A local economist sat down with the News to explain what goes into calculating arbitrary figures like 'cost of living' or 'living wage.'--NEWS PHOTO KENDALL KING
kking@medicinehatnews.com
Over the past two years, Albertans, like all Canadians, experienced significant increases in the cost of living, as the rate of inflation climbed to levels not seen since the 1980s.
But with Alberta often cited as one of the most affordable provinces to live, the News reached out to local economist Dillon Batsel for clarification on how cost of living is determined, and what it means to consumers.
Batsel, a finance and economics instructor in Medicine Hat College’s business department, explained there is no determined cost of living, as necessary variables of life differ from person-to-person. However, Canada’s Consumer Price Index, which highlights inflation year-over-year, can be used to estimate the cost of living.
“The CPI inflation index is calculated based off (the price of) a basket of goods, which consists of things from particular segments of the consumption economy,” Batsel told the News. “So things like rent, clothing, a basket of groceries, gasoline, transportation in general, etc. And (the price of) those things would be calculated on averages.
“So, (the total price of) the basket would be added up and would be compared to the previous year’s, or a base year’s, exact same basket of goods.
As of December, 2022, Canada’s CPI measured 6.3 per cent, up from 4.8 per cent in December 2021.
“So it means that from December 2021 to December 2022, the price of that basket of goods was 6.3 per cent higher than it was the year prior,” said Batsel.
The CPI can also be used to determine how the cost of goods and services varies from province to province. Recent data show prices in Alberta are slightly lower than the federal average, with Alberta’s CPI measuring at 6 per cent as of December. (Ontario, Quebec, Newfoundland and Labrador and Nunavut were also below the federal average, while New Brunswick was on par, and all remaining provinces measured above.)
Though not as comprehensive as the CPI, Alberta’s government also provides a cost of living estimate online, highlighting that the province “offers many cost of living advantages” compared to the federal average.
While Batsel acknowledges several cost of living variables are less, primarily accommodation, he says prices of other variables tend to be comparable province-to-province.
“The overall cost of living is just a little bit cheaper in Alberta, on average,” said Batsel. “But, theoretically, there shouldn’t be that big of a difference.”
While not factored into CPI calculations or Alberta’s estimated cost of living, Batsel acknowledges taxes are also often lower in Alberta.
While no data specifying or estimating Medicine Hat’s cost of living are available, Batsel theorizes it less than other Alberta municipalities, as the Alberta Living Wage Network determined Medicine Hat to have the lowest living wage ($17.50 per hour) out of 15 of the province’s most notable municipalities.
“Medicine Hat has the cheapest livable wage, because we would also have one of the cheaper costs of living,” said Batsel. “They’re directly correlated.”
Batsel attributes rising costs of goods and services to recent changes in supply (producers) and demand (consumers) markets, including the shift toward green energy, supply chain disruptions and shortages, and government market investments which led to expansions in production and labour force fluctuations.
