As surprising as it may seem, imagine that our purchasing power has improved overall since 2019, the last year before the COVID-19 pandemic, despite high inflation.
gotta do it!
Uh yes! Disposable income growth finally managed to counteract the extremely negative impact of the increase in the consumer price index. By disposable income we mean the sum of all income received by the household minus current transfers in the form of taxes and contributions to the government.
A study by the federal government’s Parliamentary Budget Officer (PBO) concludes that the purchasing power of all Canadian households has improved despite rising costs for food, transportation, housing, petrol and more.
“Nearly three years into the pandemic, PBO finds that all households have better purchasing power when it comes to disposable income. This improvement is 5%”, writes the main analyst Régine Cléophat in her recent study “The Purchasing Power of Households at Different Income Levels since 2019”.
But not for everyone
Unfortunately, the price increase affects the purchasing power of households in line with their income. Therefore, it is evident that inflation has a regressive impact on household purchasing power.
Households in the first two income groups (the first two quintiles of the five) suffered a loss of purchasing power of around 9.4%.
Inflation therefore hits vulnerable households harder when compared to its impact on the wealthiest, who have the financial means to adjust more easily.
Unable to meet the rising cost of living from their own sources of income, the lowest-income households rely on government transfers (benefits, allowances, taxes, etc.) to bolster their month-ends to survive in the face of rising prices.
Quebec is still lagging behind
The disposable income of Quebec households is significantly lower than that of Canada as a whole and Ontario, with which François Legault’s government likes to compare itself.
As evidence of this, the disposable income per household in Quebec in 2022 was US$76,855, which is US$22,785 less than that of the Ontario household (US$99,640).
Compared to the Canadian household, whose disposable income is US$93,580, the difference is US$16,725.
Finally, for each of the five income quintiles, the amount of disposable income of the Quebec household in 2022 is given here, with the plus or minus difference with that of the Ontario household given in brackets.
- First Quintile: $27,312 (+$68)
- Second Quintile: $52,148 (-$22,442)
- Third Quintile: $79,591 (-$5,364)
- Fourth Quintile: $91,981 (+$4,367)
- Fifth quintile: $175,087 (-$13,002)
Despite the negative impact of inflation, Ontario residents managed to save $9,649 per household in 2022, $4,002 more than us.
