Canada Income Gap Remains, Despite Recession Making Rich Poorer

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POVERTY AND WEALTH
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OTTAWA - New data shows the richest of the rich actually got relatively poorer in Canada during the recession, while the other 99 per cent made some gains.

But experts say that's to be expected when stock markets sink, and there is no sign that the rapidly deteriorating income inequality that Canada has experienced over the past decade is about to reverse course.

"This is likely temporary. If you look at the long-term trend, this is a blip," said economist Mike Veall from McMaster University, who has been leading the country's research on income inequality.

In Canada and the United States, he said, "both have a surge in income inequality that has been offset, a little bit, by the recession, reducing the top income share in both countries by a small amount over the last two years."

After a generation of intense income increases that saw the super-rich consolidate their grip on Canadian earnings, the top one per cent of Canadians took home 11 per cent of total income in 2009, Statistics Canada says.

That's a decline from the 12 per cent they pocketed in 2008 and the 13.8 per cent peak seen in 2007, and marks a return to levels last seen in 2000, says Brian Murphy, Statscan's chief of income research.

By contrast, in 1982, the top one per cent claimed a 7.4 per cent share of total income.

In 2009, it took total income of about $200,000 to be in the top one per cent, Murphy added. Income of about $100,000 could buy someone a place in the top five per cent.

The agency did not release a formal report on income inequality in 2009, but provided the figures in response to questions from The Canadian Press.

It's the first time the agency has released up-to-date income inequality information about the effects of the recession. Details are not yet available.

Murphy took a sample of 20 per cent of all tax filers in 2009 to reach his conclusions.

But it's probably cold comfort for the protesters rallying against income inequality across cities in the United States and now Canada.

The top one per cent in Canada have seen small setbacks in their gains before, notably during the 1990s recession and the tech wreck of the early 2000s, says Veall. But the general trend since 1980 has been relentlessly upwards.

Veall's research has shown that the most dramatic gains have been made at the very top of the earnings ladder, among the richest 0.1 per cent or the top 0.01 per cent.

Between the late 1970s and 2007, the richest 0.1 per cent of tax filers saw their share of the total income pie triple. And for the richest 0.01 per cent — those making more than $640,000 a year — their share more than quintupled.

"There's no sign of a reversal in the trend," Veall added.

Moreover, the Organization for Economic Co-operation and Development has shown that median income for Canadians has stagnated while poverty has increased over the past 10 years. Both inequality and poverty rates are now higher in Canada than the OECD average.

While Canada and the United States are moving in the same direction, income inequality in the United States is more pronounced than in Canada.

But the super-rich are the same types of people in both countries: CEOs and senior people within financial institutions, celebrities and athletes, and owners of companies, says Lars Osberg, chair of economics at Dalhousie University.

In the past, the 99 per cent may not have felt the economic stagnation so acutely because they could mask it with home equity loans and cheap technology, he said.

But now, "what we're seeing is an accumulation of grievance."

Reducing income inequality would require a combination of government efforts and private sector restructuring, experts add, and is easier said than done.

Canadian governments already alleviate some of the country's inequality through effective programs such as the child tax benefit, unemployment insurance, the working income tax benefit, medicare, and income supports for seniors, said Ken Battle, president of the Caledon Institute of Social Policy.

But a key source of Canada's income inequality is the fact that about one third of the jobs in the labour force are considered "non-standard" — they come with little job security, few benefits, and often low pay.

"This is never going to go away," Battle said. "It's really difficult to eradicate."

Economist Armine Yalnizyan, however, argues that Ottawa can play an important role changing the types of jobs companies create.

By taking a more aggressive stand on the types of mergers and acquisitions it allows, the federal government can make sure Canada's firms add good jobs and don't just ship natural resources unprocessed out of the country, she said.

Plus, the federal government is a large employer itself, that sets a standard for many others.

"Don't cut public sector jobs," she said.

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