once the plan is fully in place at the end of 2025, it will cover up to nine million low- and modest-income uninsured Canadians – a major step forward for a country that is widely seen as a laggard compared to its OECD counterparts in providing dental care. 

However, a recent study notes that even Canadians with private dental insurance face barriers to care because of high deductibles, cost-sharing and coverage limits. It recommends providing Canadians with universal coverage for a limited core of essential dental services through the creation of a federally funded arm’s-length agency, while leaving private providers to cover other services. 

The study also acknowledges that a “forceful mechanism” may be necessary to ensure that dental providers opt into the plan and to prevent extra billing.  

More child-care funding is needed 

The rollout of the federal government’s $10-a-day child care plan has helped boost the participation rate of women with young children in the workforce, according to an analysis by TD Economics. 

However, the report estimates that commitments to create new spaces fall far short of demand across Canada. One reason is that not-for-profit service providers have difficulty accessing private capital to fund expansions, according to researcher Gordon Cleveland. A shortage of early childhood educators is also putting the program’s success at risk, he says. 

What’s more, in a separate paper, Cleveland argues the $9 billion a year allotted in funding to finance the program likely isn’t enough to meet the $10-a-day target in high-cost jurisdictions such as British Columbia, Alberta and Ontario, and that a supplementary financing program will likely be needed in those provinces. 

Meanwhile, legislation to implement the new Canada disability benefit received royal assent in June, but the federal government has yet to develop the regulations to implement it. About 6.2 million people with disabilities live in Canada and 23 per cent of them live in poverty, twice the rate of those without disabilities – a situation that has been exacerbated by high inflation. 

Advocates called the benefit a “once-in-a-generation opportunity to break the link between disability and poverty,” but cautioned that the program must not repeat the mistakes of existing benefits and tax credits.  

Researchers Jennifer Robson and Lindsay M. Tedds argue the regulations must consider the intersections of gender, and the nature and severity of the disability. They also say the process must include substantive involvement of the disability community — not simply consultation. 

More income supports are needed 

Along with housing, food prices have topped cost-of-living concerns in recent months. In the 2023 budget, Ottawa announced a one-time grocery rebate that provided $2.5 billion in targeted inflation relief to 11 million low- and modest-income Canadians. The rebate was delivered July 5 with the quarterly GST/HST credit payment.  

However, the one-time grocery rebate was not enough. An analysis shows that the GST credit was too small to lift many above the poverty line.  

Federal efforts to lower costs and increase income will provide much-needed relief for low-income Canadians and other vulnerable populations. Still, more action is needed and wrestling inflation down won’t be enough. 

The federal government needs to make sustained improvements to new and existing social supports, and expand targeted benefits for those most vulnerable. Moving forward with EI reform and closing gaps in income supports for the lowest-income Canadians are two areas for increased federal action in the next budget.