How should Ontario fight inflation? By fighting inequality

April 11, 2022

As pundits puzzle over the problem of inflation, some provincial governments are taking action. Methods differ, but they are all based on the same idea: when inflation is high, people need money.

Quebec is giving $500 to all adults with incomes below $100,000. Alberta and Ontario have cut, or pledged to cut, taxes on gasoline. Ontario has axed licence plate fees. British Columbia is giving drivers a one-time discount on car insurance. New Brunswick and P.E.I. have cut income taxes.

These are not cheap moves: all told, they will cost at least $8 billion this year alone. But they are necessary, premiers say, because of inflation. “The rise in gas prices is now; the rise in food prices is now,” as Quebec’s finance minister says.

With revenues rising fast of late, provinces have money to spend. But so far, their inflation-fighting efforts miss the mark.

Here’s why: Canadians expect public services to be universal but cash transfers of any kind to be targeted. This is mostly not what the provinces are doing.

Let’s be clear: inflation does not affect everyone equally.

The lower your income, the more of it you spend on essentials like food, housing, and transportation. You know what things cost. When prices go up, you have meagre savings to absorb the shock.

At higher incomes, people spend proportionally less on essentials. They pay less attention to prices. When prices go up, they can pay more, because their income and savings provide a cushion.

Lower-income people need protection against inflation. Higher-income people already have it.

Here in Ontario, Queen’s Park’s first move to provide relief from high prices ignores this fact. The pizza delivery driver in the 12-year-old car saved $120 this year and will get up to $240 back. That’s a good thing. But the driver of the $100,000 Lincoln — who clearly doesn’t need public aid — gets the money, too. That’s not the best use of public dollars.

And let’s not forget: a lot of people don’t have cars. They don’t get anything.

On the income front, the people most harmed by inflation now are the same people who needed support before inflation spiked. Here are six things Ontario can do in the upcoming budget to help:

  • Raise social assistance rates dramatically. The pandemic proved, once and for all, that income transfers reduce poverty, including child poverty. Ontario Works and Ontario Disability Support Program recipients need more support. It’s urgent.

  • Increase the minimum wage right now. Higher wages boost buying power. For low-income workers, keeping up with inflation is necessary but not enough. Not nearly.

  • Freeze rents and “above-guideline increases” until inflation returns to normal. The eviction of tenant families during a global pandemic is a sorry chapter in Ontario’s history. Working tenant families had little in the way of savings when the pandemic began and even less now. Freezing rents costs government nothing.

  • Expand the Ontario Trillium Benefit. Ontario already has a ready-made income transfer that is highest for those with lower incomes. Boosting any part of the OTB would help those most in need.

  • Increase incomes for injured workers. As many as 46 per cent of workers with a permanent disability live at or near the poverty line. Yet starting this month, the Workplace Safety and Insurance Board is giving up to $1.5 billion to employers. That money should go to injured workers.

  • Scrap Bill 124. All workers need wage hikes, but those in the provincial public sector are barred by law from even asking for raises above 1 per cent. With Ontario inflation topping 6 per cent in February, a 1 per cent pay raise is really a 5 per cent cut.

Trying to help Ontarians cope with inflation while ignoring income inequality is a waste of money that would be better spent on public services and vital infrastructure. If we’re fighting inflation, let’s put public dollars where they’ll do the most good.

Randy Robinson is the Ontario director of the Canadian Centre for Policy Alternatives. This piece was originally published in the Toronto Star.