Must-know things on the cost of living crisis

Not being able to afford housing expenses? Sounds like a quote from some millennial reels, but actually, the cost of living and the struggle to make ends meet is a common challenge for many in these past 3 years. To be more precise, Ipsos made an overview showing that all around the globe, rampant inflation is an international phenomenon.

But how did it come to be like this? According to the Commons Library Research Briefing, the three main factors that played a strong role in the initial phase of the current increase were:

• strong global demand for consumer goods – a consequence of the COVID-19 pandemic and associated lockdowns
• related supply chain disruption
• soaring energy and fuel prices – particularly, but not exclusively, due to Russia’s full-scale invasion of Ukraine in February 2022.

The UN’s regular Economic Briefing stressed that a rise in energy and food prices are driving volatile global inflation. High prices are particularly challenging for countries that are still struggling to recover from the pandemic. Other factors that play a role in this scenario are persistent supply chain disruptions and tight labour markets.

Whenever low-income households need to pay their energy bills or put bread on the table, they feel these changes in their pockets strongly.

The UN's Economic Briefing shows that most underprivileged households' income goes to the purchase of food items, and the increase in food prices poses a risk of placing many families in poverty, which will aggravate inequality worldwide.

Now that we understand the impact of inflation on the cost of living worldwide, let’s take a close look at how it has affected people's homes and pockets.

Food for thought

Recent data from the Food and Agricultural Organization (FAO) shows that more than 3 billion people are unable to afford a healthy diet since the start of the COVID-19 pandemic. And domestic food price inflation plays a big part in the cost-of-living crisis that might lead to an increase in poverty.

According to the World Food Programme (WFP), more than 828 million people around the globe go to bed hungry every night. The WFP also reported that within 79 of the countries where it operates, “more than 345 million people are facing acute levels of food insecurity in 2023, and do not know where their next meal is coming from”.

Data from the World Bank shows that more than 64% of high-income countries are experiencing high food price inflation, while 57% of low-income countries, 83% of lower-middle-income countries, and 59% of upper-middle-income countries face an inflation higher than 5%, or even a double-digit inflation.

Of all the 195 countries around the globe, the most affected by inflation and consequently facing food insecurity are in Africa, North America, Latin America, South Asia, Europe, and Central Asia. And this cost-of-living crisis is not going to go away any time soon.

In response to this scenario, policymakers worldwide are trying to implement fiscal measures to protect their citizens from the current food crisis. Data from the International Monetary Fund (IMF) estimates that highly exposed countries may need around $7 billion to aid the poorest households through this situation.

Cost of liv-in

As if the high food costs weren’t enough pressure, the budgets of families around the world have been further squeezed by the high housing prices. A paper by the Organisation for Economic Co-operation and Development (OECD) reports that even before the cost-of-living crisis, more than one in three low-income tenants used to spend 40% of their disposable income on rent alone.

That alone wouldn’t be an issue... if growth income had followed its pace, but it didn’t happen. OECD data shows that real house prices have risen by 77% in the past 26 years, and a nearly 20% year-on-year increase in other housing-related expenses, such as utilities, rent, maintenance, and repair in 2022.

As a consequence of the rising costs of living and higher interest rates, in many cities, low- and middle-income families have been facing housing insecurity. This translates into more evictions, poor quality or overcrowded dwellings, and growing barriers to moving to better quality housing.

Recalling the opening statement of this article, “Not being able to afford housing expenses? Sounds like a quote from some millennial reels”, well, they’re not wrong. In recent years, young adults (18 -29 years old) have found it more challenging to find affordable housing than previous generations, according to a study made by OECD members, Boris Cournède and Marissa Plouin. This poses an obstacle to this demographic to become homeowners and to their ability to build wealth.

Available data from 17 countries presented that buying a house in a metropolitan region became 40 percentage points more expensive than in faraway areas. In this scenario, low-income families are the most affected, along with middle-income households that are forced to move to areas very distant from job opportunities and have little access to basic services and amenities.

Another aspect that pops up as a consequence of the housing affordability crisis and high food prices is homelessness. According to OECD research, people living under this circumstance suffer a huge impact on their life expectancy in comparison to the general population – a difference of 30 to 35 years – along with a higher risk of diseases, substance abuse, mental illness, and other health problems.

What can be done?

Many initiatives have been taken to tackle the present cost-of-living crisis, and policymakers have put effort into creating mitigating efforts such as financing mechanisms, including tax incentives, public-private partnerships, and government grants.

Regarding the pressing food insecurity, according to the Global Food Banking Network, food banks have been essential actors in providing consistent nutritious food to communities that are facing hardships worsened by the cost-of-living crisis.

And you can do something too! Download the Now-u app – available on the Apple Store and Google Play – and learn effective ways to support communities worldwide that are facing the challenges of the high cost-of-living prices.