How living in Saskatchewan crushes your wallet.
Author: Jason Chestney
The very idea of inflation is one that sends university students into conniptions, with good reason; it usually means that tuition rates are going up, as tuition rates are tied to inflation. However inflation in and of itself is not a bad thing. Inflation, according to economists, is one of the signs of a healthy economy. However, the problem is that for the last forty years wages for the proletariat and middle-class have stagnated, resulting in a massive gap between the rate of inflation and the wages that enable the population provide for themselves. As a result, the population has taken to combating inflation through not pushing for higher wages but through increasingly their consumer debt load to record high levels. This trend has persisted since the 1980s.
For university students, this phenomenon is readily apparent. They have had to pay for tuition, books, and living expenses while inflation increased prices by four percent last year. Is it any wonder that university students are looking at a future that many commentators report will leave them in a worse situation financially than their parents? The problem is also tied to the stagnant economy throughout much of the country, something the Bank of Canada is tackling by attempting to encourage Canadians to put money back into the economy through keeping the interest rate at record low levels. This low interest rate is a major problem because it further encourages Canadians to spend the money they do not have, thanks again to the discrepancy between wages and inflation, in order to maintain their standard of living. While this is tolerable at the moment, the level of consumer debt and the effects of inflation will become glaringly apparent once the Bank of Canada feels confident enough in the economy to raise the interest rates on debt to be in line with inflation.
As a result, many people with this record level of debt will be unable to pay even the minimum payment and will be forced to either dramatically reduce living standards to stave off bankruptcy or work even harder and longer in attempting to earn enough to pay their debts. Coupled with inflation, this will result in many middle-class Canadians losing their status as “middle-class” and will only increase the wealth disparity between the middle and upper classes. For university students, the possibility of this scenario occurring is even more likely due to already coming out of university with substantial student debt. The end result would lead to university students barely able to support themselves, let alone think about starting a family. This would lead to an even more indebted society, with numerically fewer Canadians to assume the debt load and offset the inflation rate.
What is the solution to this problem? It is actually quite simple: to provide Canadians with a living wage. This would enable them to financially support and sustain themselves without incurring new debt, and would encourage them to use that living wage to pay down their existing debts without using the capital to pay for things they cannot afford; the latter scenario a hallmark of the 1980s. The next step in this solution is to index living wage increases to match the rate of inflation, allowing the Canadian middle class to prosper and increase in size.