Canadian living standards have shifted dramatically in the past decade – but not all trends are clear to the eye.
Some changes are visible – houses have gotten pricier, more people are working in services jobs and the West still carries much of the country’s economic vigour. Others – such as a drop in child poverty rates and still-elevated long-term unemployment – have happened below the surface.
In a new presentation, Andrew Sharpe, executive director of the Centre for the Study of Living Standards, explores five little-known economic developments in the country. He made the presentation this weekend at the annual conference of the Canadian Economics Association, held in Montreal:
1. Sensitivity of trends in living standards to choice of income measure.
Whether real incomes in Canada are rising, stagnant or falling depends on the measure and time frame used. In 1990s, most measures showed little improvement in wages, and three measures – median after-tax income, median total income and median market income per household – showed outright declines in real incomes. The picture looks better in the 2000s, though, with all measures showing increases in the 2000-10 period. (The biggest gain came in real personal disposable income per capita, which rose 16.8 per cent). That doesn’t tell us what happened in the past several years, but it does show the most recent decade was a far better one for people, in terms of incomes, than the one prior.
2. Most new jobs created in industries with above-average wages.
Much has been written about the loss of manufacturing jobs in recent years. But between 2000 and 2012, for every factory-job loss there was one new job created in construction – which typically pay more. There are some caveats (in Ontario, Canada’s most populous province, construction job growth hasn’t been enough to offset manufacturing declines) but the growth does show resilience in the labour market given the 2008-09 recession. In sheer number terms, the sectors with the biggest job growth were health care and social assistance – along with construction and professional, scientific and technical services. The latter two sectors pay above-average wages.
To put a number on it, 1.7 million jobs were created in sectors with above-average wages between 2000 and last year, while 1.6 million were added in industries with below-average wages.
3. Falling absolute poverty rates.
There are also different ways to measure poverty. Statistics Canada’s low-income cutoff incidence (often called the LICO) shows a slide in poverty rates that began in the late 1990s and continued to about 2007. The recession halted improvements to poverty rates – but it doesn’t seem to have pushed them higher either, with the LICO roughly plateauing since the recession. (Another measure, the low-income measure or LIM, shows relative poverty grew slightly in the past decade).
Three million Canadians, or 9 per cent of the population, lived in low income in 2010, compared with 12.5 per cent a decade earlier.
Child poverty rates have fallen, using both measures, since 2004, while the percentage of single moms in poverty has fallen dramatically. Government policies including child tax benefits help explain the improvements. (Still, other studies, including one from the University of Waterloo, have shown people may be exiting poverty – but only just, with many remaining only slightly above the poverty line.)
4. Plateauing income inequality.
Again, there are more than one ways to track income inequality. The income gap grew markedly, by all measures, in the 1990s as measured using the Gini coefficient. But since then, it’s been quite stable in terms of total income and after-tax incomes (though a measure of market income shows it is continuing to climb). Why, then, does it feel like the income gap is growing? The Gini isn’t great at capturing changes in the highest and lowest ends of the income spectrum. Other studies show sustained growth in the top 1 per cent of earners.
5. Continued role for government spending and taxes in offsetting income inequality.
Government policies – such as taxes and transfers – have done much to redistribute incomes in Canada. But their impact is far smaller today than two decades ago – before a move to cut deficits resulted in lower transfers, which in turn caused inequality to climb. More generous transfers just after the recession did help level the playing field.