DOYLE: Can Canadians still afford an ordinary Canadian life?

Brian Doyle, B.Sc., MBA, CPA, CA, CIRP, LIT, PI, is a Licensed Insolvency Trustee and the founder of Doyle Salewski Inc., which assists financially distressed Canadians and corporations.For more than four decades, I have sat across the table from financially distressed Canadians. For most of that time, the people who came through our doors had a debt problem. Something had gone wrong. A divorce, an illness, a layoff, a stretch of poor decisions. We could usually name the event that put them in the chair.That is changing. More and more of the people we meet cannot point to an event at all. Nothing went wrong. Their budget simply no longer works.The distinction matters. A debt can be restructured and, in many cases, eliminated outright. A budget can only be trimmed, and it cannot be trimmed below what a family needs to live.What insolvency can and cannot doOur offices receive roughly 10,000 calls a year from Canadians looking for relief. Consumer proposals and bankruptcies remain powerful legal tools, and they work. We negotiate with creditors. We eliminate unsecured debt. We stop wage garnishments and end the collection calls. The law also requires us to provide financial counselling, and that counselling does genuine good: people leave understanding their cash flow, often for the first time in years.But counselling teaches someone to manage the money they have. It does not create money they do not have.We cannot raise a client's income. We cannot lower the price of groceries, gasoline, electricity, or rent. We can cut expenses at the margin, and we do. Increasingly, the margin is not where the problem lives..A different clientYears ago, our typical file told a story of misfortune or misjudgment. Today, I meet people who have done almost everything right, and I meet them constantly.They have careers. They have paid their taxes every year. Many own their homes and hold real equity in them. They are not reckless spenders, and when we build out their monthly budget, there is rarely a line item that embarrasses them. What there is, month after month, is a budget gap. Income on one side, necessities on the other, and a shortfall in between that no amount of discipline closes.So they bridge it. First with a credit card, then with a line of credit, then, if they have equity, with a HELOC. Each of those decisions is rational in isolation. Taken together, over three or four years, they convert a cash-flow problem into a debt problem, and eventually into a file on my desk.By the time we meet, the debt is the visible wound. It is not the injury. We can settle what they owe and trim what can be trimmed. What we hand back is a budget that still runs tight, and that gets tighter every year the cost of living outpaces their income.Inflation is not one number.Part of why this feels invisible in the public conversation is that we talk about inflation as though everyone experiences the same rate..They do not. The Consumer Price Index tracks a broad basket of goods and services. Lower-income households spend a far larger share of their income on the narrow set of things inside that basket that have risen fastest: food, shelter, utilities, and transportation. Their personal inflation rate can run well above the headline figure, and it has.That is why so many Canadians hear official economic commentary and feel it is describing a country they do not live in. The statistics are not wrong. They are averages, and averages conceal exactly the people who end up in our offices.Consider a post that circulated widely this summer. A shopper in the United States rebuilt a Target grocery order from 2020, the same 28 items, and the total had gone from $64.50 to $158.30. It is one cart and one anecdote. It was also viewed more than a million times, because people recognized their own checkout counter in it.That recognition is the point. When a single grocery receipt travels further than any statistical release, the distance between the official numbers and lived experience has itself become the story..Why the divide widenedEconomists describe the recovery of recent years as K-shaped, and from where I sit, the description is accurate. Canadians who owned appreciating assets have come through it comfortably. Canadians whose principal asset is their labour have not.There is an old explanation for this pattern that I find useful, if not universally accepted. Nearly three centuries ago, the economist Richard Cantillon observed that newly created money does not reach everyone at once. Those closest to its source benefit before prices adjust. Those furthest from it meet the higher prices first and wait for their incomes to catch up.Whatever one makes of the theory, the sequence during and after the pandemic is not in dispute. Enormous liquidity entered the system. Much of it found its way into financial markets and real estate. Asset prices rose sharply, and asset owners did well. Wage earners paid more for food, rent, and fuel while their pay lagged behind.Underneath that sits a slower problem. Canada's productivity growth has been disappointing for years, which limits what employers can pay. Household debt is among the highest in the developed world, which makes families acutely sensitive to interest rates. Weak wage growth and heavy leverage are a difficult combination in good conditions. These have not been good conditions.But they own a houseThe obvious objection to everything above is that a homeowner with equity is not truly in distress. Sell. Downsize. Refinance. Access the value.Sometimes that is exactly the right advice, and we give it. But equity is not income, and converting it is harder than it looks. Refinancing requires qualifying, and a household already short every month often cannot. Downsizing assumes there is something meaningfully cheaper to move into, which in many Canadian markets there is not, particularly once the family has to stay near work or school. And a HELOC does not solve a budget gap. It funds it, at interest, until the room runs out..Equity is a cushion for a single bad year. It is not a substitute for a wage that covers the cost of living.The question worth askingIn late May, Statistics Canada reported a second consecutive quarterly contraction, which meets the technical definition of a recession. Days later, the Prime Minister, asked directly whether Canada was in one, declined to use the word and spoke instead of weakness in the economy attributable in part to his government's own decisions. Ottawa has been arguing about the terminology ever since.My clients are not waiting on the label. Whether or not this quarter qualifies, the question that matters in their kitchens is whether an ordinary Canadian can still afford an ordinary Canadian life.From where I sit, the answer has become troubling.I do not think insolvency professionals are the right people to solve this, and I would not pretend our profession has the answer. But we do see it early, and I would ask that our vantage point count for something in the debate. Three things deserve more attention than they are getting: the productivity growth that makes higher wages possible, the housing and utility costs that consume the bottom half of the income distribution, and the household leverage that leaves families one rate change away from crisis.We can eliminate yesterday's debt. We can negotiate settlements and provide a fresh start, and we will keep doing it for everyone who calls.We cannot fix tomorrow's budget. Until Canada takes that part seriously, we will go on treating the symptom while the condition worsens.Brian Doyle, B.Sc., MBA, CPA, CA, CIRP, LIT, PI, is a Licensed Insolvency Trustee and the founder of Doyle Salewski Inc., which assists financially distressed Canadians and corporations.

DOYLE: Can Canadians still afford an ordinary Canadian life?

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