BUSINESS

Success In Canada Depends Heavily On Where You’re From

Albertans are twice as likely as Quebecers to live the “rags to riches” dream.

06/28/2017 14:23 EDT | Updated 06/28/2017 14:26 EDT

We've all heard how gender, ethnicity or culture can affect your chances in life. But new research from a University of Ottawa economics professor adds one more factor to the list: geography.

According to data in a working paper by Miles Corak, an economics professor with the Graduate School of Public and International Affairs at the University of Ottawa, there are striking differences in economic mobility among Canadian regions — differences large enough to make one seriously wonder whether we Canadians live in a postal-code lottery.

Corak produced the map below showing how likely someone was to move up the income ladder, depending on their location. Green and beige indicate areas where it's easiest to climb the income ladder, while the darker reds show places where it's harder.

'Rags to riches' map: Where it's easiest and hardest to move up the income ladder.

Miles Corak
This map shows the likelihood of a child born into a lowest-fifth income family moving into the highest fifth of earners as an adult. Green areas indicate a 20-per-cent or better chance of living the "rags to riches" life. Dark red areas indicate a less than 2.5-per-cent chance.

Corak also produced a map showing places where people born into low-income households were most likely to remain in such homes as adults. The redder the area, the more likely residents are to be trapped in a cycle of poverty.

'Cycle of poverty' map: Where low-income people were most likely to remain in the low-income group.

Miles Corak
This map shows the probability of a child born into a low-income household remaining in a low-income household as an adult. Dark red indicates a greater than 40-per-cent chance of being stuck in a "cycle of poverty."

"It's striking how much variation there is between regions," Corak told HuffPost Canada in an interview.

For instance, the data showed that people were twice as likely to live a "rags to riches" life in Alberta as they were in Quebec. That is to say, Albertans who grew up in households among the lowest fifth of earners were twice as likely as Quebecers to have moved into the highest fifth of earners during their lifetime.

In Alberta, some 18.5 per cent of those born among the lowest fifth of earners managed to move up to the highest fifth of earners. In Quebec, only 9.1 per cent managed to do so.

HuffPost Canada

Alberta also came out near the top when it came to staying rich. More than 37 per cent of Albertans born among the top fifth of earners stayed that way in adulthood, Corak's research found, compared to a little more than 25 per cent of British Columbians.

Nova Scotia and B.C. are the two provinces where it's easiest to lose your wealth:

HuffPost Canada

Corak's research also looked at how many people spend their lives in a cycle of poverty — those who remain in the low-income group. On that front, there are large regional differences too.

Manitoba, the territories, and the Maritimes have the highest rate of people trapped in poverty, while Alberta and Saskatchewan have the lowest.

HuffPost Canada

But the divisions aren't just among provinces. They break down according to rural-urban lines as well, with Canada's large cities offering much more income mobility than many rural areas.

Corak speculates that cities are better able to lift people out of poverty because they tend to have faster-growing economies than rural areas, as well as a "diversity of opportunities."

Miles Corak
This magnification of southern Ontario from Corak's "cycle of poverty" map shows the area around Toronto has been among the better ones for getting out of poverty. But Corak wonders whether this can still be the case when Toronto property prices are so high.

Yet not even the urban-rural split can fully paint the picture here. Many rural areas — particularly the oil-rich parts of the West — have some of the best income mobility in the country, which Corak says ultimately depends on a region's economic circumstances.

Corak pulled these statistics together by looking at administrative data linked to tax returns for some three million people born in the 1960s, and comparing that to their parents' tax returns and postal codes.

But because the data looks at people born half a century ago, Corak is quick to stress this is backward-looking data — it tells us little about what is happening today, and what will happen tomorrow.

'Inclusive growth' needs to be considered

For instance, the data shows that the region of southern Ontario around Toronto has been among the best places in Canada for moving up the income ladder. But Corak wonders whether, with Toronto's currently sky-high property prices, that's still the case today. High rental rates and large mortgage payments could be keeping people stuck on the economic ladder.

"Will Toronto continue to be a driver (of income mobility) if land is so expensive?" he asked.

Corak says policymakers should be looking at the idea of "inclusive growth" — establishing policies that will result in economic growth benefiting a wider group of people than has been the case.

When setting economic policy, "we should think of growth and distribution of income," Corak said.

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