Between Cassandras and deniers
Income inequality: Canadians split into two camps on who is getting ahead, new book finds in citing evidence for both
It is not as straightforward as you’d think to nail down the scope and nature of income inequality in Canada. Twenty-seven top academics try, with varying success, in a book recently published by the Institute for Research on Public Policy. They found Canadians as split on this issue as on most complex controversies — they call the two camps Cassandras and deniers — and they cite evidence to back both points of view.
No question that Canada is less equal today than 30 or 40 years ago. This is true of both market (or gross) income, as well as the net amount people have in their pockets or purses after taxes and benefits are factored in. (The growing disparity is worst in market income. But the net income of low- and middle-income Canadians has been at least somewhat protected by policies that redistribute wealth through tax breaks or cash benefits.)
Two things muddy what might otherwise be a clear picture.
One complicating factor is that inequality’s 40- year rise has been erratic, and the level has actually stabilized over the last 15 years.
But this is negated, at least in part, because the redistributive impact of taxes and transfers has fallen over the past 20 years — although this decline may begin to reverse under new policies announced in this week’s federal budget. The book was published before the budget was presented, but several of the authors note that redistributive policies have often worked in the past, and they look favourably at the kinds of changes announced Tuesday by Finance Minister Bill Morneau — the Canada Child Tax Benefit and the loosening of Employment Insurance eligibility, for example.
To complicate the picture further, contributor Joseph Marchand of University of Alberta attributes high wages in the resource sector — including jobs for traditional low-wage workers and jobs in sectors that compete with energy companies for workers — as a key factor in stopping the growth of inequality. With oil and gas companies now reeling from the collapse of energy prices, this could reestablish the trend toward greater inequality.
Thus there is plenty of grist for competing narratives from believers and skeptics. The Cassandras point out the longerterm reality that inequality is about 10 per cent greater now than back when baby boomers were just finding their feet in their careers. The deniers note Canada has been living fairly comfortably with its current level of inequality for more than a decade.
Skeptics might also cite the fact that between 1982 and 2010 the real market income of Canadians rose an average of 13.5 per cent.
Cassandras might respond with a quote from the book’s editors, who include both David Green and Craig Riddell of UBC.
“That growth was strikingly uneven,” they write.
“The income of the bottom 90 per cent increased by a meagre two percentage points. In contrast, the income of the top 10 per cent increased by more than 75 per cent and that of the top 0.01 per cent by 160 per cent.
“Among the top 10 per cent, the further up the income distribution one goes the larger are the percentage gains in real market income.”
Although inequality is usually thought of as the gap between the lowest incomes and the highest, the book also examines the dwindling fortunes of the middle class. Between 1970 and 2005 the percentage of male and fulltime female workers dropped from 54 to 42 and there was an even larger decline in their share of total earnings.
Meanwhile, the number of both high- and low-income workers increased.
The book is by no means a polemic, but on balance the authors seem to side more with the Cassandras than the deniers, and they call for a series of changes to both tax policy and transfers of government money to foster greater equality.
They warn, however, that things won’t change quickly: “The agenda we propose will require decades, if not generations, rather than years to implement and have an impact.”