Income inequality: Canada’s problem, too

Lana
Lana Payne
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With the season of goodwill upon us, it’s difficult not to think about growing income inequality; the haves and the have-nots. This time of year does bring these disparities into sharper focus.
More and more experts view the rapid accumulation of wealth by the very rich as a very big problem for the rest of us. Some explain it will also be a problem for the rich. For most part, the rich are unconcerned.

Others have been trying — for a long time — to focus attention on income inequality recognizing the danger it poses when it gets out of control.

Yet there are still those who sympathize with the one per cent who dismiss income inequality and its impact on the economy and society. Thankfully, their numbers are dwindling. Consensus is building that income inequality is a problem.

A problem for society. A problem for the economy. A problem for democracy. A problem.

What to do about it is another matter.

Those who dismiss it as a Canadian problem inevitably compare us to the United States, where income inequality is so off the charts that any industrialized nation used as a comparison could hardly measure up.

But the fact remains that it is also a big problem in Canada, where we pride ourselves on fairness and equality.

A recent Statistics Canada report found that the top one per cent hold just over 10 per cent of the country’s wealth and that this has been holding steady in the past few years but is substantially higher than in the 1980s.

In addition, their share of income gains, especially in recent years, has been growing.

The report did not take into account capital gains wealth, which is a significant source of income for rich Canadians. As Unifor’s economist Jim Stanford pointed out in a recent blog post for Progressive Economics Forum, capital gains also receive preferential tax treatment.  If income from capital gains was taken into account, the one per cent’s share would have been 13.5 per cent of total income in 2011. The story here is rich people, in addition to being rich, get juicy tax breaks making them richer.

The Conference Board of Canada has also noted that income inequality has grown substantially over time with the top one per cent of income earners in Canada accounting for 33 per cent of all the growth in median incomes since the late 1990s, an increase from eight per cent in the 1950s and 1960s.

South of the border, Economist Joseph Stiglitz, who was awarded the Nobel Prize in economics, has argued that income inequality is slowing a U.S. economic recovery. Since the great financial meltdown and subsequent economic crisis, the one per cent in the United States has captured a stunning 95 per cent of all income growth.

A study from the University of Berkley notes that since 2009, the top one per cent of incomes grew by 31.4 per cent while the bottom 99 per cent saw their incomes rise by only 0.4 per cent.

U.S. President Barack Obama has said that growing income inequality in the United States is not just morally wrong, it’s bad economics.

It doesn’t take a rocket scientist or a president to figure out that if incomes for the vast majority of the population are stagnant or falling, this will have an adverse and negative impact on a nation’s economy and more so when that economy is struggling.

In Canada, attention on income inequality is also gaining ground.

Just last week the federal Standing Committee on Finance released a report entitled “Income Inequality in Canada.” It came about as a result of a private member’s bill.

It quotes studies by University of Ottawa Economics Prof. Miles Corak and others who compared intergenerational income mobility in Canada and the United States. Canada’s intergenerational mobility was three times greater than in the United States. One big reason why Canadians can move up the income chain: public policies, in other words, government.

Four major policy areas that make a difference for Canadians: health care, child care investments, public education and government supports to families.

And yet these are all in some form or another under attack from federal and some provincial governments.

With that being the case, we need to ask whether growing income inequality and its impact on Canadians and Canadian society and economy will worsen as access to adequate public programs and policies is eroded.

Income inequality is a long-term problem. It didn’t just happen overnight.

Policy and decision makers need to consider how today’s decisions will impact on future income inequality and the economy. It will worsen if we do nothing to stem the growing gap.

A recent series from The Globe and Mail entitled The Wealth Paradox highlighted the challenges

and causes of income inequality.  Declining union density and the attacks on working people’s organizations and, in turn, their ability to force wealth to be shared, was viewed as one of the contributing factors to a declining middle class and, in turn, growing income inequality.

And yet the Harper government and others continue with their unprecedented attack on unions without a thought to how this will impact on the wages and working conditions of Canadians, and without a thought to the long-term impact on our economy.

Like most actions by the Harper government, this one is also not rooted in fairness or evidence or facts, but rather in ideology.

That’s where the U.S. problems started, too, and look where that got them: to repeat, a staggering 95 per cent of all income gains going to the one per cent since 2009.

 

 Lana Payne is the Atlantic director for

Unifor. She can be reached by email at lanapaynenl@gmail.com.

Twitter: @lanampayne

Her column returns Dec. 28.

Organizations: Statistics Canada, Progressive Economics Forum, Conference Board of Canada University of Berkley Standing Committee on Finance University of Ottawa Economics Prof. Globe and Mail

Geographic location: Canada, United States

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