Analyzing the NDP's Monthly Grocery Rebate

Welcome back to Middle Ground; today’s issue will discuss the NDP's Monthly Grocery Rebate.

What is the NDP’s Monthly Grocery Rebate?
The Ontario NDP has proposed a new monthly grocery rebate for low and middle-income families to help combat the rising prices of groceries since the start of the pandemic. 

While complete details of the proposal have yet to be shared, NDP Leader Marit Stiles says it would impact four million households across Ontario. The plan is to provide rebates of up to $122/month or $1464/year for a family of four, proportional to the additional costs families are paying for groceries compared to prior to the pandemic. 

The NDP says that a full credit would be provided to households with an income under $65,000 and proportionally reduced for those between $65,000 and $100,000. The policy is estimated to cost the provincial government over $400M a year. 

Will this help Ontarians?

No. This type of policy, similar to CERB during the pandemic, has significant long-term consequences for the economy. This rebate will artificially increase the amount of money spent on groceries and other goods in society, resulting in inflation. Over time, this will make everything less affordable for everyone as the cost of all goods rises, negating any benefits for those receiving the rebate while making them increasingly unaffordable for those not receiving the rebate. 

What is a better alternative?

I previously wrote about tackling shrinkflation by requiring all retailers to post a sign on store shelves beside products whose sizes have declined. This type of signage will make consumers more aware of increasing costs and put more pressure on companies to offer affordable products or lose business to their competitors. 

Opening competition in the grocery chain market can help lower prices. Currently, the market is an oligopoly, with Loblaws controlling 29% of the market share in Canada, Sobeys/Safeway controlling 21%, Costco controlling 11%, Metro controlling 10.8%, and Walmart controlling 7.5%. These five companies combined account for 79.3% of the groceries sold in Canada. 

Introducing companies like Aldi and Lidl, specializing in low-cost groceries, would create more consumer choices. This can be done by making it simpler for them to expand their US operations into Canada instead of needing to setup new processes, supply chains and systems in Canada.

Additionally, allowing more Neighbourhood Retail, which we’ve previously discussed, would allow more farmers to sell produce locally, avoid chains, and make small mom-and-pop stores a viable, affordable alternative to big chains. 

If you learned anything from this newsletter, forward it to one person who would benefit from these insights.

Liam Gill