Acost-of-living crisis is a socioeconomic situation or period of highinflation where nominalwages have stagnated while there is a sharp increase in thecost of basic goods, such asfood,housing, andenergy. As a result, living standards are squeezed to the point that people cannot afford thestandard of living that they were previously accustomed to.Public health is threatened.[1] The population becomes 'poorer' than it used to be in real terms. This is in contrast to a situation in which wages are rising to meet the rate ofinflation and workers' standard of living remains unchanged.[2]
During the 2020s, a cost-of-living crisis impacted many countries around the world amidglobal inflation.[3][4] In February 2023, 3 out of 4 consumers globally were worried about the rising cost of everyday expenses.[5]The Big Issue defines a cost of living crisis as "a situation in which the cost of everyday essentials like groceries andbills are rising faster than average household incomes".[6] Change in averagereal incomes can be measured byreal GNI per capita change.[citation needed]
Cost-of-living crises have had significant and wide-ranging negative consequences for mental and physicalwell-being.[7] For example, high food prices force people to choose to eat foods with less nutritional value or less food in general. This leads to a higher rate ofobesity (due to higher cheap carbohydrate consumption) orundernutrition, and, by extension, less energy and lowered performance at school or work. Worse nutrition also leads to a higher likelihood of getting sick from infectious diseases. In poorer countries, there is a higher risk of starvation.[8][9]
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.[10][11]
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 theirlifestyle expenses.[12] Workers are most likely to strike in an effort to improve their circumstances.[13]
Small businesses will be negatively affected due to higher material and energy prices.[14] Customers also have less purchasing power, and so will purchase fewer items from companies who do not sell essential goods.[15] It becomes more difficult to predict investment returns because of marketvolatility and uncertainty. People are also less likely to invest in businesses or the stock market because they have lessdisposable income.[16]
Consumer confidence drops.[17] Non-essential spending is reduced, withluxury goods,travel andfashion seeing the greatest declines.[18] People are more likely to take ondebt in order to keep up with bills and living expenses.[19]
In 2022,The Guardian reported that numerous countries were being impacted by a cost of living crisis, includingBelgium,Germany,India,Nigeria,Philippines,South Africa andTaiwan.[4]
In the 2020s,Australia faced a cost of living crisis, impactingfood security and increasing demands for food banks.[20]
In 2022,Brazil saw double digit inflation rates.[21] Despite Brazil being anagricultural powerhouse,food prices are rising.[21]
In 2024,CBC News reported many Canadians were struggling amidst rising living costs and working multiple jobs.[22]
In late 2021, the prices of many essential goods in theUnited Kingdom began increasing faster thanhousehold incomes, resulting in a fall inreal incomes. The phenomenon has been termed a cost-of-living crisis. It is due in part to theeconomic impact of the COVID-19 pandemic, includinga global surge in inflation, as well as the economic instability caused byBrexit and theRusso-Ukrainian war.
While all in the UK are affected by rising prices, the crisis most substantially affectslow-income persons. 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,[23] but living costs have remained at elevated levels, and have continued to increase faster than headline inflation into 2025.[24] TheJoseph Rowntree Foundation projected in 2025 that disposable incomes would continue to decline for the rest of the decade.[25]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.
