‘Income inequality is still very much an issue’

NatioinalPost.com – FullComment/Today’s Letters – Re: The Myth of Income Inequality, Andrew Coyne, Sept. 2.
13/09/06.   Andrew Jackson / Dougald Lamont / Gord Coverley

Andrew Coyne argues that rising income inequality is not a serious issue. But the numbers can be read quite differently.

Mr. Coyne shows that the incomes of the top 20% rose much faster than those of middle and lower income groups for two of the last three decades. But he suggests that the short period from 2000 to the Great Recession of 2008 was more typical.

While he is right that the temporary return of low unemployment helped middle and low income groups, he fails to make an absolutely key point: Income inequality in the 2000s stabilized at much higher levels than in the 1970s. There was no reversal of the trend. The income share of the top 20%, both before and after taxes, did not decrease. Meanwhile, the income share of the top 1% continued to increase significantly from 2000 until 2008.

This is especially significant since data on the income share of the top 1% — based on tax returns — is more accurate than household survey data that fail to capture the incomes of the very, very rich.

Better times for the economy from 2000 to 2008 did not reverse the dismal trend of the previous two decades. A temporarily rising tide did not make incomes more equal.

Income inequality is still very much an issue.

Andrew Jackson, Packer Professor of Social Justice at York University and senior policy adviser to the Broadbent Institute.

Andrew Coyne writes that inequality is getting better, not worse. But his argument is based on quintiles, or averages, which means he is ignoring exactly what he is setting out to measure: concentration. The distribution of wealth (and to a lesser extent, income) is based on Pareto’s power law of 80/20. That means that the top 20% have 80% of the wealth. Within that top 20%, 20% will have 80% of the wealth, and so on. It roughly breaks down to 80%, 16%, 3.2%, 0.64%, 0.36%, with the top 0.36% owning more, by several orders of magnitude, than the 80%.

More recently, the distribution of income was the greatest it has been since the Great Depression. That was based on deciles, with the bottom 10% averaging $10,000 and the top 10% averaging $100,000. The bottom range of the top 10% was $75,000 a year. According to Statscan, in 2008, 26.5% of Canadians made $15,000 or less, and 36.5% made $20,000 or less. Nearly 60% made $35,000 or less. About 1% made over $200,000. What people are buying and building is financed by debt, not work, which is one reason both government and individual’ debt is at an all-time high.

The argument that people today are better off because they can buy better gadgets wears thin, at least until an iPhone is developed that can take care of people in their retirement.

Dougald Lamont, Winnipeg.

There is something very odd about Andrew Coyne’s conclusion about the relative equality of income over the years. He may be right, from a statistical viewpoint (Who could argue about all those graphs?). However, what is crucial is what you have to spend to maintain that equality. I don’t have the resources to research all aspects of the rise in the cost of living, but commonsense tells us that that it negates income increases for most people.

Just to list a few culprits: Food, housing, dental care, medical prescriptions, insurance, taxes, comfort items (drink and cigarettes), transportation and so on. There is, after all, a reason for all those empty storefronts.

Gord Coverley, Ottawa.

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