Cost-of-living crisis

A cost-of-living crisis is a situation or period of high inflation with increases in the nominal cost of living while real wages decrease. As a result, real income and living standards are squeezed to the point that people cannot afford the standard of living that they were previously accustomed to. The population becomes 'poorer' than it used to be in real terms. This is in contrast to a situation in which wages are rising with inflation and workers' standard of living remains unchanged.[1]

During the 2020s, a cost-of-living crisis impacted many countries around the world amid global inflation.[2][3] In February 2023, 3 out of 4 consumers globally were worried about the rising cost of everyday expenses.[4] The Big Issue defines a cost of living crisis as "a situation in which the cost of everyday essentials like groceries and bills are rising faster than average household incomes".[5]

Effects on society

Health

Cost-of-living crises have had significant and wide-ranging negative consequences for mental and physical well-being.[6] For example, high food prices force people to choose to eat cheaper foods with less nutritional value or less food in general. Worse nutrition also leads to a higher likelihood of getting sick from infectious diseases. In poorer countries, there is a higher risk of starvation.[7][8] Public health can be threatened.[9] Reduced access to household heating and cooling has been demonstrated to cause a range of health issues including respiratory and cardiovascular illness, heat-related illness, poorer mental health and in some cases premature death.[10][11]

Mental health also declines across the board due to the stress of being unable to afford to live properly. Rates of depression and anxiety increase. People are also more likely to lose sleep, forego meeting with friends, not engage in their hobbies, and skip out on exercising. A cost-of-living crisis will lead to a higher demand for social and health services. However, higher operating expenses and a lack of staff to meet the higher demand will result in squeezed budgets and worse service. Overworked and underpaid staff will also be more likely to quit, creating a vicious cycle.[7][12]

Job market

Workers are more likely to quit their job and switch to a higher-paying one because their current job no longer pays enough to cover their lifestyle expenses.[13] Workers are most likely to strike in an effort to improve their circumstances.[14]

Business and investments

Small businesses will be negatively affected due to higher material and energy prices.[15] Customers also have less purchasing power, and so will purchase fewer items from companies who do not sell essential goods.[16] It becomes more difficult to predict investment returns because of market volatility and uncertainty. People are also less likely to invest in businesses or the stock market because they have less disposable income.[17]

Spending and debt

Consumer confidence drops.[18] Non-essential spending is reduced, with luxury goods, travel and fashion seeing the greatest declines.[19] People are more likely to take on debt in order to keep up with bills and living expenses.[20]

By region

2012 Aysén protests due to the high cost of living in Patagonia

In 2022, The Guardian reported that numerous countries were being impacted by a cost of living crisis, including Belgium, Germany, India, Nigeria, Philippines, South Africa and Taiwan.[3]

Australia

In the 2020s, Australia faced a cost of living crisis, impacting food security and increasing demands for food banks.[21]

Brazil

In 2022, Brazil saw double digit inflation rates.[22] Despite Brazil being an agricultural powerhouse, food prices are rising.[22]

Canada

In 2024, CBC News reported many Canadians were struggling amidst rising living costs and working multiple jobs.[23]

Ireland

Ireland is currently experiencing a cost-of-living crisis, resulting in Ireland becoming the most expensive country in the European Union.[24] This crisis has been accompanied by crises in housing, fuel and healthcare. A reported 36% of Irish families were not able to pay at least one essential household bill.[25] This economic strain has contributed to public dissatisfaction and protests against the government.

New Zealand

New Zealand is currently experiencing a cost-of-living crisis, with increasing unemployment and a contracting GDP alongside record numbers leaving the country, but The Treasury and Reserve Bank government departments expect New Zealand's economy to make an economic turnaround sometime between 2026 and 2030.

United Kingdom

These paragraphs are an excerpt from United Kingdom cost-of-living crisis.[edit]

In late 2021, the prices of many essential goods in the United Kingdom began increasing faster than household incomes, resulting in a fall in real incomes. The phenomenon has been termed a cost-of-living crisis. It is due in part to the economic impact of the COVID-19 pandemic, including a global surge in inflation, wage stagnation attributed to the Conservative Party's austerity programme, as well as the economic instability and mass migration[26][27] caused by Brexit and the Russo-Ukrainian war.

While all in the UK are affected by rising prices, the crisis most substantially affects people living in poverty. The British government has responded with measures including grants, tax rebates, and subsidies to electricity and gas suppliers. Regular pay began to outpace inflation beginning in May 2023,[28] but living costs have remained at elevated levels, and have continued to increase faster than headline inflation into 2025.[29] The Joseph Rowntree Foundation projected in 2025 that disposable incomes would continue to decline for the rest of the decade.[30]

