5 things we know about eco­nomic in­equal­ity And why we need to act

Asian Journal - - Editorial -

Win­nipeg: The ex­tent of eco­nomic in­equal­ity – in­clud­ing what drives it and what to do about it – is hotly de­bated amongst pol­icy mak­ers, econ­o­mists and political lead­ers. What isn’t de­bated is its ef­fects on cer­tain seg­ments of so­ci­ety: from health out­comes of in­di­vid­u­als and en­tire com­mu­ni­ties to so­cial co­he­sion, eco­nomic growth and so­cial mo­bil­ity. So how bad is it and who does it af­fect? Here are five things we know about eco­nomic in­equal­ity in Canada:

1. Eco­nomic in­equal­ity is a mat­ter of life and death.

Ac­cord­ing to a re­port this month from the Cana­dian In­sti­tute for Health In­for­ma­tion, the gap be­tween the health of high and low-in­come Cana­di­ans has widened over the past decade for mea­sures such as smok­ing, hos­pi­tal­iza­tion for chronic ob­struc­tive pul­monary dis­ease (COPD), and how Cana­di­ans rate their own men­tal health. A Sta­tis­tics Canada re­port has also found that eco­nomic in­equal­ity, in­clud­ing in­come in­equal­ity, is as­so­ci­ated with the pre­ma­ture death of 40,000 Cana­di­ans a year, which is equal to 110 Cana­di­ans dy­ing pre­ma­turely ev­ery day. Com­par­ing the wealth­i­est 20 per cent of Cana­di­ans with the poor­est 20 per cent of Cana­di­ans, it was found that a man liv­ing on a low in­come has a 67 per cent greater chance of dy­ing each year than his wealthy coun­ter­part, and a woman liv­ing on a low in­come, a 52 per cent greater chance.

2. In­come in­equal­ity has grown over the past 20 years in Canada.

Ac­cord­ing to the Gini co­ef­fi­cient (a mea­sure­ment of the sta­tis­ti­cal dis­tri­bu­tion of in­come be­tween res­i­dents across the coun­try), Canada suc­cess­fully re­duced in­come in­equal­ity in the 1980s. How­ever, ac­cord­ing to the same mea­sure­ment, in­come in­equal­ity rose in the mid-1990s and has re­mained at an all-time high. To put this into per­spec­tive, Canada ranks 12th high­est among de­vel­oped coun­tries for the worst in­come in­equal­ity and re­ceived a “C” grade on in­come equal­ity from the OECD.

3. Stud­ies sug­gest that eco­nomic in­equal­ity is driven by the ris­ing con­cen­tra­tion of wealth at the top.

In 2012, the top 10 per cent of Cana­di­ans ac­counted for al­most half of all wealth while the bot­tom 30 per cent of Cana­di­ans ac­counted for less than one per cent of all wealth. Maybe the sim­plest way to un­der­stand all this is this sin­gle statis­tic: the top 10 per cent of Cana­di­ans held al­most $6 of ev­ery $10 of fi­nan­cial as­sets in the coun­try, ex­clud­ing pen­sions.

4. The roots of eco­nomic in­equal­ity are of­ten so­cial.

Econ­o­mists fre­quently make a dis­tinc­tion be­tween in­equal­ity due to dif­fer­ences in ef­fort and tal­ent, and those due to dif­fer­ences in cir­cum­stances that are seen as be­yond an in­di­vid­ual’s con­trol, such as gen­der, race, class, eth­nic­ity, sex­u­al­ity, ge­og­ra­phy, age, abil­ity, im­mi­gra­tion sta­tus and re­li­gion. Other data also sug­gest the be­lief that ef­fort equals wealth is mis­guided. In­dige­nous peo­ple earn only 70 cents for ev­ery dol­lar ver­sus non-In­dige­nous peo­ples; and women make 67 per cent of what men make. Th­ese in­come gaps partly stem from dis­par­i­ties in the dis­tri­bu­tion of good pay­ing and more se­cure jobs.

5. In­come in­equal­ity slows the over­all eco­nomic growth of the coun­try.

Ben­e­fits do not trickle down. The IMF and the OECD have found that an in­verse re­la­tion­ship ex­ists be­tween in­creas­ing the in­come share of those liv­ing in the high­est in­come group and over­all eco­nomic growth of the coun­try. If the in­come share of the top 20 per cent of in­come re­cip­i­ents in­creases by one per cent, GDP growth ac­tu­ally slows. How­ever, a sim­i­lar in­crease in the in­come share of the bot­tom 20 per cent – a coun­try’s poor­est – is as­so­ci­ated with a rise in eco­nomic growth. This pos­i­tive re­la­tion­ship con­tin­ues when in­creas­ing the in­come share of the middle class, re­sult­ing in higher eco­nomic growth. Carolyn Shim­min is a Knowl­edge Trans­la­tion Co­or­di­na­tor with Ev­i­denceNet­work.ca and the Ge­orge and Fay Yee Cen­tre for Health­care In­no­va­tion. © 2016 Dis­trib­uted by Troy Me­dia

Carolyn Shim­min

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