Supply management is driving up the prices of milk, eggs, and poultry, and Canada’s least affluent families are being hit hardest. A new analysis released recently by the MEI quantifies the impact of this policy on household expenses.
“The main effect of supply management is to drive up the prices of a number of staple foods such as milk, poultry, and eggs,” said Gabriel Giguère, senior policy analyst at the MEI. “Unfortunately, those most affected by this policy are the least well-off: that is to say, our lowest-income families.”
By comparing the prices of dairy products, eggs, and poultry between Canada and comparable markets in the American Midwest, the authors were able to determine how much supply management adds to the cost of a typical Canadian grocery basket.
They noted that milk costs 171 per cent more in Canada. Canadian consumers pay 46 per cent more for eggs, and 29 per cent more for chicken.
Overall, supply management results in an additional cost to the average Canadian of $224 per year.
However, this cost is not evenly distributed. In absolute terms, households in the lowest income quintile pay $279 more per year as a result of supply management. The wealthiest households, on the other hand, are paying $1,141 more per year, explained MEI.
“However, when measured as a proportion of disposable income ,the disparity becomes striking: the impact on the least affluent households is nearly four times higher. The additional costs for the bottom quintile amount to 1.25 per cent of disposable income, compared with only 0.33 per cent for the top quintile,” it said.
“This is partly explained by the fact that the nature and quantity of the products consumed both vary depending on one’s means.”
“Supply management is a regressive policy that places a particularly heavy burden on the less fortunate while benefiting only a small number of farmers,” said Giguère. “For families struggling to make ends meet, it’s clear that having a few hundred more dollars in their pockets at the end of the year would make a big difference.”
The effect of the supply management system on poverty is equally clear. A family is considered low-income if in order to meet its basic needs it has to spend 20 per cent more of its budget than the average, noted MEI.
Supply management artificially raises the prices of many essential goods, and it is estimated that 41,279 Canadian households – representing 120,083 people – are now living below the low-income cut-off due to these higher costs, it said.
“By abolishing supply management, we could help 120,083 people – roughly the population of the city of Terrebonne – lift themselves out of poverty,” said Giguère. “It wouldn’t make them rich overnight, but it would give some breathing room to the people who need it most.”
The federal government should seriously consider abolishing the supply management system, added the MEI researcher. A program that deliberately drives up the price of staple foods and keeps tens of thousands of households in poverty is just not good policy.
“If the goal is to help people cope with the cost of living, abolishing supply management is one of the most direct measures the government can take,” he said. “Reducing the restrictions that jack up the prices of essential goods is a practical way to help the most vulnerable households.”
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