Canada is among the worst countries in the developed world in terms of the widening income gap between top earners and others in society, according to the Organization for Economic Co-operation and Development (OECD).
The analysis shows income inequality is on the rise in most developed economies, but the trend has particularly taken hold in the United States and Canada.
The OECD report shows the top one per cent of Canadian pre-tax income earners captured 37 per cent of the overall income growth between 1981 and 2012, and now swallow up 12.2 per cent of the country’s income pie.
In the U.S., the top one per cent captured 47 per cent of income growth in the country during the period, and now take in 20 per cent of the country’s pre-tax annual income.
Meanwhile, incomes among the poorest households have not kept pace with overall income growth, the OECD says. In fact, stripping away the top one per cent would leave overall income growth considerably lower in many countries. This is why the majority of the population can’t reconcile their countries’ economic growth rate with improvements in their incomes, the report speculates.
The growing income gap has become a major political issue in Canada, with both the Liberals and NDP likely to focus on the topic in next year’s federal election. But the Harper government has downplayed the problem, pointing to other studies that show the Canadian middle class has done relatively well in the past decade.
The apparent disconnect is that most of the growing disparity in Canada occurred in the 1980s and 1990s, whereas the last decade or so has seen the gap narrow or remain static.
McMaster University economics professor Michael Veall, who has done extensive work on the so-called top one per cent, attributes the recent stall in the growth of disparity to the dot-com bust in the early 2000s and the 2008-09 economic crash — two crises that sharply affected investment incomes.
The OECD also acknowledges the effect on top earners from the recent economic crisis, but says by 2010 real incomes among the top group had increased by four per cent, while for the lower 90 per cent incomes were stagnant.
The OECD, whose 34 member countries are among the world’s wealthiest, warns the problem will worsen unless steps are taken to ensure top earners pay their fair share of taxes.
“Without concerted policy action, the gap between the rich and poor is likely to grow even wider in the years ahead,” predicted OECD Secretary-General Angel Gurria.