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Corporations are winning the inflation bump, while Canadians struggle with high prices

“Of every additional dollar that you're spending, on average, a quarter of it is just being declared as profits in oil and gas and mining,” said a senior economist at the CCPA.
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Between fall 2020 and fall 2022, 47 cents of every extra dollar spent on rent, food, transportation and more ended up as corporate profits in four industries, found a recent CCPA report.

As Canadians struggle to afford essential goods and services, the spoils of inflation are ending up largely in corporate profits, particularly in oil, gas and mining industries, a new analysis reveals.

The Canadian Centre for Policy Alternatives (CCPA) crunched the numbers to see how much more Canadians spent over the last two years due to inflation and pinpointed which industries benefited the most.

Between fall 2020 and fall 2022, 47 cents of every extra dollar spent on rent, food, transportation and more ended up as corporate profits in four industries, the report found.

For example, many consumers are justifiably angry that food prices are going up, and they blame the grocery stores because that's who’s selling them those goods, said David Macdonald, senior economist at the CCPA and author of the report Where are your inflation dollars going?
“But that doesn't really tell us who's benefiting from those higher prices,” he said, noting grocery stores were rolled into a larger retail category, so this analysis can’t single out their profits.

Supply chains are long and it's not just the grocery stores themselves, it's food manufacturers, it’s farmers, Macdonald told Canada’s National Observer. It's also the oil and gas industry that provides the crude to make diesel and gasoline to run tractors and fuel the trucks transporting these goods back and forth across the country, he said.

“Without this industry analysis, you just kind of blame the last person in the supply chain as opposed to getting a more in-depth understanding of who is ending up with all this money at the end of the day,” he said. To answer that question, Macdonald created a new dataset to calculate how much of each inflation dollar ended up as profit, worker compensation or other costs (like depreciation and interest) across Canada’s 15 economic sectors.

“Of every additional dollar that you're spending, on average, a quarter of it is just being declared as profits in oil and gas and mining,” said Macdonald.

“By far, the largest beneficiary of inflation has been the oil and gas extraction and mining industries, which, in an era of climate change, is probably not what we want,” Macdonald added.

Due to higher prices alone, $72 billion more was sent to the corporate sector in the third quarter of 2022 compared to the third quarter of 2020, the report found.

Of that, $18 billion ended up in mining and oil and gas extraction, and basically all of it was profit. Only $656 million went towards increased compensation for workers, the report found.

Macdonald’s methodology isolated inflation dollars, thereby removing the impact of higher levels of production that can also increase wages and profits. Because of the way industries are categorized, he couldn’t parse out exactly how much of the profit due to inflation can be attributed to oil and gas extraction versus mining.

The second-largest beneficiary was the manufacturing sector — which includes the refining of petroleum into diesel and gasoline — netting nine cents on every inflationary dollar. Real estate, rentals and leasing came in a close third with seven cents, and finance and insurers accounted for six cents of every inflationary dollar.

“This particular analysis really shows that these companies have been on the winning side of inflation despite the disruption it's caused everyone else,” Macdonald told Canada’s National Observer.

One way to cycle these corporate profits back to Canadians is through a corporate surtax on all industries, much like the one in place for banks and life insurers’ groups. This one-time 15 per cent tax on income above $1 billion for the 2021 tax year for banks and insurers was introduced in Budget 2022. The report says companies profiting from inflation are the best candidates for such a tax because those profits aren’t due to increased output.