Ashleay: Welcome to iA Financial Group’s “In Your Interest” podcast, where we discuss your need-to-know economic news and how it affects your finances. Inflation, labour shortages, the housing crisis, and household debt: the economic impacts on the middle class are numerous – so imagine the impact on the poorest. Today on our podcast, we have a special guest in studio to discuss how to mitigate these impacts and explore concrete solutions to help people. My name is Ashleay, and I’m here with my colleague Sébastien Mc Mahon, our Chief Strategist and Senior Economist at iA Financial Group, as well as Isabelle Genest, President and CEO of Centraide Québec and Chaudières-Appalaches (United Way). Hello, Isabelle. Hi, Sébastien.
Sébastien: Hi, Ashleay.
Ashleay: First of all, Isabelle, can you tell us a little bit more about your role at Centraide?
Isabelle: Sure. I’m the CEO of Centraide. Many of you know it as United Way. Here in Québec City, Centraide raises money to support local community agencies to fight poverty and social exclusion.
Ashleay: I see. Whom do you help and how do you help?
Isabelle: We help 215 local community agencies, and they help on every aspect of poverty and social exclusion.
Ashleay: Wow. We know that the demand at agencies has increased. But what are we seeing now that we haven’t seen before?
Isabelle: We’re seeing people with an income who go to agencies to have their very basic needs met. What we saw before the pandemic was people, usually on social security or welfare, who would get help from different food banks, for example. And now we see more and more small families with two income-earners and young kids in line to get food or help.
Sébastien: The situation is that the economy is growing, and the face of poverty or people in need evolves over time. There have always been inequalities. Over time, there can be even more inequality. How do you see the evolution of inequalities over the last decades and during and since the end of the pandemic?
Isabelle: The pandemic brought into focus situations that we knew existed prior to the pandemic. If we look at family income in the province of Québec and divide it into ten deciles over the period from 1998 to 2018, we see that the increase in income in the bottom decile is only $1,000. In the top decile, the increase was more than $700,000. So you see that inequalities are much greater. And the pandemic made the situation worse.
Sébastien: There is a study by the Bank of Canada that I like to cite for many reasons that showed that during the pandemic, between late 2019 and late 2021, the average Canadian household got richer by $230,000 resulting from the rise in housing prices and the rise in the price of assets. If you have a pension fund, you had some gains, and you increased your savings. But what’s behind these numbers? The fact is that if you didn’t have a house but were fortunate enough to have a pension fund, then you found yourself in a situation where you saved more money because you could go to the restaurant or the movies as often as before. Now, however, you face inflation, including a 10% rise in your grocery bill.
Isabelle: The first people to lose their jobs during the pandemic were the ones with the lowest wages. We see that the people you’re referring to who didn’t have the assets to get through the pandemic are also the ones who lost their jobs early in the pandemic. Of course, that only increased inequalities.
Sébastien: In a way, asking the question is answering it. But there is no typical family that needs help.
Isabelle: Not really, especially nowadays after the pandemic and what we see with inflation. Increasingly, we see income-earners who need help. But the 215 community agencies that we support help people at different life stages as income-earners. You may have a very good job and a steady income, but all of a sudden you face a mental-health crisis in your family. If your son develops schizophrenia, for example, you cannot, as a mum or dad, go to the emergency room to get help. So these agencies will also help in such cases. This is what we see more and more. It’s a kind of ripple effect. Take the housing crisis, for example: if you lose your house, you may develop violent behaviour or addictions or mental-health issues. So we need this whole net to support everyone. If we don’t help the people who need help at different stage in their life – we all lose. With help, people can get a job, pay taxes, and contribute to society. Increasingly, to get this help, they call on these agencies. What sometimes happens is that they then get involved in the agencies, become a member of their board or a helper for other people – in which case, we all win.
Ashleay: Absolutely. And what are the impacts of your organizations on our economy? They must be quite large because, as you said, we all win when we help out.
Isabelle: Community agencies have an impact right in the field. They help people who have very basic needs. We know these agencies provide tons of services that would otherwise have to be delivered by our healthcare system and education system. So community agencies must be considered economic-development partners in addition to being social-development partners.
Sébastien: The economy is always growing, and that means more wealth is being created. Not everyone benefits from the same advantages and the same access to this growing wealth. There are some things that economic policy can do. However, it’s difficult for governments to target specific needs in the way your agencies can, right?
Isabelle: Yes, that’s right. But I think both community agencies and governments can contribute in their own way. When governments develop new economic policies, they must consider if such policies will increase or decrease social inequalities. These policy effects may not be immediate, but they must consider potential effects immediately. Will the policies push inequality up or down? Will this occur in six years or in six months? This exercise doesn’t need to be a very meticulous or complicated. It just needs to be included in the policy-making process.
