This article originally appeared in the Financial Post. Below is an excerpt from the article, which can be read in full here.
By Philip Cross, June 14, 2023
Earlier this year, a Statistics Canada survey reported 26 per cent of Canadian households said they wouldn’t be able to cover an unexpected bill of $500 if one came along. With prices and interest rates higher now than they were then, that share may even have risen. Working harder is not the solution, however: a 2016 StatCan survey indicated Canadians were increasingly dissatisfied with the balance between their work and personal lives.
This notion that Canadians are under growing financial and time management stress is based on the questionable methodology that requires people to accurately assess themselves. As economist Thomas Sowell once observed, “Statistics compiled from what people say may be worse than useless.” There is precious little corroborating evidence that the finances of a significant share of Canadians are so precarious that even a small unexpected bill or loss of income would push them over the brink. Nor is there convincing data that Canadians are time-stressed — not because of excessive demands at work, at least.
Start with personal finances. Stories about how a significant number of people could not cope with even a small shock to their income or expenses have become a staple in journalism. Yet when COVID struck and millions of people were thrown out of work overnight, there was no surge in personal insolvencies or defaults despite governments taking a month or more to design and implement income replacement programs. People proved surprisingly resourceful and resilient about money when they were required to, just as ordinary people are capable of extraordinary feats and sacrifices when suddenly thrust into war (and are generally calm about it: a 1945 Gallup poll found almost two-thirds of Americans admitted not making “any real sacrifice for the war.”) The Bank of Canada resumed raising interest rates last week because Canadian households have kept on spending despite the squeeze from rising prices and higher interest rates.
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