The current round of inflation was born out of the COVID crisis and caused by many issues (for example overseas supply chain challenges, healthy consumer bank accounts, consumers who despite inflation and global uncertainty still seem willing to spend, and wage increases to counter the Great Resignation, etc.). The February 2022 year on year inflation rate in Canada was 5.7% overall, a rate not seen since August of 1991 (February’s US consumer price index increased by the most year on year since 1982, breaking 40 years of historic lows).

Some of these cost increases are worth highlighting for the Health and Human Services sector (and especially for any organizations that has residential offerings). Shelter costs increased by 6.6% year on year, which increased prices for independent living, or for agencies or families looking to purchase housing for people (owned accommodation is up by 6.2% and rental by 4.2%). Anecdotally we know that it’s impossible now for organizations to find rental accommodation in the community for anywhere near what has been budgeted. Combined with the move by GTA folks out of the Toronto area to smaller cities and rural areas, buying a home to accommodate someone in many Ontario communities is just not possible.

Grocery costs also increased by 7.4% (it was 6.5% in January) year over year, with the largest increases in meat (16.8% for beef, 10.4% for chicken). For those organizations providing transportation it’s costing you a lot more – gasoline prices (whether for taxis, transit, or fleet vehicles) were up 32.3% year on year. While transit subsidies can help keep these costs down in urban centres in rural areas there is just no other way for people to get around to participate in their communities.

Inflation ripples through to people supported by the sector in many ways:

1. Higher wage expectations/demands in an already constrained sector as staff watch their real wages decrease. Organizations already challenged by the Great Resignation will be even more challenged as experienced staff leave for greener pastures in sectors like Long-Term Care which is receiving a large share of political attention post pandemic. This sector also has a lot of long-term employees who are topped out on their pay-grids with no room to raise their wages. Already underfunded organizations with frozen annual budgets can’t pass staff cost increases along and will need to cut back on services or not replace staff who retire to make budgets work.
   
   
2. Higher costs to people supported by member organizations. As food and other living expenses increase the money available to choose an inclusive life will decrease. We already know of organizations who have had to increase their food budgets for households for several months in a row to compensate for increased costs at the store.
   
   
3. To fight inflation, central banks will also increase interest rates, affecting loans and mortgages held by families and member organizations. The US Central Bank (which Canada watches closely) predicts another 5 to 7 increases of 0.25% – for a total increase this year of 1.5% to 2.0% this year on interest rates. The Bank of Canada is hinting that rates could go up another 0.5% in April and that it will likely use all 6 of its decision dates in 2022 to continue hiking rates. Having a mortgage come up for renewal in 2022 or 2023 could be a very tough negotiation.

There is no obvious end in sight at this time – no one seems sure what will break the cycle (although obviously Central Banks hope the interest rates will slow it down). The conflict in Europe has introduced a new level of uncertainty and how new measures (particularly sanctions that have never been tried before) will affect the economy in the year(s) ahead. Most economists are predicting inflation will continue at or around these rates through 2022 into 2023 before there is potential for them to decrease.

There is inflationary pain ahead. What, if anything, can be done to help manage inflation in your organization will be the topic of the next PMB 180.