Since the Bank of Canada adopted inflation targeting way back in 1991, consumer price inflation has been remarkably stable. The cost to purchase a basket of goods for the average, or representative, B.C. consumer has risen almost 40% since 1998. An increase of this magnitude is sizable, but over a two-decade period it translates into an average annual inflation rate of just 1.6%. Inflation did rise above 2% in B.C. on several occasions, but they were short-lived.
B.C. Consumer Price Index, 1998=100
Source: Statistics Canada, Consumer Price Index table number 18-10-0004-01.
Rising living costs impact household finances. The cost of living, however, is only one side of the equation. The other factor that determines whether people are making financial headway is earnings. If wage growth outpaces inflation, households with members in the workforce are better off in real terms. Over the same two-decade period, the average hourly wage in B.C. went up by 58%, So, the average wage has outpaced inflation by roughly 18 percentage points (in total) since 1998. Over the entire two-decade period, the average real wage in B.C. advanced by less than 1% annually.
The real wage gains, however, have not been evenly distributed. Over the first decade, the average wage in the province just barely kept ahead of inflation. In contrast, after 2008 wage growth consistently exceeded inflation by a more meaningful amount, meaning that most of the gain in the average real wage rate occurred in the post 2008 era.
B.C. Consumer Price Index and Average Hourly Wage (indexed), 1998=100
Source: Statistics Canada, Consumer Price Index table number 18-10-0004-01 and Labour Force Survey table number 14-10-0063-01.
Stronger average real wage growth in the more recent decade is due to both more moderate inflation and stronger wage growth. Over the first decade (1998 to 2007), B.C.’s average hourly wage generally grew by 2%. In comparison, over the more recent decade, it has run around 2.5%. Inflation over the first period averaged 1.8%, while during the second ten-year period it averaged a more modest 1.4%.