Everywhere you go, everyone’s talking about the same thing. Complaining about the cost of living has become the new complaining about the cold.
It’s obvious from how political rhetoric over the election conformed to it being a major issue. Clearly it was what everyone who answered a door was talking about.
Also like complaining about the weather, no one does anything about it. For all the comments I’ve heard about how hard it is to afford anything these days, I haven’t heard any concrete solutions.
I must point out that living in civilization has always been very expensive. Over my lifetime, I’ve watched advocates for the impoverished point this out to people until they were blue in the face. But it largely fell on deaf ears as the silent majority was shielded from it by privilege of wealth accumulated over a few generations. However, most of that wealth has been spent and the not-so-silent majority is now coping with problems the poor have been enduring for centuries, so now cost of living is a problem.
So how do you reduce the cost of living? Not very easily. Pretty much every solution has a trade-off.
Forcing prices down, also known as deflation, is a political no-go. This was what governments tried in the 1920s when stock markets were going haywire and it’s blamed in-part for sparking the Great Depression, a repeat no politician wants attached to their legacy. The safer alternative, cranking up interest rates to curb spending, is the Bank of Canada’s current strategy.
A classic response would be for workers to demand higher wages, either through strikes or minimum wage legislation, or both. As mentioned previously, wages have largely stayed the same since the 1980s, almost half a century ago. A caveat to higher wages is that businesses normally pass additional expenses on to the consumer, so any reduction of the cost of living is temporary at best. As these wage increases are usually very industry specific, not everyone gets to share in the temporary relief either.
Similarly, cutting consumption taxes like the GST or the carbon tax would provide a temporary reprieve, but any cost savings would quickly be eaten up by inflation.
Universal Basic Income is a possible alternative — where the government sets a minimum standard of income, say $20,000, and writes every single adult a cheque for that amount every year with no strings attached. Any income you earn is on top of that. This has the benefit of helping raise everyone without putting additional strain on employers, and I’m sure anyone making less than $80,000 a year can just imagine the wonders they could do for their lives and family with an additional $20,000 at their disposal. However, the costs of a program like this would be enormous and would require a massive shift in how government collects revenues, likely involving a massive tax increase on top earners, who undoubtedly would fight it every step of the way and have the resources to do so. There’s no guarantee this would stop prices from continuing to creep up either.
A fourth option to consider is forcing greater transparency from businesses. A “bread cartel” consisting of seven major grocery chains was revealed in 2017 and prompted an investigation by the Competition Bureau. Instead of an invisible hand guiding prices, sleight of hand colluded to artificially inflate the price of bread. We can only guess what else we’re being overcharged for. But if we were to require all businesses to have the same transparency as governments — meaning we can see everything, from the cost of materials to the cost of distribution, then we would know how much something is worth compared to how much we’re actually paying for it. Targeting overinflated parts of supply chains would likely bring a noticeable reduction in overall costs.
But knocking out price gouging schemes will also cut into those businesses’ bottom lines, and most entrepreneurs who have to choose between a smaller boat and laying off a few employees will usually do the latter.
Solutions to rising costs exist, but all require sacrifices and significant political risk. So I wouldn’t be surprised if complaining remains our solution of choice.