On Affordability: Approaches to Dealing with Inflation and Cost of Living Issues experienced by the People of Calgary Centre

A Policy Paper prepared by the Rahim Sajan Nomination Campaign

Campaign Manager: Alex McBrien Policy Team: Zain Jinnah (Policy Chair) Fazilah Shariff Curtis McKinney Russell Scantlebury

Policy Advisor: Contact Information:

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http://www.teamrahim.ca @RahimSajan http://www.facebook.com/teamrahim

Getting to the End of the Month: Stretching our Dollars One only needs to look at the data from Statistics Canada and the Bank of Canada to see a disturbing phenomenon: most Canadians do not have as much as they once did. Statistics Canada documents note that the stagnation of real hourly wages of the majority of Canadian workers between 1981 and 2011. Over that entire 30-year period, the average hourly wage of full-time workers rose by just 14 per cent (and that includes the top 1 per cent). This compares to growth of over 50 per cent in real GDP per person over the same period.i To make matters worse, according to the Bank of Canadas Inflation Calculator, in that same 30-year period, Annual Inflation was, on average, 2.97%. Consequently, prices between 1981 and 2011 increased by 140.48%. Therefore, our wages - on average - have not kept up with our economic growth or inflation. The question of why the dollar does not stretch as far as it once did is one best left to academics. From our point of view, the question that should be asked is as follows: Can the Federal Government make living in Canada easier? In our opinion, the Federal Government can act in many ways. For example, let us think about improving the efficiency of our society. Since 1995, a typical small car has had a gas tank that holds approximate 50 L of fuel. According to Statistics Canadaii, in 1995, 50 L of gas would have cost about $25.00. Or put differently, in Calgary, gas was on average 50 cents per litre. Translated into todays dollars, this would mean that 50 L of gas should be $34.13. However, as many car drivers know, in the last number of years, they have paid much more than that. They have paid $40, $50 or even $60 dollars to fill up their cars. With the present efficiency of cars, most people fill up once a week. However, what would happen if drivers filled up their cars once a month or once every two months? This might sound like science fiction; however, we have the technology. The technology in some cars like the Nissan Leaf, the Chevy Volt and various hybrids could allow Canadians to reduce their use of gasoline, thus providing Canadians with an opportunity to reduce their energy budgets. Instead of paying up to $360 dollars a month, a simple change in the car efficiency standards would allow Canadians to spend no more than $80 dollars a month on gasoline. Simply put, an act of leadership from the Federal Government could reduce the spending of Canadians by more than $200 a month. Using Efficiency and Action as our motto, the Federal Government could do more. Citizens could have their budgets reduced if the Federal Government invested more money into urban transportation and infrastructure. Toronto, Ottawa and Montreal have all invested in the BIXI system and bicycle infrastructure. Those cycling investments have added to those cities existing and sophisticated LRT, subway and/or bus systems and it has led to an interesting phenomenon: some people in those cities are going without cars. This is an interesting fact. With companies, like AutoShare and ZipCar, people can rent cars by the hour. With companies, like Hertz and National, people can rent cars by the day. While, for most everyday activities, many people in major Canadian cities are using bicycles and transit to get to places. This means that many Canadians are saving both money and time. The Federal Governments investment in Transit Infrastructure in the 60s, 70s and 80s allowed Toronto, Ottawa and Montreal to build out this infrastructure. Why cant Calgary and Calgary Centre get a similar programme today? It could be a grant, an interest-free or low interest loan. By ignoring them, the Federal Government is making citizens pay more for everyday activities. So why doesnt the Federal Government pay attention to the urban infrastructure of the economic engine of the country: large cities?

