7 things the Census teaches us about income inequality

BehindtheNumbers.ca – 2017/09/13
September 13, 2017.   Trish Hennessy

It has been years since Statistics Canada has been able to release Census data on income inequality in Canada but the numbers are out at long last.

Here are 7 things the Census teaches us about income inequality in Canada between 2005 and 2015.

Resource boom masked inequality trends
Thanks to high resource prices pre-2015, median incomes went up in Alberta, Saskatchewan, and Newfoundland and Labrador.

But as CCPA Senior Economist David Macdonald notes: “One of the stories of the resource boom is that there are definitely increases in median income, but most of the gains are going to go to the top (earners).”

The Census data stops at 2015, so don’t expect those trends to be sustained by the time the next Census comes around because resource prices started tanking in 2014 and we may never see the likes of the earlier 2000 prices again.

Traditional engines of growth not firing on all cylinders
Macdonald observes: “Much of the action (on income) is because of the Prairies, not as much because of the traditional engines of growth, which are Ontario and Quebec.

In fact, as CCPA Senior Economist Sheila Block detailed in her report Losing Ground: Income Inequality in Ontario, 2000-2015, the bottom half of Ontario families saw their wages drop during that period.

The result: Ontario is becoming more polarized. The labour market might be rewarding families in the upper end of the income spectrum, but the bottom half of families raising children in Ontario saw its share of earnings fall to 19 per cent of the income pie.

The decline in manufacturing jobs and a rise in precarious, low-wage work helped fuel polarization in Ontario. Given the decline in resource prices, could Ontario be scripting the future of income inequality in other parts of Canada?

Income inequality is a stubborn beast
Miles Corak, University of Ottawa economics professor, points to this chart to show how Canada’s highest income earners are “pulling away from the rest.”

Other Statistics Canada data show the median income of the richest 10 per cent in Canada grew by 16 per cent between 2005-15 — faster than Canadians who are in the middle of the income spectrum.

While income inequality hasn’t gotten dramatically worse since the Great Recession of 2008-09 — most of the damage happened between 1976-2006 — it’s not magically reversing on its own. It will take public policies to help close the gap.

The gender gap is also a stubborn beast
CCPA Senior Researcher Kate McInturff found the Census data reveal a persistent income gap between men and women in key Canadian cities.

At this rate, McInturff estimates that it will take 70 years for the gender gap to close. Clearly, more proactive government policy is needed to bring fairness to the labour market.

It takes two income earners to make it
It’s no surprise that a growing number of Canadians worry that they are one or two paycheques away from disaster.

The Census data show that it takes two income earners for households to make it these days.

According to Statistics Canada: “In 2015, 96% of Canadian couples had both spouses reporting income, up significantly from about two-thirds in the mid-1970s.”

So women are doing their part to keep households afloat. They just need the gender income gap to close, and soon. A national affordable child care strategy would be particularly helpful, too.

RRSPs are the refuge of the rich
For decades, Canadians have been told they can’t count on a golden pension from their workplace so they’d better invest in RRSPs, but the Census data show it’s really only the rich who can afford to do that in a meaningful way.

Canadian households with an income of more than $250,000 contributed an average of $19,549 a year to RRSPs. But families in the middle of the income spectrum — those earning $70,000 to $79,000 — contributed only $5,487 a year.

Once again we are reminded that this tax advantage is benefiting the wealthy.

Despite Canada’s wealth, poverty persists
Canada is a wealthy country — and it was especially so during the resource boom — but it’s not trickling down to the poor.

The Census shows us that 1.2 million children lived in poor families in 2015.

The city of Windsor, Ontario, stands out: its child poverty rate was a whopping 24 per cent in 2015 — the highest in the country. Nearby London, Ontario’s child poverty rate was 22.2 per cent— the third highest in Canada.

That Windsor and London have been in the headwinds of the manufacturing slowdown in Ontario over the 2000s simply suggests that they’ve been the canary in the coal mine.

Poverty and income inequality don’t magically go into reverse. It takes a concerted public policy strategy.

That’s why we applaud the Ontario, Alberta, and B.C. governments for pursuing a $15 minimum wage strategy.

The Census data make it clear that Canadians should be combatting the low-wage strategy that has contributed to stagnating wages and stubborn income inequality.

The Census data also point to the dire need for a national poverty reduction strategy, backed with government funds to make it worth the paper it’s written on.

Finally, a vocal group of high earning professionals are complaining about the federal government’s plan to limit “income sprinkling” by closing tax loopholes. The Census data serve as a reminder that a low-tax strategy for the well-off shouldn’t be one of Canada’s top priorities.

Redistribution of the wealth should be the priority.

[Link to the Statistics Canada database here.]

Trish Hennessy is director of the Canadian Centre for Policy Alternatives’ Ontario office. Follow her on Twitter: @trishhennessy

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