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(Sergey Kishan/iStockphoto)
(Sergey Kishan/iStockphoto)

Earlier discussion

Is income inequality just business as usual? Add to ...

Comment From Mark A: Is there any way that this trend could be reversed without a massive public policy shift? It seems to me that the demand for the bottom end of the labour market has been steadily declining (offshoring, big box retail, online retail) and will only continue to decline. As the world gets increasingly efficient at selling things without paying bottom of the ladder labour, how can you ever fix this without government intervention?

Armine Yalnizyan: Mark, your question has two parts. One is how we pay each other in the production of goods and services for which there is essentially no global competition. The other is how Canadians are paid in a labour market that is essentially global in nature. We can redress some of the vagaries of the market through public policies, but the root cause of growing inequality is how different peoples' work is valued. IN a slow growth environment, which seems to be the foreseeable future for Canada, it will become harder and harder for those at the top of corporate structures to take the types of increases they have been commanding in the marketplace and expect unionized workers to be happy about losing their pension, benefits and wage increases, and expect low-end workers to essentially stay put or lose more ground. Two things can happen - those at the top start moderating their increases; or those in the middle and the bottom start seeing solid increases, particularly as the wave of retirements starts accelerating. The problem with rising incomes, generally, is that usually goes along with rising prices; and we're about to host the largest cohort of retirees we've ever had in history, a group that lives on fixed and low incomes, to whom rising prices are toxic. So how will the highest priced workers get away witih demanding more in that context I wonder?

Comment From batgirl: On the flip side, is there any evidence that increasing in income equality is correlated with increasing growth in GDP?

Armine Yalnizyan: Good Question, Batgirl! The answer is NOPE. At least, it's not a linear correlation. Historically, increasing economic growth first deliver rising inequality, then lowering inequality (Simon Kuznets' famous work back in the 1950s). That's still true of developing nations - economic growth is first badly distributed, then leads to demands for greater equality. Then we've come to this stage of advanced capitalism in some developed nations (US, UK and Canada for example) where growth has been accompanied by stunning increases in inequality; and other advanced industrialized nations where it hasn't (the typical suspects - Norway, Finland, Denmark, Sweden, etc. etc.) So no one-size-fits-all explanations for the relationship between GDP growth and inequality. Raises the question: why wouldn't you pick greater equality?

Comment From Hassan Ali: my question is given the difficulty associated with measuring income inequality in GDP for example, what policies can help to measure income inequality?

Armine Yalnizyan: Hassan, while there are no "industry standards" on how to measure income inequality, there are many ways of doing so (ratios of the top 10 to bottom 10%; or the top to bottom 20%; or the Gini Coefficient) , and a number which are used internationally. Some people think it's important to look at poverty. Others think it's important to look at the share of income and wealth held by those at the top. They all contribute to an understanding of how the gains from economic growth are distributed/concentrated, which tells us something about our collective expectations and our future prospects.

Comment From John Campey: Armine, what yould you see as the key "message" or specific policy initiative that could engage and motivate people (beyond the inner circle of the 'converted') to take this on in a significant way?

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