This is part of The Globe's Wealth Paradox series, a two-week examination into how the income divide is shaping Canada.
Globe and Mail columnist Konrad Yakabuski led a discussion with five of Canada’s leading experts about this country’s income gap and what can be done about it.
- Kevin Lynch is vice-chair of BMO Financial Group.
- Anne Golden is distinguished visiting scholar at Ryerson University.
- Jim Stanford is an economist with the trade union Unifor.
- William Robson is president and CEO of the C.D. Howe Institute.
- Miles Corak is a professor of economics at the University of Ottawa.
Konrad Yakabuski: Is income inequality a big problem in Canada? Or have we imported this debate from the United States, where inequality really is a big problem?
Anne Golden: Income inequality is, indeed, a serious issue for Canada. While the actual gap between the rich and the rest is far greater in the U.S., inequality is growing faster in Canada than in most peer countries. The biggest jump in Canada's inequality occurred from 1994 to the early 2000's. Too much inequality is bad for society and the economy.
Kevin Lynch: Rising income inequality is a real issue in Canada, as it is in many countries, but the reality of Canadian income inequality is quite different than that in the United States. We must guard against importing perceptions from the U.S., and make sure we understand the Canadian facts.
William Robson: Statistics Canada’s figures on real incomes by quintile show gains since the mid-1990s for each group, and the shares of each group – whether we look at pre-tax or after-tax incomes – have been remarkably stable. Many young people are doing less well, and worries about retirement are common in the middle class, but the dismal U.S. headlines do not reflect Canadian reality.
Anne Golden: I don’t agree that the shares of each group have remained stable. Since 1976, only the richest group of Canadians – the top 20 per cent – increased its share of national income. All other groups lost share. In fact, the top 1 per cent of Canadians took home a third of all income growth from 1998 to 2007. The average income of the poorest quintile, after accounting for inflation, taxes and transfers, grew by just $2100. The real incomes of the top quintile grew by 13 times as much! For sure, the pattern is worse south of the border, but our income inequality is growing and it is a problem.
Jim Stanford: The U.S. has the most unequal society of any industrialized economy. So saying that “things may not be perfect, but we have done better than the U.S.” is not exactly a claim to fame. Instead of comparing ourselves to the outlier, let’s compare ourselves to the broader set of industrial economies. On those grounds, income distribution in Canada (measured variously, such as the ratio of top-to-bottom incomes or the Gini coefficient) is relatively bad. And inequality in Canada has gotten a lot worse since the 1970s, with economic and human costs that we all experience. So we could clearly do a lot better at sharing the wealth, and building true shared prosperity.
Miles Corak: It is certainly the case that income inequality has increased in Canada, not as much as in the United States, but certainly more, as Jim has stressed, than in many other countries. Particularly notable has been the rise in the share of income going to the top 1 per cent. Whether this is a "problem", however, is an open question. Whether public policy should be addressing the rise in inequality depends upon the underlying drivers, what can effectively be done about them, and, most importantly, it depends upon the consequences and costs of higher inequality.
EXPECTATIONS vs. OUTCOMES
Konrad Yakabuski: Clearly middle-class income growth has not matched middle-class expectations, but can we honestly say average Canadians are materially less well off than they were 30 years ago? That there is more poverty in Canada?
William Robson: The Statistics Canada family-income figures I just mentioned start in 1976 and currently run to 2011. They do show bad news from 1976 to the mid-1990s. But the news after 1996 is way better – real gains across the board, and a growing market-income share for the bottom fifth. Poverty rates are down in Canada – again, a key contrast with the United States.