It seems that everything is becoming more expensive. Prices of food, gas, and housing are rising while wages are slow to keep up with this acceleration.

Price increases have become a dreary routine now. We have become aware of the impact of shipping delays on foods and imported goods, as well as the now high housing costs which have become a harsh reality of life.

But by the end of 2021, this distinctive pattern of price increases began to change. For nearly three months, Canadians who budget weekly noticed that most price increases occurred in very few and relatively volatile categories, like food, fuel, and accommodation. Not anymore.

Economists differ on why this is happening and how exactly the change will affect Canadians.

To Nguyen, a Toronto-based economist at RSM Canada consulting firm, said: "The story is no longer about energy, food, or housing." "It's largely about everything in the economy."

It used to be that Canadians trying to stay within budget would look for cheaper goods. They could avoid driving when fuel is expensive, for example, or change their diet to reduce imported food. But when inflation is general, it becomes more difficult.

According to some economists, this is a sign that inflation may have started long-term and it will begin to do more harm to Canadians.

Those at the bottom of the wage ladder—including women, new immigrants, and those working in risky jobs—are more affected by general inflation. People experiencing income stagnation end up paying higher prices, even for the less expensive goods and services they rely on.

The amount of inflation in everything has increased, according to a report by Statistics Canada that showed prices rising generally by 5.1 percent annually, the highest rate since 1991.

But behind this headline number, people like Steven Tapp, chief economist at the Canadian Chamber of Commerce, drew attention to the three ways Statistics Canada measures something called "core" inflation: a statisticians' attempt to measure the underlying movement in prices by cutting out volatile goods.

Tapp said the strategy is to exclude prices that tend to rise temporarily, price increases "that may fade and disappear" without becoming part of long-term inflation.

Tapp said, "These [core] measures will give the Bank of Canada more reasons to worry because what they’re trying to focus on is inflation expectations, and expectations are rising."

Both Tapp and Nguyen explained that the rise in core inflation, after volatile goods are removed, has two possible explanations. One is that rising volatile prices fuel the core of inflation because everything is shipped, needs energy, and contains imported goods.

The other is that with rising inflation, everyone expects it to continue rising, so businesses plan to raise prices to keep up with expected inflation and workers try to do the same with their wages.

Tom Vilsack, an economist at McGill University in Montreal, who describes himself as a conservative and a supporter of monetary economy, insists there is another reason for the rise in core inflation: a huge flow of money into the economy, especially among central bank governors.

Vilsack told me from his farm in Vermont, where he said: "When there is a huge amount of money everywhere, all prices rise," and he added "Locally produced eggs have risen to nearly 8 Canadian dollars." Vilsack insists that there is "a lot of damn money"—and if it is not absorbed by less government spending and less central bank stimulus, core inflation will not go away.

According to Kaylee Thissen, an economist and policy analyst at Unifor, Canada’s largest private sector union, she says: "If there really is a lot of money, the problem is that not enough of it goes to the people doing the work."

If Canadians are falling behind, the reason is not that prices are rising. The problem is that during the past year, with inflation rising to more than five percent, incomes failed to keep pace.

Recently, Sobeys warehouse workers negotiated a four-year deal that includes a 20 percent wage increase over the contract duration. People who studied the economics of rising wages and prices in the past say one benefit of inflation is that it works to adjust wages and prices, allowing everyone to get a raise—although there is more and less disparity among workers and sellers depending on demand in this sector.

Recently, the Governor of the Bank of England, Andrew Bailey—who critics noted earns hundreds of thousands of pounds annually—faced backlash when he warned British workers against demanding higher wages with rising inflation for fear of making inflation worse. Thissen hears something similar when Canadian and American authorities warn of a wage-price spiral.

Thissen said the growing gap between the prices of necessities and Canadians’ ability to afford them is not just bad for workers and their families. She said it harms the entire economy when total purchasing power shrinks. She is concerned that in the effort to save the economy from the pandemic effects, the concept of inclusive economic growth was forgotten, which is a field that Unifor strongly advocated for.

A few months ago, when core inflation seemed to be at 2 percent, it might have been reasonable for central banks here and in the United States to be patient and let the economy take its course. But now that the measure of generalized inflation, which was once stable, is rising sharply, it seems almost certain that banks will try to curb it with higher interest rates.

But if the Bank of Canada and the U.S. Federal Reserve begin taking tough action against "inflation of everything" with rising interest rates while wages continue to lag, it will be up to elected officials to ensure that ordinary people who vote them into office are not the ultimate losers.

Edited by: Dima Abu Khair