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Economy Lab

Income inequality rising quickly in Canada Add to ...

The gap between the rich and the rest is growing ever wider -- with the chasm increasing at a faster pace in Canada than in the United States.



That’s the conclusion of a Conference Board of Canada study Tuesday, which says income inequality has been rising more rapidly in Canada than in the U.S. since the mid-1990s.

More related to this story



Its global analysis found that Canada has had the fourth-largest increase in income inequality among its peers. Between the mid-nineties and late 2000s, income inequality rose in 10 of 17 peer countries -- including Canada. It remained unchanged in Japan and Norway, and declined in five countries.



“Even though the U.S. currently has the largest rich-poor income gap among these countries, the gap in Canada has been rising at a faster rate,” noted Anne Golden, president and chief executive, adding that high inequality raises both “a moral question about fairness and can contribute to social tensions.”



Of total world income, 42 per cent goes to those who make up the richest 10 per cent of the world’s population, while 1 per cent goes to those who comprise the poorest 10 per cent, it says.



Tuesday's report landed on the same day the U.S. Census Bureau said the 46.2 million Americans in poverty last year was the largest in the 52 years that data has been published.



Countries with very high inequality are clustered in South America and southern Africa. Countries with low inequality are mostly in Europe. Canada and the U.S. have medium income inequality, the report says.



While plenty of prominent economists in the U.S., including Nobel Prize winner Joseph Stiglitz and University of Chicago professor Raghuram Rajan, have devoted much analysis to the growing income gap south of the border and its economic impact, the issue has not garnered much attention in Canada.



Today’s report offers little explanation on why the income gap is growing more rapidly in Canada than elsewhere. Broadly, it says market forces and globalization are increasing disparity, along with institutional shifts such as dwindling unionization rates and stagnating minimum wages.



It also doesn’t delve much into what’s happened with the gap in recent years. Part of the challenge is finding solid statistics -- national data on income levels is typically two years out of date. The most recent figures, for 2009, show Canadian poverty rates started to rise again in the recession after a decade of improvement.



Canada’s income gap is a worry to several business leaders, as discussed in this story I wrote with Anna Mehler Paperny in May.



A separate Conference Board report published in July showed the richest segment of Canadians increased their share of total national income while poor and middle-income individuals have lost ground since 1993.



The Conference Board uses a measure of income inequality called the Gini index. It calculates how the distribution of income deviates from a perfectly equal distribution. A Gini index of 0 means that every person in the society has the same amount of income while 1 would show that one person has all the income.



A country with low inequality has a Gini index of 0.3 or less while those above 0.4 point to a high-disparity country. Canada’s Gini index hit 0.320 in the late 2000s from 0.293 in the mid-1990s. During the same period, the United States’ Gini index rose to 0.378 from 0.361.



Income inequality, along with corruption, were named as the two most serious challenges facing the world at this year’s World Economic Forum in Davos.



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