Unfortunately, skeptics have reason to doubt official statistics

This column originally appeared in The Globe and Mail on October 11, 2013. 

“Don’t tell me you believe those numbers!” she said, practically laughing. “The government is lying to us!”

I was a bit taken aback, but I shouldn’t have been. The woman in the audience was reacting to my statement that Canadian inflation is currently below the Bank of Canada’s 2-per-cent target. But increasingly, I find that people I meet are losing faith in Statistics Canada’s official figures. And that’s a problem.

The Statistics Canada offices in Ottawa are seen on May 1, 2013. (Sean Kilpatrick/The Canadian Press)

The skeptics have a point. Since August, 2008, prices in the all-items basket of consumer goods and services have risen 6.5 per cent. But if you break it down into its components, you quickly sympathize with the disbelievers: Prices for discretionary items have been stable or falling, but prices for many non-discretionary items have taken off.

Over the past five years, prices of food purchased from stores rose 14.3 per cent, led by fresh vegetables (16.3 per cent) and baked goods (15.2 per cent). If you ride the bus or subway, prices are up 17.5 per cent. If you require child care, that will cost you 21.1 per cent more. And good luck if you’re trying to improve your employment prospects through education – tuition fees have increased by 21.2 per cent.

On the other hand, if you’re a higher-income Canadian with discretionary cash to spend, you’ve been seeing some breaks. Furniture prices have fallen by 3.8 per cent, as have prices for freezers and refrigerators (down 1.5 per cent), women’s clothes (down 13.6 per cent), and home entertainment equipment (down 27.1 per cent). You’re probably not taking the bus, but the price of your new car has barely budged (up by only 0.2 per cent). A nice cabernet sauvignon from the wine store is up a mere 0.4 per cent.

Low-income Canadians, who are disproportionately renters, are seeing greater increases in rental prices (up 7 per cent) than are owners of their accommodation (up 4.6 per cent). On top of this, home owners are seeing big savings in natural gas heating prices (down 38.6 per cent).

Inflation is not the same for everyone. If you have plenty of discretionary income to spend on flat screen TVs, clothes, and big houses heated with natural gas, inflation is tame. But if you’re scraping to get by and facing rising prices for food, rent, child care and public transportation, inflation is crushing you. No wonder so many Canadians just don’t believe the official inflation figures.

This poses two distinct problems. The first is that it exacerbates the concerns about growing income disparities. We know that the degree of income disparity has increased in most developed economies, including Canada. Not only are the rich getting richer, but also their consumer costs are increasing more slowly. But for a low-income worker, a “cost of living” wage increase of 2 per cent does not match the reality of the monthly bills.

The second problem is more nuanced. If Canadians lose faith in the official statistics, it’s a signal that they are losing confidence in the messages delivered by governments in general. I happen to have absolute faith that Statscan’s inflation figures are accurate and honest, but clearly the skeptical woman in my audience – who believes the government is lying – does not. Such distrust of governments and their agencies is not healthy in a democracy.

When skeptics challenge me about the legitimacy of the inflation numbers, I point out that Statscan is independent of government interference and among the most highly regarded statistical agencies in the world. Then they point out the federal government’s termination of the long-form census. And I cringe.

Economic indicators such as the consumer price index are important not only to economists, but also to union negotiators, human resource departments, business planners, and the general public. It’s important that Canadians have confidence in their accuracy and legitimacy. Some recognition of the rising inflationary pressures on low-income households (such as a separate subindex on non-discretionary items) would be a good start.

But perhaps the federal government should also reconsider its involvement with Statistics Canada. The more Canadians believe the agency to be free of government interference, the more likely those inflation figures will be considered legitimate.