Housing In the 1980s, the Federal Government ended its MURB residential housing programme. It stopped putting money into Co-operative Housing complexes and stopped Building Affordable Housing. It should not be a surprise that more renter households have difficulty affording their dwelling than was the case two decades ago. In 1986, only 21% of renting households spent more than 30% of their income on shelter. This increase occurred even though rents rose no more rapidly than other prices during the period.iii While rents have increased, on average, our incomes have not. Therefore, while prices might be in-line with historical averages, incomes are clearly out of line. Furthermore, the market has become smaller and less wealthy. As noted by Statistics Canada, in the 1990s, many renters became property and condominium owners. This shrinking market has therefore seen less profit and little to no new investment. Coupled with new government regulations, only one thing has happened: renters have gotten squeezed. This might not sound like a societal problem but it is. For, it means that young people cannot afford to move out. It means that Canadians cannot move to where jobs are. It means that there is not enough capacity for change and therefore not enough capacity for improvement. Given that private interests in a free market place have not stepped in to provide solutions, it will be argued here that the Federal Government can, and should, act. However, with that being said, the Federal Government should spend taxpayers dollars in a responsible way. Therefore, we propose looking at an approach which is revenue neutral or a market-based solution to solve this unique problem. This type of solution has been proposed before. For example, the Business Development Bank of Canada and Farm Canada were created out of a need: a need that the market could not fulfill. By using a revenue-neutral approach or market-based solution, renters would pay the full cost of the government services which would be provided. Our solution to this market-based issue is the creation of a National Infrastructure Bank or a National Cooperative Housing Bank. This could be a bank that the Federal Government could own or it could be a publicprivate partnership. For example, the Federal Government could put in the seed capital initially and then have the Bank listed on the TSX or CNSX. Or the Federal Government could fund this bank by releasing bonds to the private market. Those Bonds could be guaranteed by the Federal Government in the same way that Canada Post, CMHC and EDC are provided with government guarantees. However, one thing is clear: the Federal Government needs to take the lead. However, National Infrastructure Bank or a National Co-operative Housing Bank is only a start. For the Bank would be empowered to create and fund Not-For-Profit Housing Options. This might mean the creation of self-sufficient Co-Operative Housing Projects; where the members of the co-operative are responsible to manage the development. Sarcee Meadows Housing Co-operative is in the riding of CalgaryCentre and it is an example of such a project. With a long waiting list, Sarcee Meadows helps to reduce the cost of rent in Calgary-Centre. With a National Infrastructure Bank helping to create more co-operative facilities, the Federal Government could help to release the strain on the housing market without using taxpayers money.

National Service in exchange for Tuition Young Canadians are looking for ways to pay for their education. Why not look at a form of National Service to allow for this to happen. While, the Canadian Forces (CF) has outstanding education, training and professional development opportunities, such as paid tuition, second language training and financial support

for continuing education, it is clear that those benefits can be improved. We would fight for those improvements. However, this Civilian Programme could also be in order because there is a need. Imagine if a charity registered with a National Service Programme - could receive two or three individuals to help out in the Downtown Eastside in Vancouver. Or what if Calgary Institutions, like The Mustard Seed or the Interfaith Food Bank, could count on having Mount Royal or University of Calgary students to help them run and grow their programmes? By supporting these programmes, Canadians will find that there will be strong returns. Fewer Canadians will find themselves in trouble with the law, while more Canadians will be trained. Consequently, more Canadians will remain available to the Canadian Economy. By developing our Human Resources, our society will profit. With this in mind, if Canadians gave five years of their life to our country, we should be able to repay them by paying for their college and university education.

Retirement Ottawas proposed new pension system is little more than the existing RRSP program with a new label, and could actually be a worse option for low-income earners, according to a new analysis by the C.D. Howe Institute. A report released Thursday says the federal governments Pooled Registered Pension Plan (PRPP) proposal, which is being touted as a way to provide pensions for self-employed people and others who do not have workplace plans, does not improve enough on the existing Registered Retirement Savings Plan (RRSP) system long in place in Canada. Ottawas pooled-pension proposal gets thumbs-down, Janet McFarland, The Globe and Mail, Published Last updated Thursday, Aug. 23 2012, 3:23 PM EDT

