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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? (Chris Young For The Globe and Mail)
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? (Chris Young For The Globe and Mail)

Income inequality in Canada: What’s the problem? Add to ...

Miles Corak: Roughly speaking, middle-income households are not much, if at all, better off than 30 years ago. They are now working harder and relying more on government transfers to maintain the same standard of living. The starting salaries of each successive cohort of young people entering the labour market are lower. Poverty is another thing altogether, and though it has fallen when compared to 20 years ago, this is cold comfort.

Kevin Lynch: As Sergeant Friday used to say: “The facts, nothing but the facts.” And the facts suggest that income inequality worsened in Canada, as measured by the Gini coefficient by about the same percentage as the OECD countries on average, and the deterioration actually happened in the second half of the 1990s, not in the last decade. Over the last decade, median real disposable income rose in Canada by about 20 per cent compared to a decline of 4 per cent in the U.S., and the ratio of the top 10 per cent to the bottom 10 per cent declined slightly after rising in the 1990s. Within these statistics, there were increasing market returns to those with better education, and pressures on middle class workers as the nature of work changed.

Anne Golden: The point is not that the middle class and the poor in Canada are not worse off than they were 30 years ago. The point is that the incomes of the middle class have stagnated. The average income of the middle quintile grew by just 6 per cent in real terms in over a third of a century. Nor is the point that the poor are not worse off. It’s that they are not much better off, despite a period of significant growth in incomes. The point is that it is top fifth of the population who reaped the benefit of this growth. And the effects of this can be seen in a shrinking of the number of middle class neighbourhoods, as rich and poor grow further apart.

Miles Corak: It is also important to appreciate that this picture cannot be brought into focus by relying on any statistic. The Gini coefficient, by its very construction, is not sensitive to changes in the extremes of the income distribution and so does not fully capture the impact on inequality of rising income shares being captured by top earners. Over the last decade inequality continued to increase, but the nature of the increase was different, reflecting a pulling away of the top tail of the income distribution.

Jim Stanford: How low we set the bar: Despite the advent of incredible technology. Despite a 50 per cent increase in average labour productivity. Despite the mass entry of women into the paid labour market. Despite all these things, the real income of the truly “middle” household (the median family) has not budged in more than 30 years – and even that is due to the impact of government in moderating the strong polarization of market incomes. And yet some claim this as a “victory.” Most Canadians have been completely sidestepped by the benefits of economic progress for a generation – precisely because of the erosion of the institutions designed to share the wealth (like income security, collective bargaining, and progressive taxation). Real incomes for the richest 1% doubled in the same period, and real incomes for the super-rich (the top 0.01%) tripled. So by the definition of relative poverty (being worse off than those around you … and, in this case, much worse off than those you read about and see on TV), poverty has indeed increased in Canada.

William Robson: Since we are making such different claims about the trends, I’m quoting Statistics Canada’s household incomes, adjusted to an individual basis to correct for how the average household is getting smaller over time. Between 1996 and 2011, the after-tax-and-transfer figures do show average incomes in the top quintile outpacing the others. But they also show average incomes in every quintile up more than 30 percent over the period – not a bad performance, and much better than what came before it.

Jim Stanford: Adjusting the data for the size of household is problematic for several reasons. First, household expenses per capita are higher for smaller households, so claiming that families are “richer than they feel” because there are less people in each household is not very comforting. Second, to some extent households may be smaller precisely because incomes have stagnated, so there is a circularity in the causation. Third, while average household size has declined, average household paid working hours did not.

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