Ashleay: Can you explain the impact of inflation on the most vulnerable? Is there a cascade effect?
Sébastien: That’s a good question. Inflation seems to have peaked sometime in the summer, and it’s probably going to linger on. When you look at the effect of inflation at the grocery store, you see that food prices are still rising at a 10% surge year over year. As for gasoline, it’s up 12, 13, 15%. As a result, not everyone is impacted in the same way.
Isabelle: No, but you and I and anyone with a steady income – never mind wealthy people –can still go to the grocery store and buy milk and butter. We can still fill up at the pump. We’re more careful about what we put in our basket, but we know we can afford to put food on the table and in our fridge for our kids. People who are very poor, however, must feel they have a mountain to climb to achieve these things. Someone from one of the agencies we support was telling us about a man whom they’d helped with his budget and who started to cry at the grocery store when he saw the price of meat. He couldn’t afford simple ground beef – so he broke down and cried. It’s an immense obstacle for these people. And we need to help them.
Ashleay: Absolutely. And what are the social issues of today and tomorrow?
Isabelle: Here and elsewhere around the world, there two main social issues. The first is the increase in social inequality. The richest societies have less social inequality. That’s something that’s very simple to understand, but very complicated to apply elsewhere. The second social issue is climate change. Vulnerable and disadvantaged populations are the first to be affected by climate change and resulting disasters around the world. It’s the same locally. When there’s a flood near Québec City, it’s the people who are not insured and who live in low-price housing and disadvantaged neighbourhoods who are most profoundly affected by disasters stemming from climate change.
Sébastien: We’re now hearing about inflation-shielding policies and things like that designed to help everyone cope with higher inflation. Typically, this is a scheme where money is sent to everyone to help them cope with inflation. But, as economists, we always say that not everyone needs that money, and, in the end, the scheme won’t eliminate inflation. How does your organization react to these money-for-everyone policies?
Isabelle: Basically, our reaction is the same as yours. If everyone gets the same amount, it means that a single mum with two kids who earns $30,000 a year gets the same as someone who earns $95,000 a year and has no kids. Of course, this also increases social inequality. This is a very good example of what I was referring to before: economic policies must be carefully considered and designed in a way that doesn’t worsen social inequality.
Sébastien: As you know, we’re hearing about labour shortages. Businesses have to do more to get qualified workers and pay these workers more. Programmers, for example, are being brought over from overseas, and their wages are growing quickly. But labour shortages also lead to increased automation and robotization of supply chains – as a result, people lose their jobs. Some are benefiting from labour shortages and some are being left behind completely. So growth has an effect on inequality.
Isabelle: Yes, it does. Labour shortage is also a very important issue within the community agencies we support. So the problem you’re talking about is also felt by community agencies: they don’t have the means to pay good salaries right now. One solution is that community agencies are helping youth get access to higher education. That makes all the difference in the world. During the pandemic, we saw young people go to picnic tables near libraries to get their wi-fi signal to do their homework because their parents had to choose between paying the rent and paying for internet access. At the end of the day, they will help the agencies that help youths and help reduce the effects of the labour shortage.
Sébastien: The effects have long-term impacts. My wife, who is a teacher, saw first-hand the discrepancy between the students who are lucky enough to live in a large house, who have their own bedroom, and who have a computer to study from home and the students living in small apartments who have to do their homework on the kitchen table surrounded by brothers and sisters. The latter had trouble concentrating of their studies, which was then reflected in their grades. These gaps appeared during the pandemic, but it’s difficult to get back to normal even now that the pandemic is over.
Isabelle: That’s a very good example, Sébastien. Let’s not forget that such situations are not due only to income levels. Some kids had to study in homes where there was violence and where healthcare and mental-health issues were also present. This had an impact on them. Community agencies saw a lot of this and are now helping restore balance to these kids.
Ashleay: Well, Isabelle, thank you very much. Very touching, insightful, informative. So again, thank you. And Sébastien, also, thank you for your input.
Sébastien: Thank you, Isabelle.
Ashleay: Love this podcast? Want to know more about economic news? Follow our “In Your Interest” podcast, available on all platforms. Visit the economic news page on ia.ca or follow us on social media.
Sébastien Mc Mahon joined iA Financial Group’s economy team in January 2013. Throughout his career, Mr. Mc Mahon has held various positions in several prominent financial institutions, notably at Quebec’s Ministry of Finance and the Autorité des marchés financiers, Quebec’s financial market regulator.
Sébastien Mc Mahon also serves as Vice-President, Asset Allocation, and Portfolio Manager for our subsidiary, iA Investment Management Inc. (iAIM), with assets nearing $15 billion. Mr. Mc Mahon is also a member of the firm’s asset allocation committee.
Sébastien Mc MahonChief Strategist and Senior Economist
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