This morning I did a series of interviews with CBC radio stations, talking about the Grocery Rebate that is being sent out to households today (July 5). Here’s the gist of the conversations I had…
Who is eligible and how much?
Generally, anyone who received a GST credit payment in January 2023 should expect to receive the Grocery Rebate. The amount they receive will be double the January 2023 GST credit payment. Your eligibility depends on your family status and your income, but a single adult that received the maximum benefit can expect to receive $234, a family with 2 kids will get $467.
For more information and detail: https://www.canada.ca/en/revenue-agency/services/child-family-benefits/goods-services-tax-harmonized-sales-tax-gst-hst-credit/grocery-rebate.html
How does this work as a rebate on groceries?
It’s not really a rebate, and doesn’t depend on what you spend on groceries. It’s cash in the bank and you can use it to go to the movies if you want to. But a typical low income family is spending a large share of their budget on food (around 15% or more), and when budgets are tight, this is the first thing they cut back on. I’d expect most families are taking that Grocery Rebate cheque and taking it to a grocery store.
Is this significant, enough, effective, etc?
That depends on your perspective…
If I were a single mom, working full time at minimum wage, I’d be earning about $2000 per month. I’d definitely notice a cheque for $467. That’s significant. And, as I said, it’s probably going to be spent on groceries.
Using the system for administering the GST credit is a great way to target benefits to those folks who need it most. These are often people least likely to be able to negotiate a higher wage when prices rise. For anyone whose wages and benefits haven’t increased with inflation, this rebate helps, but it won’t be enough to cover the increased costs they’re managing.
In thinking about targeting via the GST credit, I took a look at this work by Petit, Tedds and Robson: https://policyoptions.irpp.org/fr/magazines/september-2022/gst-credit-expansion/
Is this going to lead to more inflation? The critics say…
Suppose the federal government sent cheques out to someone like me. I have savings to cushion the blow. I can negotiate a higher wage in line with inflation. Sending me a cheque would boost consumer demand and that could drive some inflation. But that’s not what this rebate is.
This is targeted to a group whose purchasing power has likely deteriorated over the past couple years. This is helping them maintain some of their old demand, not boosting it to some new higher level. It’s also fairly small in terms of the dollars going out.
So no, it’s not going to lead to more inflation.
What is the price tag?
It’s $2.4 Billion! Which sounds huge to any normal person for whom a billion dollars is unimaginable. But as context, Canada’s GDP is about $2.8 trillion. So, the rebate cost is less than 1/10 of one percent of our GDP. It feels big, but it’s a small from that perspective.
(Estimate is from the Parliamentary Budget Officer.)
Other tactics, policy levers worth thinking about?
My top pick: At the provincial level, we can ensure minimum wages and benefits such as social assistance are indexed to inflation. That way, when prices rise, low income Canadians can expect their wages and benefits to rise with it and cover those rising expenses. In Ontario, our minimum wage has been indexed (set to increase in October), but things like Ontario Works benefits are not.
[Sidenote: many federal benefits, like Old Age Security and the Guaranteed Income Supplement, are indexed to inflation and increase regularly in response to price increases. Perhaps not as fast as some would like it, but the inflation risk is covered.]
At the federal level, we need to support competitive markets. Are we letting wage rise when labour markets seem tight? Are food industries working competitively or keeping prices high via supply management? Are we concerned about collusion in pricing across grocery stores? These are the types of things they need to stay on top of.