Are li­ving stan­dards in Ca­na­da be­co­ming mo­re une­qual?

Re­sults of a re­cent Fra­ser Ins­ti­tu­te re­port flies in the fa­ce of ac­cep­ted wis­dom that Ca­na­da is quickly be­co­ming a mo­re une­qual and po­la­ri­zed so­ciety

La Jornada (Canada) - - ENGLISH SECTION -

Much has been writ­ten in re­cent years about in­co­me inequa­lity and the (ap­pa­rently) gro­wing gap bet­ween the rich and the poor. The fo­cus on in­co­me is un­ders­tan­da­ble. It’s a mea­su­re that re­so­na­tes with the ge­ne­ral pu­blic. It’s fairly easy to de­ter­mi­ne be­cau­se ever­yo­ne fi­les an an­nual in­co­me tax re­turn. For the re­sear­cher, in­co­me is at­trac­ti­ve be­cau­se it’s the most ac­ces­si­ble in­di­ca­tor of well­being and is avai­la­ble in most of Sta­tis­tics Ca­na­da’s sur­veys.

Ho­we­ver, is in­co­me the best way to mea­su­re peo­ple’s ac­tual li­ving stan­dards?

It’s fair to say that it’s not, and a gro­wing num­ber of aca­de­mics find con­sum­ption to be a pre­fe­rred in­di­ca­tor. The rea­son is sim­ple. So­me peo­ple can con­su­me subs­tan­tially mo­re than their in­co­me by bo­rro­wing or by re­cei­ving gifts. Ot­hers con­su­me much less than their in­co­me if they sa­ve a sig­ni­fi­cant por­tion or if they pay down debt.

To illus­tra­te, con­si­der a young fa­mily that earns $50,000 in 2016 but spends $60,000 (for them­sel­ves and their young chil­dren) by bo­rro­wing and with so­me fi­nan­cial gifts from pa­rents. Which of tho­se two num­bers is a bet­ter re­flec­tion of their ac­tual li­ving stan­dard in 2016? It’s easy to ma­ke the ca­se that the $60,000 con­sum­ption amount cap­tu­res the fa­mily’s eco­no­mic well-being bet­ter than their in­co­me.

If con­sum­ption is a bet­ter re­flec­tion of a hou­sehold’s stan­dard of li­ving, what can we say about the de­gree of inequa­lity of tho­se li­ving stan­dards over ti­me? A new Fra­ser Ins­ti­tu­te study exa­mi­nes the inequa­lity of con­sum­ption in Ca­na­da over the pe­riod 1969 to 2009 (the last year of avai­la­ble da­ta). Af­ter ad­jus­ting for hou­sehold si­ze, which has chan­ged quite dra­ma­ti­cally over the past four de­ca­des, the study finds that con­sum­ption inequa­lity has ba­rely chan­ged sin­ce 1969. Using a po­pu­lar mea­su­re, inequa­lity of con­sum­ption is up only th­ree per cent in 40 years.

This re­sult flies in the fa­ce of stu­dies and re­ports te­lling us that Ca­na­da is quickly be­co­ming a mo­re une­qual and po­la­ri­zed so­ciety. The­re ha­ve been sco­res of me­dia sto­ries ( To­ron­to Star, Glo­be and Mail, CBC, CTV, etc.) about the alar­ming ri­se in inequa­lity in Ca­na­da. Whi­le the­se are ba­sed on re­ports of in­co­me inequa­lity, usually from left-wing think-tanks such as the CCPA, the Broad­bent Ins­ti­tu­te and the Con­fe­ren­ce Board, they crea­te the clear im­pres­sion that the gap bet­ween the rich and the poor is wi­de­ning and we are be­co­ming a much mo­re po­la­ri­zed so­ciety. And with the­se stu­dies, of cour­se, co­me re­ne­wed de­mands for the go­vern­ment to “fix” the pro­blem with mo­re re­dis­tri­bu­ti­ve ac­tions.

Quite a num­ber of the­se stu­dies, ho­we­ver, con­ti­nue to use pre-tax in­co­me, which ser­ves to exag­ge­ra­te the de­gree of inequa­lity. But peo­ple don’t get to spend pre-tax in­co­me. They can only ma­ke spen­ding (or sa­ving) de­ci­sions on their af­ter-tax in­co­me. So, it’s com­mon now for cre­di­ble aca­de­mic stu­dies to use af­ter-tax in­co­me in mea­su­ring in­co­me inequa­lity.

Furt­her, many of the­se re­ports al­so fail to ad­just for hou­sehold si­ze des­pi­te the de­cli­ne in the si­ze of an ave­ra­ge hou­sehold over the years. Mo­re in­co­me is now sha­red among fe­wer peo­ple and, on­ce we ac­count for this, the­re’s less inequa­lity. Fai­ling to ad­just for so­met­hing as basic as hou­sehold si­ze is a sig­ni­fi­cant con­cern and only ser­ves to furt­her exag­ge­ra­te the de­gree of inequa­lity.

The­re has been much chan­ge in Ca­na­dian so­ciety sin­ce the 1960s. The­re has al­so been a mas­si­ve growth of the sta­te, which has in­vol­ved it­self in al­most every as­pect of our li­ves and is mo­re ac­ti­vely re­dis­tri­bu­ting in­co­me than ever be­fo­re. Yet, al­most sur­pri­singly, the­re has been no subs­tan­ti­ve chan­ge in inequa­lity of how we ac­tually li­ve.

When we look at our best proxy for Ca­na­dian li­ving stan­dards, hou­sehold con­sum­ption pro­perly ad­jus­ted for si­ze, we find the­re has been very little chan­ge in the “gap” over the past four de­ca­des. -TROYMEDIA

Ch­ris­top­her A. Sar­lo is a se­nior fe­llow with the Fra­ser Ins­ti­tu­te and pro­fes­sor of eco­no­mics at Ni­pis­sing Uni­ver­sity.

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