Canadians are not using all of their RRSP rooms as it is. According to the Globe and Mail, cumulatively Canadians have about $500-billion in extra RRSP room.iv Therefore, it is not surprising that the Harper Governments Pooled Registered Pension Plan (PRPP) is running into problems. Many provinces have not signed onto the Programme. Furthermore, as noted by the C.D. Howe Institute, this programme will not allow Low Income Earners to save more money. All of this is known and the product has not even hit the market yet. Once PRPPs are available for use, Canadians might find that they are expensive because Canada has some of the highest management investment costs in the Western World. Therefore, if history is any predictor, one would have to say that the new Pooled Registered Pension Plan (PRPP) will not be cheap. With this being said, Rahim Sajan is proposing that we use what we have. Canadians have used the existing CPP/QPP system for over fifty years. Therefore allowing for its expansion will not harm Canadians. In fact, it could help us; while adding little or no cost to the taxpayer - in the short and long-run. Furthermore, while the programme was reworked by the Chretien Government in the 1990s, it has always kept is promises. Therefore, why not allow Canadians to increase their payments by a small amount? Today, the programme works on a simple principle: both the employee and the employer pay for the eventual retirement of the employee. Combined they pay 9.9% of the employees maximum until the Maximum Pensionable Earning is hit. For self-employed persons, they pay both sides of that equation. Our argument is simple: move the 9.9% to 11% over five year period. Such a change would allow all Canadians to have an expanded and reliable retirement. This is what we want to talk about, this is our vision.

Dealing with our Debt Issues Despite repeated warnings, Canadians have returned to their borrowing ways, pushing consumer debt levels to a new record high. A report released Thursday by TransUnion shows that the average Canadians non-mortgage debt reached $26,221 in the second quarter of 2012, up $192 from the previous quarter. The $26,221 amount is the highest per person debt level since the credit bureau started tracking the data in 2004. The borrowing binge: Consumer debt hits eight-year high by Roma Luciw, The Globe and Mail, Published Wednesday, Aug. 22 2012, 6:18 PM EDT Canadians debt is at historic levels. Our Finance Minister and the Governor of the Central Bank have been reminding us of this since the start of the Financial Crisis. As we have noted above, this increase in debt is in part due to governments lack of leadership. Their withdrawal from society has neither been consistent or planned. Ad hoc cuts have left us with a lack of understanding of the role of government. The Rahim Sajan Campaign aims to change this notion. Government has a role; it just needs to be defined. We argue that government should not just transfer the risk of governing society onto individuals. Instead of helping people with cost effective rental alternatives, the Federal Government has let renters borrow from Payday Lenders and Banks. Let us illustrate the problem. On average, renters spend a higher portion of their incomes to house themselves than do homeowners. In 2004, the average renter household spent over onequarter of its annual gross income on shelter, compared to less than one-sixth for the average homeowner.v Since renters spend so much of their money on their accommodations, when things go bad, renters borrow. However, renters are not alone in their issue. Suburban House Owners have increasing been asked to bear more of the financial burden of living away from the city. For example, Suburbanites have noticed that more and more of their budget has been eaten up by energy costs. Gas is used to drive their kids from A to B. Heating costs increase as house sizes increase. This does not include the high mortgages they have to hold to just own their houses. In many ways, many of us have become dependent on debt to make up the short falls that have come as a result of slow increases in income. Like in the US and Europe, higher levels of debt poses a risk for all of us. For so many of our larger products are financed through debt. Therefore, any economic shock (i.e. a rapid increase in bankruptcy/delinquencies or market drop) could cause a rapid devaluation in the value of a set of assets. If the US is an example, everything from cars to homes could lose 5-25% of their value overnight. Therefore, the Rahim Sajan campaign is arguing that collateral should be required for most credit products with a limit of more than $5,000. Just as Canadian law requires that a mortgagee provide 5 to 20% down payment for a house, we should make sure that similar requirements are in place for car loans, lines of credit and credit cards. Again, this is a conversation we want to have. These are our ideas on the way in which our society should evolve.
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Canada's economic problem is not high wages, by Andrew Jackson, Rabble.ca, Aug. 17, 2012 CANSIM table 326-0009 iii http://www.statcan.gc.ca/pub/63f0002x/63f0002x2007052-eng.htm iv http://www.theglobeandmail.com/globe-investor/personal-finance/why-dont-we-use-our-rrsp-contributionroom/article4263821/ v http://www.statcan.gc.ca/pub/63f0002x/63f0002x2007052-eng.htm
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