Guar­ding against in­co­me inequa­lity in Ca­na­da

Does Ca­na­da need to worry about the same fes­te­ri­ng ma­lai­se that has dis­rup­ted the Uni­ted Sta­tes?

La Jornada (Canada) - - ENGLISH SECTION -

Do­nald Trump’s pre­si­den­tial cam­paign, as inar­ti­cu­la­te and ve­nal as it was, tap­ped in­to im­por­tant and deeply-roo­ted Ame­ri­can reali­ties, reali­ties that may al­so con­tain les­sons for Ca­na­da.

Does Ca­na­da need to worry about the same fes­te­ri­ng ma­lai­se that has be­co­me so dra­ma­ti­cally evi­dent in the U.S.? Po­wer­ful international da­ta on in­co­me inequa­lity of­fer sig­ni­fi­cant in­sights.

Bran­ko Mi­la­no­vic, a lea­ding eco­no­mist, has pro­du­ced so­me of the best research on world in­co­me inequa­lity, dra­wing on de­tai­led da­ta from his years at the World


Mi­la­no­vic has pro­du­ced a re­mar­ka­ble graph that in­clu­des in­co­me dis­tri­bu­tion da­ta from al­most all of the world’s 200 coun­tries. It asks a sim­ple ques­tion: how much ha­ve in­di­vi­duals’ in­co­mes grown bet­ween 1988 and 2008?

To ans­wer, Mi­la­no­vic di­vi­ded each country’s po­pu­la­tion in­to sma­ller groups, de­ter­mi­ned each group’s in­co­me mea­su­red in stan­dar­di­zed 1988 U.S. do­llars, then sor­ted them in in­crea­sing or­der of in­co­me. The world’s po­pu­la­tion, then, is ran­ked from poo­rest to ri­chest, re­gard­less of na­tio­na­lity. The graph then shows how much each group’s in­co­mes grew from 1988 to 2008.

The glo­bal ave­ra­ge in­co­me growth for all the groups was about 25 per cent - not bad at about two per cent real growth per year. But the­se im­pro­ve­ments we­re very far from evenly dis­tri­bu­ted.

Among the bot­tom fifth of the world po­pu­la­tion, in­co­mes grew at ra­tes bet­ween 20 and 40 per cent - lif­ting hun­dreds of mi­llions out of po­verty.

In­co­mes around the mid­point of the world’s in­co­me spec­trum grew twi­ce as fast over this two-de­ca­de pe­riod, at 80 per cent. This growth sig­nals dra­ma­tic im­pro­ve­ments in li­ving stan­dards for many in what we used to call the less-de­ve­lo­ped world, and it re­flects the emer­gen­ce of a much lar­ger midd­le class in many coun­tries. This is all very good news.

But the­re is a dra­ma­tic drop in the in­co­me growth ra­tes for in­di­vi­duals in the up­per ran­ges - ex­cept at the very top. For in­di­vi­duals who­se in­co­mes pla­ced them in the top 75 to 85 per cent, their in­co­mes hardly grew at all, and tho­se who­se in­co­mes are in the top 85th to 95th per­cen­ti­les of the world’s po­pu­la­tion saw their in­co­mes grow by only 10 to 15 per cent over a 20-year pe­riod - al­most stag­nant.

Only for the top fi­ve per cent of in­co­me re­ci­pients was growth abo­ve 20 per cent, and it was most dra­ma­tic among the top one per cent of the world’s po­pu­la­tion - at a stag­ge­ring 60 per cent or mo­re.

So who are the­se big win­ners and lo­sers?

Mi­la­no­vic’s analy­sis pla­ces the newly-emer­ging Chi­ne­se midd­le class at the peak of this cur­ve, with an in­co­me growth ra­te around 80 per cent. At the trough of the in­co­me growth cur­ve you’ll find the U.S. lo­wer-midd­le class - many of Trump’s co­re sup­por­ters - with es­sen­tially ze­ro growth in in­co­mes.

The Chi­ne­se midd­le class has blos­so­med eco­no­mi­cally whi­le wor­king-class Ame­ri­ca has stag­na­ted.

Whe­re does Ca­na­da fit on the cur­ve?

Ca­na­da is very well off in glo­bal terms - even tho­se in our lo­west in­co­me groups ha­ve an ave­ra­ge in­co­me well abo­ve most of the world’s po­pu­la­tion. Un­pu­blis­hed da­ta pro­vi­ded to me by Mi­la­no­vic show that Ca­na­da’s me­dian in­co­mes would put us at about the 93rd per­cen­ti­le of the world’s in­co­me dis­tri­bu­tion.

It may seem Ca­na­dians should ha­ve no com­plaints. But the­re is pau­se for con­cern. Our pat­tern of in­co­me growth and inequa­lity lar­gely mi­rrors what’s hap­pe­ning glo­bally - dra­ma­tic in­co­me growth at the top, with only mo­dest gains lo­wer down the in­co­me spec­trum.

The bot­tom th­ree-fifths of fa­mi­lies saw their in­co­mes grow by ni­ne to 15 per cent over the 20-year pe­riod. The se­cond hig­hest fifth did a little bet­ter with their in­co­me gro­wing by 19 per cent - whi­le the top fifth saw their in­co­mes ex­pand by 35 per cent, two to th­ree ti­mes as much as tho­se in the bot­tom 60 per cent.

The­re is so­me com­fort. Ca­na­da’s in­co­me inequa­lity is con­si­de­rably less than that of the U.S. We ha­ve stron­ger so­cial sa­fety nets, grea­ter lon­ge­vity and sig­ni­fi­cantly mo­re equi­ta­ble edu­ca­tion.

But in this glo­bal con­text, we can’t af­ford to be com­pla­cent.

Wit­hout mo­re vi­go­rous ac­tions to coun­te­ract in­crea­sing inequa­lity among Ca­na­dians, we risk gro­wing the same kinds of re­sent­ment and ma­lai­se he­re. -TROYMEDIA

Mi­chael Wolf­son is an ex­pert ad­vi­sor with Evi­den­ceNet­ and holds a Ca­na­da Research Chair in po­pu­la­tion health mo­de­lling/po­pu­lo­mics at the Uni­ver­sity of Ot­ta­wa. He is a for­mer as­sis­tant chief sta­tis­ti­cian at Sta­tis­tics Ca­na­da and has a PhD in eco­no­mics from Cam­brid­ge.­jor­na­

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