Rich-poor gap speeds up in Canada

The U.S. may lead the income inequality parade among major industrialized countries, but the gap between rich and poor is growing faster in Canada than in the U.S., the Conference Board of Canada says.

 The 1990s enjoyed the fastest economic growth in this generation. The last time the economy grew so rapidly was in the 1950s and 1960s. But back then, the top one per cent of income earners took home a mere eight per cent of economic growth. Today, the top one per cent’s share has ballooned to almost 40 per cent, five times what it was 50 years ago.

 "The main story here is that the bulk of the wealth that has been created in the past 22 years has accrued to the top fifth of the population and one-third of that has gone to the top one per cent," Conference Board CEO Anne Golden says.

 All but the wealthiest 20 per cent of Canadians saw their share of income actually drop. Even within that peak privileged group, the benefits are once again skewed to the very top.

 Most gains have gone to a very small group of super-rich. This tiny minority — the one per cent of Canadians whose income was higher than 99 per cent of all Canadian tax-filers — is composed of just 246,000 people. They took home almost a third of all growth in incomes from 1998 to 2007. Canada’s median income — half of the population earning above it and half below — rose a meagre $2,500, from $45,800 to $48,300, over the 33 years between 1976 and 2009, the board report says. "Moreover, the gap between average and median income has been growing... The growing gap signals that income growth is distributed unequally."

 "High income inequality raises a moral question about fairness and can contribute to social tensions" that eventually spill over into the economy, Golden told The Financial Post. "The bulk of the population saw its salary increase — if they were lucky — by the rate of inflation, while those who have professional or ‘C-suite’ jobs — like CEOs — have seen their salaries increase by double digits."

 The Conference Board is not some so-called left-wing pressure group grinding a predictable axe. It’s Canada’s leading independent, non-profit applied research organization and it specializes in tracking economic trends as well as organizational performance and public policy issues.

 Economists are split over the reason for burgeoning inequality. One camp attributes it to market forces — skill-based technical change and increased globalization demanding ever more highly skilled labour. The other blames institutional forces — declines in unionization, stagnating minimum wages, deregulation and national policies that favour the wealthy such as successive reductions to the top marginal income tax rate, dropping it from 90 to 80 per cent in the 1950s to just 29 per cent today, as well as the telescoping of tax brackets down to three from nine. Golden said taxation is the means by which policy-makers can redress economic imbalances within society. "But the thrust of taxation policies in developed countries has been against redistribution."

 Another institutional force driving Canada’s growing inequality is the shredding of Canada’s social safety net. Between 1976 and 1994, the effect of the tax and transfer system was to increasingly reduce income inequality. Since 1994, however, the trend has reversed because "the redistributive effect of the tax and transfer system has grown weaker since 1994."

 One glaring example is so-called "employment" insurance. The number of unemployed Canadians who qualify for EI has nosedived from 82.9 per cent in 1990 to just 47.8 per cent in 2009. Almost half of unemployed Canadians are thus forced onto welfare.

 But welfare also has been slashed. A single parent with one child saw her average welfare income fall $1,200 annually, from $18,200 in 1994 to $17,000 in 2009. Welfare income is now below the market-based measure low-income cutoff all across Canada. The biggest gap is in Alberta, Canada’s wealthiest province; the smallest is in Newfoundland and Labrador, until recently its poorest.

 Meanwhile, the cost of food has skyrocketed 63 per cent since 1995, creating "a frightful food crisis for Canada’s poorest people," according to John Stapleton, a former Ontario civil servant who now serves on the board of directors of Toronto’s Daily Food Bank. And the cost of shelter, particularly in Canada’s major cities, has soared while governments — particularly Ottawa — have virtually washed their hands of social and low-income housing.

 Homelessness and hunger amid conspicuous wealth and consumption lead to violence, crime and social pathologies of all kinds.

 Frances Russell is a Winnipeg author and political commentator.