Productivity |  Quebec continues to catch up

Surprise, your purchasing power increases!

The cost of living is one of the concerns of the moment, for good reason: booming inflation is eating away at household budgets. But in the end, has the purchasing power of Quebecers really eroded if we also consider the increase in their income?

Surprisingly, the answer is no for most categories of households, noted the Université de Sherbrooke Chair of Taxation and Public Finance.

In an in-depth study on the subject, authors Frédérick Hallé-Rochon, Luc Godbout, and Suzie St-Cerny come to surprising conclusions. They analyzed the evolution of income after taxes and social contributions of 14 types of households in Quebec to conclude that for 11 of them, purchasing power has increased in recent years, despite inflation.

Singles, single-parent families and people over 70 years of age stand out, among others.

Their disposable income, after taxes and inflation, has risen between 1.1% and 3.3% since 2019, according to the study. On the other hand, people who live with a partner are more losers, but the losses are relatively modest (1% to 1.3%).

To carry out their analysis, the researchers compared the average income that 14 types of households will earn in 2023 -after the inflationary storm- with what they obtained in 2019, that is, before the pandemic. Revenues have been deflated for inflation, so they are comparable year over year.

The authors also compared the evolution of purchasing power in the long term, that is, since the year 2000.

Result: the median disposable income of single people will be around $37,222 in 2023, or 1.1% more than in 2019, once inflation is eliminated. For couples with children, this median net income will be $109,075, which is 1.3% lower than it was in 2019 (we’re far from the butcher shop).

Among the favorable elements that have offset inflation are, of course, wage increases, which are relatively significant in Quebec. In 2023, the Desjardins Group expects the increase to be around 4.1%, on average, after an increase of 4.2% in 2022 and 2.9% in 2021.

In addition to the wage increases, we must mention the sharp increase in the benefit for workers in Canada, such as the most recent tax credit for people over 70 years of age.

In fact, a large number of households have effectively suffered the impacts of the inflationary boom in 2022, for example those that have had to change accommodation.

And with relief programs put in place during the pandemic fading away, the scare was significant for some compared to 2020.

However, one-off government measures to neutralize the effects of inflation, such as Legault government controls, have partly compensated. And next year, the indexation of government parameters to inflation (tax tables, pension plan, etc.), to which must be added salary increases and tax measures, particularly for the elderly, will more than compensate the rise in inflation, on average.

According to Luc Godbout, there has been some inflammation of the problem. “The effect of inflation may have been exacerbated by media coverage (vox pop, gas prices, etc.). In many cases, the one-time measures have fully or significantly offset the increased cost of living,” says Mr. Godbout.

To these specific measures will be added the important tax reduction promised by the CAQ government in 2023 (the study estimated its impacts for the 14 typical households, but the data in this column are all prior to the tax reduction).

One thing is certain, in the long term, the average household has seen its purchasing power increase significantly, according to the study. For example, real growth, that is, after inflation, was 64% for single-parent families between 2000 and 2019. It must be said that these households have been particularly helped by the Quebec governments in recent years.

Other winners: singles (+43%) and couples with children (+40%).

The improvement in the last 20 years has not been linear, says Luc Godbout. Between 2007 and 2012, purchasing power almost stagnated in Quebec, in the context of the financial crisis. Then it recovered, with the favorable effects that we see in the long term.

Luc Godbout agrees that the period is currently more difficult for home ownership. But to those who complain that the needs are greater today than they were 25 or 40 years ago, he replies that those needs, above all, have changed.

Yes, there are cell phone charges, but the long distance charges are gone. And today, most households, regardless of their social class, pay for a car or a regular trip to the South, which could not be done in the 1970s or 1980s, for example.

Facing, right?

To know more :

Correction, Churchill Falls

In my column on Churchill Falls, I wrote that the cost of two recent transactions yielded a market price ranging from $4,650 to $4,838 per megawatt. It should have been written for kilowatt, of course. My fault.

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