The new reality of 6.7% inflation is that Canadians will be forced to spend less
CBC
Did your boss give you at least a 6.7 per cent raise this year? Can you think of any friends whose bosses did?
As inflation jumped by a whole percentage point last month — up from 5.7 in February to 6.7 per cent in March — Canadians are increasingly being squeezed between the rising cost of necessities and a sharp plunge in their spending power.
Bound by contracts that failed to foresee inflation rates approaching seven per cent, or held by wage restraint legislation that limits increases to as low as one per cent, the number of Canadians who will be forced to cut back is growing.
And that is beginning to be felt throughout the economy; relative luxuries like streaming services are already feeling the impact as subscribers look for ways to spend less.
For some, including those who already have every nickel accounted for, it is nothing new, said Shirley Tillotson, a professor emeritus of history at Dalhousie University in Halifax who has studied taxation and inflation.
Those people have had to cut back steadily amid lingering inflation.
"It is genuinely a problem for people on fixed incomes, seniors who have unindexed pensions," said Tillotson. "People who are on social assistance or any other form of public benefit that's not indexed, they're all going to be terribly hard hit."
The problem is that wage increases that don't keep up with inflation have the same effect on your personal finances as an actual cut in income.
Even with a raise of 1.7 per cent — more than some nurses or teachers will get this year — this 6.7-per-cent hike in consumer prices means households will have to shrink their spending by five per cent to even keep treading water.
"You've got to cut back on things that, you know, you don't necessarily need," said Adrian Chang, who lives in downtown Toronto and doesn't drive. He said he's noticed the rising cost of food and rent, and plans to go out less as a result.
But for many others, especially those with fixed expenses or the vast majority of Canadians carrying debt, cutting five per cent from their budgets will be hard. It's not just the poorest who spend every penny.
"There is a real reason to be afraid of inflation," said Tillotson.
Pulling both from her research and her own personal experience, Tillotson said that for people who have lived through times of sharply rising prices, such as the Second World War or the 1970s and 1980s, just the word inflation scares them.
And historically, governments have been afraid of it, too. Tillotson points to a 1945 National Film Board propaganda film titled Money, Goods and Prices, which uses what she calls a "voice of God" narration to patiently explain how wartime inflation works and how the government was going to fix it.
