Canada’s ‘Misery Index’ Among Highest In Industrialized World
HALIFAX–Canada is in the middle of economic “misery” right now, according to the Fraser Institute, due to the country’s high inflation and unemployment.
In a recent study, titled “Return of The Misery Index,” Canada had the sixth worst misery score (10.88) out of 35 industrialized nations in 2021. The score is a combination of the country’s inflation rate and unemployment rate.
Canada’s inflation rate in 2021 was 3.15 while the unemployment rate was 7.72. This score is very high when you look at the two best scores in the study: Switzerland (3.57) and Japan (2.61).
Canada has the fourth highest inflation rate and eighth highest unemployment among the 35 countries surveyed.
Only five countries are more miserable than Canada. Spain is the worst with a Misery Index score of 17.61, followed by Greece (15.73), Italy (11.96), and Iceland (11.26).
According to the Fraser Institute, the Misery Index was a popular economic indicator amongst economists decades ago. Now, it’s making a comeback after Covid-19 triggered a historical level of economic hardship, particularly with high levels of inflation and unemployment.
“Return of The Misery Index” argues Canadians should be concerned about Canada’s score and what it means for the future of the country’s economy.
“In 2021, inflation rates increased markedly and are expected to remain at their current level throughout 2022,” reads the report. “While many argue the current inflation rates are transitory, meaning that they are short-term in nature, there are genuine reasons to worry that higher inflation could be longer lasting.”
“Indeed, Canadians are now rightly concerned with inflation, our Misery Index, and our comparative performance with other industrialized countries.”
Jason Clements, executive vice president of the Fraser Institute, says the federal government can curb high inflation by working with the Bank of Canada and watching its spending.
“The federal government could signal its commitment to working with the Bank of Canada to ensure we return to a normal and stable level of inflation,” says Clements. “Instead, it’s quite clear there was contentious negotiations between the bank and the government over the renewal of the bank’s mandate.”
“Moreover, the federal government could curtail spending to present a clear path back to a balanced budget, and in particular be more judicious about subsidizing workers not to work. Remember, at its core, the inflation problem is about too many dollars chasing too few goods and services.”
In terms of Canada’s high unemployment rate, Clements questions whether or not Canada’s generous Covid-19 support programs have encouraged people to avoid work, rather than seeking employment.
“The question is balance. Are policies balancing the need to support workers who genuinely need to be out of the workforce or are they encouraging workers to remain out of the workforce?”
“The comparisons with other industrialized countries implies that Canada is likely doing more of the encouraging workers to remain out of the workforce compared to supporting those who genuinely need to be out of the workforce.”
Derek Montague is a Huddle reporter in Halifax. Send him your feedback and story ideas: [email protected].