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Incomes and the recession

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Today's Statistics Canada release "Income of Canadians" provides data for 2009 and a partial reading on the impacts of the recession. (I say partial because the 2008 annual average data were impacted by the onset of the recession in the last quarter of the year, and since these impacts continued well into 2010.)

The data give some sense of the devastating impact of the recession upon working families, and also underline the importance of income support programs like Employment Insurance.

In 2009, average earnings fell from $39,100 to $38,500 due to the steep rise of unemployment and an increase in short-term jobs. (Median earnings fell from $29,600 to $ 28,700 or by 3 per cent) This fall in average earnings happened even though the earnings of those who were steadily employed actually rose over the year.

The number of Canadians working full-time year round decreased rapidly. In 2009, 8,916,000 Canadians were working full-time year round, compared to 9,593,000 in 2008, a decrease of 677,000 full-time, full-year jobs over a year.

Mainly because of reduced earnings for those hit by the downturn, the average market income of families fell from $63,500 to $61,900.

However, this was offset by an increase in government transfers, from an average of $3,900 to an average of $5,100. Since taxes also fell slightly, the average after tax income of families was actually unchanged at $59,700.

Statistics Canada reports that half of the increase in transfers came from Employment Insurance, as the number of families receiving benefits rose by 20 per cent. The increase in EI take-up partly reflected the fact that eligibility for benefits gradually increases as unemployment rises, plus the fact that the government was pushed into a temporary five-week increase in benefits for those who managed to qualify.

The release underlines the importance of Canada's EI program in a time of recession, even though we know that one half of all unemployed workers fell through the cracks and did not collect benefits, while many others ran out of benefits before finding a new job.

Despite the increase in EI and other income transfers, the poverty rate for all persons rose from 9.4 per cent to 9.6 per cent in 2009 compared to 2008, and the child poverty rate rose from 9.1 per cent to 9.5 per cent.

This increase in poverty is disturbing since the 2009 reading really takes us only to the mid point of the recession, which continued into 2010. Even today, we are far from where we were before the recession in terms of the number of workers in steady full-time jobs.

This article was first posted on The Progressive Economics Forum.

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