Canada's incredible expanding wealth gap

 

 

Dr. Lars Osberg, professor of economics at Dalhousie University, has been studying inequality in Canada for a long time. Over 35 years ago, he published Economic Inequality in Canada, which looked at inequality in Canada’s post-war economy. He found that in the years between 1950 and 1980, economic inequality between the top and bottom 20 per cent of family units Canada was relatively constant: the top 20 per cent took about 10 times the income share of the bottom 20 per cent.

Things weren't great, but at least it wasn't getting worse.

Fast-forward to the 2018 release of another book by Osberg: The Age of Increasing Inequality: The Astonishing Rise of Canada’s 1%, and things have changed significantly.

"We saw a different kind of Canada than in the post-war period," Osberg said during an interview at his Halifax office recently. "And if we look forward another 35 years, if current trends continue, when the students in my classes will be in their 50s, what sort of world will they be living in?"

Osberg found that the relatively stable inequality of the post-war years has been replaced by a troubling decades-long trend of increasing concentration of income and wealth at the top. In 2015, the richest 20 per cent of Canadians now held more than 12 times the share of total incomes than the poorest 20 per cent. The middle class was "disappearing" and the incomes of the poorest remained abysmal.

Oddly, Canada’s Gini index, a measure used to summarize income inequality, has appeared to register little change since 2000, a period characterized by a steep rise in top incomes. Osberg explains that because the Gini index (which is the go-to economic measure when comparing inequality between nations) calculates the "average dollar difference in incomes between all possible pairs of people," it's a good indicator of what is happening in the middle, where most people are. But because the extremely rich are a very small percentage of the total population, the Gini obscures shifts in the income shares at the very top.

It's simple but eye-opening explanations like this which make The Age of Increasing Inequality a valuable read for those hoping to make sense of inequality, as well as the data and arguments advanced by economists and politicians about the problem. The book is clear and accessible. Still, Osberg doesn't gloss over the complexity and multi-dimensional nature of the issue.

He traces the rise of the incomes of the ultra-rich to the forces driving salaries in the upper echelons of the corporate world and the effects of capital income and inheritance. Outrageous CEO "compensation" packages are perhaps obvious targets (the Canadian Centre for Policy Alternatives reports every January on CEO salaries; in 2018, the 100 highest paid CEOs made 209 times more than the average worker in 2016). As Osberg notes, unlike the paycheque of a retail employee or a college professor, much of that pay is in the form of stock options, any capital gains of which are taxed at half the rate of ordinary income in Canada. And when this wealth is passed down to the children of the ultra-rich, it isn’t taxed.

 "We don't have an inheritance tax like the U.S. In Canada, in a sense, we tax the wealth of the middle class through property taxes on their homes. But we don't tax financial wealth, as they do, for example, in Switzerland," Osberg said.

 "If you look at taxing the top one per cent as a policy alternative for Canada, it raises significant revenues. It could make a significant impact on poverty, tuition-free universities could be funded," said Osberg. "But it’s only part of the puzzle, it doesn’t directly affect the employment earnings of the middle class."

The incomes of the middle class flat-lined for 20 years until about 2000, when there was some growth -- though nothing along the lines of the top earners, writes Osberg. He links this stagnation to a period of high unemployment, a "collateral" effect of Canadian financial policy to ward off inflation. When the federal government decided it needed to eliminate the deficit in the mid-'90s, it was slashed programs like unemployment insurance and social assistance. The increase in middle incomes after 2000, which Osberg traces to the tar sands boom and the housing bubble, "overstates the well-being gain of households because the hidden costs of decreased public services" are left out of the equation.

And how have the poorest in Canada fared? From 1980 to 2015, their incomes haven’t changed significantly. In 1980, the lowest 10 per cent earned just under $10,000 a year (in 2015 dollars). In 2015, that had risen to just under $14,000. Depending on how it's measured, there were between 3.3 and 5.2 million people living under the poverty line in Canada in 2015.

After offering a few cursory arguments for why one should care about economic inequalities (a reader not already convinced of the correlation between inequality and right-wing extremism is unlikely to be convinced by the author's brief consideration of the thesis), Osberg turns to the question of what we should do to combat the "astonishing" rise of inequality in Canada.

In line with his emphasis on the different aspects of inequality, he advances several proposals. Among them: a Carbon Fee and Dividend instead of fixed carbon pricing, which inequitably penalizes lower income people instead of the producers of emissions; a guaranteed annual income or "participation income" which would increase the minimum wage and, importantly, not replace our current social programs; policy shifts by the Bank of Canada to increase employment; and increasing taxes on the ultra-rich.

Osberg acknowledges that Indigenous poverty and inequality in Canada are complex issues he lacks the expertise to tackle. Neither does he take an in-depth look at the ways in which inequality is sorted along gender, race, ability or other similar lines (though he emphasizes that anti-discrimination in employment, without addressing inequality generally, would -- at best -- equalize who is at the top as well as the bottom).

The Age of Increasing Inequality would be best paired with work on the racialization and feminization of poverty and the low-wage labour-market; research by Sheila Block and Grace-Edward Galabuzi is a good starting point. And not everyone will agree on which of Osberg’s proposals need to be implemented, or in what order (radical anti-poverty organizers have been critical of a guaranteed annual income, for example).

Despite these issues, The Age of Increasing Inequality is a valuable starting point in understanding how our increasingly unequal Canada came to be. This is crucial information if we want to change it. As Osberg said: "There is a still a possibility of reversing that trend."

Image: Wikimedia Commons

Yutaka Dirks is a writer and editor living in Montreal. He has written for the Los Angeles Review of Books, THIS, Briarpatch, The Montreal Review of Books, Alberta Views, and other publications. His work is included in Beautiful Trouble: A Toolbox for Revolution and has been nominated for the CBC Creative Non-Fiction Prize and the Canadian Association of Journalists/CWA Award for Labour Reporting.

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