As inflation soars, Carleton students say they are struggling to cover essential living costs including rent, gas and food.
Inflation has skyrocketed since early 2021, with the Bank of Canada reporting an 18-year high of 4.7 per cent annual inflation last October and November.
According to central banks, the COVID-19 pandemic has led to a multitude of supply chain issues. Rising shipping costs, delays and shortages in products such as microchips are causing prices of living essentials to rise across the world.
However, Carleton economics professor Vivek Dehejia said he believes there are other major factors contributing to soaring inflation.
Dehejia said two other sources causing high inflation are the large fiscal deficits and the “continuation of ultra-loose monetary policy” by the central banks through extremely low interest rates. Currently, the interest rate is 0.25 per cent.
One area inflation impacts is housing costs. Due to low interest rates, housing prices rose more than 18.7 per cent in 2021, resulting in increased rent costs for students and most Canadians.
Abdullah Shabir, a third-year international economics student at Carleton, has felt the impact. He said finding a place to live within a reasonable budget has been difficult.
“Houses were either unaffordable for the facilities they provided or required too many housemates,” Shabir said.
Dehejia said there will be upward pressure on rent when the city reopens, as he forecasts professionals will return to Ottawa in a short time period and more firms and universities will offer in-person activities.
Another significant factor affecting students’ budgets is rising oil and gas prices. Gas prices have risen by over 30 per cent since the start of the pandemic, going from $108.4/100L in February 2020 to over $142.6/100L in November 2021 in the Ottawa region.
Shabir said he has stopped driving due to rising gas prices. The price hike has resulted in him losing hours while on Ottawa’s “unreliable public transportation systems.”
Students who commute to see their families, like Sydney Weaver, a fourth-year communication and media studies student at Carleton whose family lives five hours away from campus, have had to reconsider how often they go home.
Weaver said she used to go home once a month but said the rise in gas prices “will make [her] reconsider whether [she] will go home during reading week or whenever.”
Rising oil and gas prices also affect a significant portion of the Canadian economy, including sectors such as manufacturing, transport and energy. These indirect effects cause the price of the end product to rise.
Dehejia said increased oil prices have increased the cost of getting food to grocery stores, resulting in higher consumer prices.
According to the United Nations, global food prices have risen by more than 30 per cent since the start of the pandemic.
For Weaver, these prices mean she’s more cost-conscious.
“Whenever I go to the grocery store, I tend to stick closer to whatever is on sale and sometimes it means not getting what I want,” Weaver said.
Stagnant wages are compounding these issues. Year-over-year wage growth was 4.3 per cent in February 2020, but was only 2.7 per cent in November 2021—nearly half the growth rate of inflation.
The average student is on a tight budget, so necessities like rent, food and fuel make up a sizable portion of their consumption.
Dehejia said that if the prices of necessities go up, it will hurt students, seniors and low-income individuals the most.
Food bank usage has already been on the rise as a direct result of stagnant incomes and rising food and housing prices, according to Food Banks Canada.
The Bank of Canada says it expects high inflation to be transitory and predicts a fall back to the one to three per cent range by the end of 2022.
Some economists, however, are doubtful of this viewpoint. Dehejia, for example, believes high inflation is not transitory and will not go away very soon.
Canada’s Food Price Report published in 2022 predicts food prices will rise by an additional five to seven per cent in 2022. The market expects housing prices to rise by about 7.3 per cent in 2022 due to low supply.
“Inflation was dormant for quite a long time, [leading to] some complacency amongst policymakers,” Dehejia said. “But now it’s here and it’s a fairly major problem.”
To help bring down inflation, central banks have started signalling interest rate hikes for 2022. The market currently expects the Bank of Canada to increase the policy interest rate to about 1.25 per cent by the end of 2022.
Featured image by L. Manuel Baechlin.
