Rob Rainer Headshot

So There's Income Inequality. Now What?

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Spiked by public attention to the Occupy phenomenon, 2011 was the year in which the issue of income and wealth inequality mainstreamed in Canada. Witness: Bank of Canada Governor Mark Carney called the Occupy demonstrations "entirely constructive." Jeffrey Simpson, perhaps the land's top newspaper columnist, wrote about inequality. The Conference Board of Canada released a significant report.

On January 6, Jeffrey Simpson wrote further to say that, "it's imperative that political actors put the issue front and centre on the national agenda." The NDP leadership race, at least, is embracing the challenge, for example Brian Topp's plan for federal tax reform.

So let's herald a little good news: Inequality is on the public and political radar.

And let's review a few facts:

• Between 1976 and 2009 only the richest 20 per cent of Canadians increased their share of national income.
• At a finer scale, in 2008 the average income of the top 10 per cent ($103,500) was 10 times higher than that of the bottom 10 per cent ($10,260), representing an increase from an eight to one inequality gap in the early 1990s.
• At a finer scale still, the top one percent (the rage of Occupy) -- some 246,000 individuals whose average income is $405,000 -- raked in almost a third (32 per cent) of all growth in incomes between 1997 and 2007.
• At the very top, the richest 0.1 per cent -- an estimated 24,600 Canadians with minimum income of $621,300 and an average income of $1.49 million -- held 5.5 per cent of total income in Canada, up from less than 2 per cent between the 1940s and 1970s.

And so, in her accompanying message to the Conference Board's report, their President, Anne Golden rightly asked: "What does income inequality say about our values? In short, is it fair?"

A recent "quick poll" by the Huffington Post would seem to give the answer. To the poll's question, "Do you agree with Brian Topp's plan to raise taxes on the wealthiest Canadians?" five per cent of votes cast were for the proverbial "don't know." Fourteen per cent of votes agreed that, "No, it makes no sense to raise taxes on the people who do the most to create jobs and grow the economy." But 81 per cent of votes cast were in agreement that, "Yes, too few Canadians are sharing in the country's growing wealth, and this could help change that."

Notice how this 81 per cent correlates with the 80 per cent of Canadians who have seen shrinkage of their share of the national income pie!

And so, following an awareness breakthrough in 2011, public support and political interest for addressing inequality is apparent. But what is to be done?

As the London-based Equality Trust states, there are two compatible options:

• Reduce the differences in employment income before tax; and
• Increase the redistribution of income through tax and benefit systems

A business leader I know exemplifies the first option: As the founder and head of a successful language training firm, her philosophy is for a maximum four to one ratio between the highest and lowest paid employee of her firm. In her own way, this leader is doing her part to promote a fairer society.

But such an approach requires inequality enlightenment among thousands of business leaders to make a difference at a national scale, or perhaps legislation mandating limits to employment income inequality. In a country governed federally by a party ideologically wed to laissez-faire economics, and where in 2010 the average compensation for the 100 highest paid CEOs in Canada was 189 times that of the compensation of the average worker, neither option seems likely.

And so the more effective option for combating inequality is for governments to, first, rebuild greater fairness into our systems of taxation and, second, increase the distribution of income from the "top" to the "bottom." In 1948 there were 19 personal income tax brackets in Canada, and the top marginal tax rate was 80 per cent on incomes over $250,000 ($2.37 million in 2011 dollars). Today, we have but four brackets and the top rate is but 29 per cent, kicking in on earnings over $132,406.

The key to solving inequality seems pretty clear. Have we the public will now to support the political will for a fairer, better society?

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