See also

References

  1. ↑ "Cost-of-Living Crisis: How Does It Impact Companies and…". Euromonitor. 21 November 2022. Retrieved 27 August 2023.
  2. ↑ "What the cost of living crisis looks like around the world". International Rescue Committee. Retrieved 27 August 2023.
  3. 1 2 Reporting team (20 June 2022). "From New Zealand to Nigeria: the global toll of the cost of living crisis". The Guardian. ISSN 0261-3077. Retrieved 9 January 2025.
  4. ↑ "Euromonitor – A Look at the Cost of Living in 2023". lp.euromonitor.com. Retrieved 27 August 2023.
  5. ↑ Webster, Premila; Neal, Keith (September 2022). "The 'cost of living crisis'". Journal of Public Health. 44 (3): 475–476. doi:10.1093/pubmed/fdac080. PMID 36038510. Retrieved 4 June 2024.
  6. ↑ Norman, Mark (6 July 2022). "Cost of living: How the crisis is affecting our health". BBC. Retrieved 4 June 2024.
  7. 1 2 Kilfoyle, Michelle (4 May 2023). "How is the cost of living crisis affecting public health?". Economics Observatory. Retrieved 27 August 2023.
  8. ↑ Roverts, Manon; Petchey, Louisa (3 February 2023). "The cost-of-living crisis is a public health issue". British Politics and Policy at LSE. Retrieved 27 August 2023.
  9. ↑ Dunn, H.; Lowe, R.; Mahmood, H. (2024). "A mixed methods evaluation of the impact of a cost-of-living policy and practice hub on integrated care strategies". Public Health. 234 (September 2024): 33–36. doi:10.1016/j.puhe.2024.05.034. PMID 38943833. Retrieved 1 September 2024.
  10. ↑ "Climate change: Heat and health". World Health Organization. Retrieved 15 August 2026.
  11. ↑ Protecting health in Europe from climate change. World Health Organization Regional Office for Europe. Retrieved 15 August 2026.
  12. ↑ "Mental health and the cost-of-living crisis report: another pandemic in the making?". mentalhealth.org.uk. Retrieved 27 August 2023.
  13. ↑ Christian, Alex (13 July 2023). "How the cost-of-living crisis is fuelling job quits". bbc.com. Retrieved 27 August 2023.
  14. ↑ Bai, Stephanie (21 July 2023). "A wave of strikes has hit Canada. What does this say about our labour market?". Macleans.ca. Retrieved 27 August 2023.
  15. ↑ "How will the cost of living crisis hit your small business?". Bionic. Retrieved 27 August 2023.
  16. ↑ Kollewe, Julia (3 April 2023). "Half of all UK consumers have cut non-essential spending". The Guardian. Retrieved 27 August 2023.
  17. ↑ "The cost of living crisis and how it impacts investments". linkedin.com. Retrieved 27 August 2023.
  18. ↑ "Rising cost-of-living pushes consumer confidence to all-time low". Deloitte United Kingdom. Retrieved 27 August 2023.
  19. ↑ "69% of consumers hold back on non-essential spend as cost of living rises; 90% adopt cost-saving behaviours: PwC Consumer Insights Survey". PwC. Retrieved 27 August 2023.
  20. ↑ Suhanic, Gigi (1 June 2023). "Posthaste: Canadians walk financial tightrope as consumer debt hits record $2.3 trillion". financialpost.com. Retrieved 27 August 2023.
  21. ↑ "As the cost-of-living crisis takes its toll on Australians, some are looking outside the box for solutions". ABC News. 16 July 2024. Retrieved 9 January 2025.
  22. 1 2 "Cost of living crisis: Relying on food handouts and moving country". BBC. 30 May 2022. Retrieved 5 June 2024.
  23. ↑ Mullin, Malone; Antle, Sarah (1 January 2024). "We asked, you answered: Here's how Canadians are working to survive the cost of living crisis". CBC News.
  24. ↑ https://www.independent.ie/business/money/ireland-now-the-most-expensive-country-in-the-eu-for-housing-health-alcohol-and-electricity/a/157475583.html
  25. ↑ https://www.todayfm.com/news/families-skip-meals-because-of-cost-of-living-crisis-2269722
  26. ↑ Fernández-Reino, Mariña; Sumption, Madeleine; Vargas-Silva, Carlos (2020). "Migrants and Housing in the UK". Oxford Review of Economic Policy. 36 (Supplement_1): S382–S396. doi:10.1093/oxrep/graa016. ISSN 0266-903X. There is some evidence that migration has increased house prices Migration contributes to the demand for housing through its contribution to population growth. Given that the supply of housing in the UK has increased more slowly than demand, migration may be expected to increase housing costs. The determinants of housing costs are complex, however. Costs of housing take different forms – notably house prices, the private rental market and (low-cost) social housing – affecting different groups in different ways, depending on the type of housing they are most likely to occupy. In addition to demographic factors affecting the number of households (such as population growth and average family size), demand also depends on factors such as income growth and the availability of mortgage credit.
  27. ↑ "Mass migration not delivering promised economic benefits, say Jenrick and O'Brien". The Centre for Policy Studies. Retrieved 25 August 2026.
  28. ↑ "Average weekly earnings in Great Britain - Office for National Statistics". www.ons.gov.uk.
  29. ↑ Inman, Phillip (31 March 2025). "Will bills continue to rise and what does it mean for Labour?". The Guardian.
  30. ↑ "The Guardian view on the IMF's warning: Britain's economy runs hot for profits, cold for pay". The Guardian. 14 October 2025.
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