Every generation expects to achieve more than the one that came before it and for many years, those expectations came true. But a disquieting trend has emerged over the past two decades, as the gap between the richest Canadians and the rest has grown, faster here than in all but one other OECD country, the United States. While inequality is less pronounced in Canada than the U.S., it is headed in the same direction, by several key measures.
The growth in inequality is being driven by an accumulation of wealth among the very top income earners, while the middle class lower income earners continue to stagnate. The richest 1 per cent earned 10.6 per cent of Canada’s income in 2012, down slightly from the pre-recession peak of more than 12 per cent, but up sharply from 7.1 per cent in 1982. The concentration of wealth in this country is also rising: The top 20 per cent control 70 per cent of net worth.
How did this happen? A host of factors are at work, including technological change, the shift of manufacturing and other low-skill jobs to the developing world, the decline of unionization, a surge in self-employment and a proliferation of performance-based incentives for top executives. And the great equalizers – universal health care, education, pensions – are under threat, as cash-strapped governments look to trim budgets.
Canada is facing a Wealth Paradox. As wealth continues to grow at the top, the economic health of the whole grows poorer. Already, mobility between income groups has slowed – it is much harder to get ahead than it used to be. If no action is taken, the Canadian dream itself may be in peril. Read more in a full story by Barrie McKenna.