The cost of living: Krishna Pendakur awarded Bank of Canada Fellowship to focus on poverty and economic inequality

“We’ve just gone through two years where the price of rent and the price of food went up very dramatically.” Yet often ignored is how people of differing income levels have different spending patterns that leave poorer households vulnerable to price increases.

“Food and shelter are necessities that poor people spend a larger fraction of their budget on,” says Distinguished SFU Professor of Economics, Dr. Krishna Pendakur. “When the price of those two things increases, that means inflation is a much bigger deal for poor people than for rich people.”

The Bank of Canada exists “to regulate credit and currency in the best interests of the economic life of the nation.” In Pendakur’s words, “They’re interested in price stability or inflation rates being low. But what inflation rate?” He asks, “Whose inflation rate? This idea that the bank should pay attention to inflation and inequality is one angle of my proposal.”

Pendakur was awarded the Bank of Canada Fellowship, giving him substantial resources to pursue this research agenda. The Fellowship, awarded to “academics who are making exemplary contributions to economic and financial research in Canada,” is a great honour awarded to very few people. The five-year term enables Pendakur to continue to build upon an impressive three-decade career researching and writing on poverty and economic disparities. 

Drawing upon his expertise in economic history, public economics, labour economics, household economics, econometric theory, and microeconomic theory, Pendakur’s proposal is three-fold:

1. Measure the cost of living focusing on how changes inflation may differ for households with different income levels
2. Create a single social cost of living index that the central bank could use in inflation targeting
3. Illuminate the cost of living through frontier microeconomic and econometric theory using barcode-level scanner data

When receiving the congratulatory phone call from Tiff Macklem, the Governor of the Bank of Canada, Pendakur heard an unexpected but pleasant surprise: Macklem was particularly impressed with a fourth aspect of Pendakur’s research, which he is well known for, but was not included in his proposal---his work on the economic inequalities facing Indigenous peoples.  

In 2011, Krishna Pendakur and his brother, Ravi Pendakur, a sociologist at the University of Ottawa, published Aboriginal Income Disparity in Canada. Building upon findings from their highly-cited 1998 paper, The Colour of Money: Earnings Differentials Among Ethnic Groups in Canada, the brothers achieved another pivotal accomplishment in the literature. “In the ethnic mosaic that is Canada,” Pendakur says, “there are a whole bunch of inequalities but the largest is that facing Indigenous peoples.”

Pendakur feels that this should be a focus of the country’s central bank, “and they actually have policy tools that are relevant and important for Indigenous peoples.”

As a Bank of Canada Fellow, Pendakur will be attending the Learning Exchange in Ottawa this May. Empowered now to relay data and recommendations to the country’s chief monetary authority, he aims to “push their research agendas towards understanding and mitigating price inflation faced by poor households and Indigenous inequality. These are areas where I can contribute that’s very different from what others are contributing.”