A report released by the Montreal Economic Institute says Canada’s supply management system increases the cost of staple foods for consumers, adding an average of $224 annually to grocery bills and contributing to higher living costs for lower-income households.
The analysis concludes that higher prices for dairy products, eggs and poultry associated with supply management disproportionately affect lower-income Canadians and estimates that more than 120,000 people remain below the low-income cut-off because of those added food costs.
The report compares prices for milk, eggs and poultry in Canada with comparable markets in the American Midwest to estimate the additional costs associated with the supply management system. According to the analysis, milk costs 171 per cent more in Canada, while consumers pay 46 per cent more for eggs and 29 per cent more for chicken.
“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.”
The report estimates the average Canadian pays an additional $224 per year because of supply management. It says the impact varies by household income, with those in the lowest income quintile paying an estimated $279 more annually, while households in the highest income quintile pay an estimated $1,141 more.
Measured as a share of disposable income, however, the burden is greater for lower-income households, according to the report. It says the added costs represent 1.25 per cent of disposable income for households in the lowest income quintile, compared with 0.33 per cent for those in the highest quintile.
The report attributes part of that difference to variations in the types and quantities of products purchased by households with different income levels.
“Supply management is a regressive policy that places a particularly heavy burden on the less fortunate while benefiting only a small number of farmers,” Giguère points out. “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 report also examines the relationship between supply management and poverty. It says a household is considered low income if it must spend 20 per cent more of its budget than the average household to meet its basic needs.
Based on that measure, the analysis estimates that higher prices linked to supply management leave 41,279 Canadian households, representing 120,083 people, below the low-income cut-off.
“By abolishing supply management, we could help 120,083 people – roughly the population of the city of Terrebonne – lift themselves out of poverty,” Giguère said. “It wouldn’t make them rich overnight, but it would give some breathing room to the people who need it most.”
The report calls on the federal government to consider abolishing the supply management system, arguing that reducing food prices would ease cost-of-living pressures for Canadian households.
“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,” said Giguère. “Reducing the restrictions that jack up the prices of essential goods is a practical way to help the most vulnerable households.”
The Montreal Economic Institute is an independent public policy think tank with offices in Montreal, Ottawa and Calgary.
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I am not a fan of supply management. That said, the analysis does not take into account food production sovereignty and the impact on the viability of the small farms which make up the majority of the truck farming industry particularly in Quebec. Can these farms remain financially viable with lower product prices, and higher capital equipment costs to generate efficiencies which will allow them to compete with the large US and foreign producers?
The article’s conclusion seems too simplistic for such a complex subject.