Inflation creates housing and saving challenges and greater debt loads: Poverty Free Saskatchewan

July 28, 2022

Save with SPP reached out to Poverty Free Sask (PFS) via Joanne Havelock, to gain some knowledge about their views on inflation and its many impacts on life and retirement.

“Canadians have experienced a low wage economy since the late 1980s,” begins the PFS response, received via email.

“Inflation has been higher than wage increases throughout this period, negatively affecting savings rates. Many Canadians have had difficulty creating sufficient retirement savings. Following the 2008 Great Recession many seniors found themselves in even greater financial difficulty. This and future possible market downturns especially affect people with defined contribution pension plans. Although interest rates and living costs had been low for a number of years, the sudden and seven per cent plus high inflation of 2021-2022 is having an impact. Seniors today are hit hard by very high energy and food prices,” the group notes.

Here are the answers PFS has kindly provided to our specific questions.

Q. What does higher-than-usual inflation mean for people living on a low income, particularly seniors?

Higher costs may lead people who are fortunate to own a home to sell their home prematurely and move to rental accommodations, or to smaller rental units, or to live with relatives. Low-income seniors face difficulties regarding living accommodations. Subsidized housing may not be available everywhere, and eligibility requirements and suitability of location or building arrangements can pose barriers. The spaces for government subsidized personal care or long-term care are limited.

Seniors may have to choose between paying the rent, paying for food and paying for prescriptions or medical supplies.

Many seniors are caring for grandchildren or other family members, and they are doubly hit with inflation costs.

People who are low income as seniors may have been low income all of their lives, due to being from disadvantaged groups, and therefore may not have the physical or monetary assets built up to buffer inflation effects.

Q. Does higher inflation (higher costs) make it harder for people to save for the future (i.e., retirement).

It is clear that higher inflation makes it more difficult for people to save for retirement. Some people may be able to make choices in their spending that will still allow them to save. But many others are living paycheque to paycheque (if they have a steady job) or contract payment to contract payment. Then as a senior, they live from pension cheque to pension cheque. In addition, some seniors are still in the workforce because old age pension increases have fallen behind inflation over the decades.

Q. What do higher interest rates mean for those with high debt?

People with high debt will find their costs getting higher and higher. This can lead to higher personal bankruptcy and the associated stress.

Q. What steps can be taken by government/society to help those impacted by inflation?

Poverty elimination plans, involving government, business and the community, would prevent people living in poverty. Suitable and affordable housing is needed for low-income families and children, singles and seniors.

Education systems should accommodate everyone, including adult education and training. Improved employment practices would enable people from disadvantaged groups to obtain and retain jobs, and pay equity would help ensure women are paid fair and equitable wages.

Government and business could work on having reasonably priced grocery stores in all areas, and transportation options to stores. “Buy local” programs would strengthen local food sustainability. It is also important to preserve natural settings that provide medicines and food for northerners, Indigenous peoples and others.

Social assistance benefits should be increased to ensure people can adequately cover living costs. The rules should give more opportunity for people on assistance to work extra to meet their needs. The minimum wage should be increased, which might improve the possibility of savings.

Government could also protect people against rising costs by: GIS, OAS and CPP at least matching Consumer Price Index increases; a national pharmacare program; more reasonable public transportation costs; the re-introduction of inter-city transportation; and better education on managing credit and debt and saving for retirement.

Q. Any other thoughts on inflation and poverty?

Inflation hits people living in poverty the hardest. They are often on fixed incomes. Seniors, as they age, are not able to go out and earn extra money, even if they wanted to do so.

Provincial poverty elimination plans would improve the financial and social situation of people experiencing poverty and eliminate the existence of poverty, allowing them to have adequate incomes as seniors.

We thank Joanne Havelock of PFS for taking the time to respond to questions from Save with SPP.

If you don’t have access to a retirement savings program through your workplace, or are working independently as a contractor, consultant, or freelancer, the Saskatchewan Pension Plan may be the retirement savings program you’ve been looking for. SPP, which is open to any Canadian with registered retirement savings contribution room, allows you to save at your own pace. You can contribute any amount, up to $7,000 per year, to SPP, who in turn will invest your contributions to provide you with retirement income in the future. Check out SPP today.

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Joanne Havelock, PFS, Poverty Free Sask

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