BUSINESS

This Chart Pretty Much Says It All About Canada's Income Inequality

03/04/2014 02:16 EST | Updated 03/04/2014 02:59 EST

Employment Minister Jason Kenney has been boasting about data showing that Canadians’ net worth boomed in recent years, arguing, in essence, that Canada isn’t facing the sorts of income inequality problems that others are facing.

It’s a political gambit, of course, and it’s aimed at Liberal Leader Justin Trudeau’s recent talk about income inequality. Last week, Kenney accused Trudeau of “making things up” when the Liberal leader asserted that Canada’s middle class is stuck in neutral.

But is Trudeau really making things up? Not according to a new study of incomes from the University of British Columbia, which found that nearly all the gains since the 1980s have gone to the top 10 per cent of earners — and much of that went to the very top 0.01 per cent of earners.

The researchers describe the income gains at the top of the ladder as "dramatic."

Check out this chart from Thomas Lemieux and W. Craig Riddell of UBC’s School of Economics, breaking down income growth for the top 10 per cent of earners and everybody else since 1982. The smallest increase? That would be everybody else.

income growth distribution canada

According to Lemieux and Riddell’s research, incomes in Canada grew by 13.5 per cent overall since 1982, adjusted for inflation, but almost all of that went to the top 10 per cent of earners. The top 0.01 per cent of earners saw incomes grow more than 160 per cent, adjusted for inflation, during that time. Income growth was “negligible" for the bottom 90 per cent.

That certainly paints a different picture from the one in StatsCan’s recent survey of financial security, which found that Canadians in the top three earnings quintiles (meaning the top 60 per cent of earners) saw their net worth grow by 40 per cent since 1999. But for the lowest 20 per cent of earners, there was virtually no increase in net worth.

Net worth is a measure of a household’s assets, minus its debt, so many observers argue this data likely reflects growing house prices rather than actual increases in the standard of living of Canadians.

Andrew Jackson, a social justice professor at York University and senior policy adviser for the left-leaning Broadbent Institute, said the real change is that houses form a much larger part of Canadians’ wealth than they used to.

Median house values increased by 47 per cent, while the median mortgage amount outstanding rose by 42 per cent,” Weaver wrote in the Globe and Mail.

“With housing assets accounting for about one-third of all assets, and many older homeowners having no mortgage, these gains gave a broad boost to net worth.”

But incomes aren’t keeping up with house prices. That’s not a problem for those who paid off their mortgages, but it’s certainly a problem for new entrants in the housing market. And it may explain why institutions like the OECD and Deutsche Bank are calling Canada’s housing markets among the most overvalued and unaffordable in the world.

H/t: Press Progress

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