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Income inequality in industrialized world continues to grow, says OECD

Chilean children look out from their one-room shanty. Chile is at the bottom of the OECD’s income equality list.

Eliseo Fernandez/REUTERS

Income inequality is growing across the industrialized world, including Canada, with the global financial crisis deepening the divide between the rich and the poor, says an analysis to be released Wednesday.

And the rate of change is quickening. The income gap increased at a faster pace in the three years to 2010 than it had in the previous 12 years, according to an Organization for Economic Co-operation and Development report.

That is a concern because income inequality is a reflection of a country's well-being and the degree to which everyone is getting ahead, said Horacio Levy, social-policy analyst on income inequality.

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"When we look at GDP, it's a very big, aggregate number … that doesn't necessarily reflect whether everyone's benefiting," he said Tuesday in an interview from Paris. "But income inequality tries to assess the wealth of the people and how it's distributed."

Income inequality in Canada is not nearly at the levels of the United States or Greece.

But Canada is not immune to the trend, with the income gap above the OECD average and larger in 2010 than it was in 2007. Relative poverty rates in Canada have increased since 1995, particularly among young people, and are slightly above the OECD average.

"There is no reason to be complacent in Canada," Mr. Levy said. "Even if Canada hasn't been as affected doesn't mean it can't be in the future."

If anything, the income divide has deepened since 2010 in most advanced economies, as governments moved into austerity mode, with spending cuts eroding the social safety net just as jobless benefits for many unemployed people expire, he said.

"Our guess is that things have gotten worse since 2010," Mr. Levy said.

The Paris-based organization's analysis shows Iceland is the most equal country. Slovenia comes next, followed by Norway.

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Income inequality is most stark in Chile, along with Mexico and Turkey. Canada ranks 22nd in equality rankings of the OECD's 34 member countries.

In several measures, Canada comes out ahead of its peers. Unlike many other countries, market income (total income minus income from government programs) went up in the 2007 to 2010 period, while taxation and benefits policies in Canada mitigated the trend of a deeper divide.

In most countries, the poorest earners saw their incomes decline in this period. Not so in Canada, where incomes among the bottom 10 per cent of earners did rise, a little. That said, incomes rose at a faster pace among the top 10 per cent of earners.

Across OECD nations, after taxes and transfers the richest 10 per cent of the population earned 9.5 times the income of the poorest 10 per cent in 2010 – up from nine times in 2007.

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