25 July 2022
In this note, we provide measures of the effects of high rates of inflation in food prices and the costs of housing on Canadian households reliant on government-provided income assistance. Inflation puts these households at risk because little of their income is indexed to inflation. That which is indexed to inflation varies by province and by family composition. In most provinces, protection from inflation depends on periodic ad hoc adjustments to income support payments, adjustments that are sometimes separated by many years. A notable exception is Quebec, where nearly full indexation ensures recipients of income support are protected from inflation. In other provinces, the general lack of full indexation means that during periods of inflation, Canadians reliant on social assistance are subject to two types of risk, one economic and one political. The economic risk is due to the fact inflation threatens to cause them to endure a catastrophic fall in what is already a low standard of living. The political risk arises because in most provinces, whether inflation results in a fall in living standards is entirely dependent upon whether politicians choose to provide periodic, unscheduled increases in social assistance incomes, euphemistically referred to as income “enrichments.” With a single stroke of a legislative pen the political risk can be eliminated and the economic risk minimized. The high rates of inflation currently being experienced add urgency to this consideration. We show that deteriorating health, increased reliance on food banks and rising rates of homelessness are just some of the inevitable consequences of delay.