Inequality and Canadian politics
OttawaCitizen.com – Opinion/Columnists
March 20, 2015. Peter Loewen
Slowly but unquestionably, Canadians have grown concerned about inequality, for a combination of reasons. Concern over inequality has increased in the United States, and much of this discourse has spread here. Landmark publications – not least Piketty’s Capital – have helped to frame the discussion. And, as the data demonstrate, Canada has grown more unequal in the last 10 years. How any of this will matter for our politics is an open question.
We can think of income inequality in Canada in at least two fashions. First, differences in income before taxes and government transfers, and those that exist after taxes and transfers. In shorthand, we might think of these inequalities as economic and political, respectively. Economic inequalities have grown over the last 10 years, though in fits and starts, and never approaching those of the United States. Canada’s one per cent are not nearly as rich as their American counterparts.
If economic or market inequalities have grown, it is not obvious to me that this has to do a lack of government policy, particularly if these incomes are derived from wages rather than capital gains. A recent talk by Stephen Gordon, the Laval University economist, suggests this is exactly the case. Talented and marketable individuals have substantially increased their bargaining power vis-à-vis employers in the last decade. When this is matched with infrequent and modest increases in the minimum wage, inequality has resulted.
Declining marginal tax rates have certainly had some role in this income increase, as they have increased incentives to bargain, but this is not the principal place where government has allowed inequality to increase. Instead, post-transfer inequality has increased principally because government is transferring less to poor citizens. The problem is then not too little government spending or even too little taxing, but the wrong spending.
Inequality has multiple causes, and the above sketch is just part of the picture. But if there is truth in it, what does it say for the ability of our political parties to address inequality?
The Conservative party has nailed its colours to a middle-class mast. To their credit, their policies have been clearly targeted to those families with employed parents who want little more from government than the provision of health and education, and otherwise prefer lower income and consumption taxes. This is a defensible set of individual preferences. But this is a difficult policy package to reconcile with one that encourages increased minimum wages and which provides substantial income support to those at the bottom of the income distribution.
The NDP is in a stronger position to move on this file. Recent work by Richard Johnston at UBC suggests history is on the side of the NDP. The most robust action against income inequality has occurred in provinces under NDP governments with a strong labour base. Thomas Mulcair can look to these places for his policy cues. The NDP have made repeated promises against increasing marginal tax rates, and this ties their hands to some degree. But the evidence suggests that there is not much action there anyway. Instead, they can put forward policies offering robust income support to those at the bottom, coupled with support for strong labour policies and an increased federal minimum wage (with admittedly not much coverage of the actual labour force).
What about the Liberal party? They appear ready to make inequality a central concern of their campaign. (This is to the credit of Toronto Centre MP Chrystia Freeland, who has probably written more on inequality than all of Parliament combined.) It is not clear, however, that this is a definite winner. The Liberal coalition, even in its emaciated 2011 form, was split equally between wealthy and poor voters. Effectively addressing inequality will require reversing various Tory policies that have benefitted their wealthier supporters in favour of their poorer supporters. Voters are social actors, willing on occasion to sacrifice for others and for the greater good. But convincing them of this will be no small task, especially against a prime minister willing to play to voters’ reasonable self-interests.
Ultimately, addressing inequality will require winning a political, not an economic argument.
Peter Loewen is an assistant professor in the department of political science at the University of Toronto, Mississauga.
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Tags: budget, economy, featured, ideology, standard of living, tax
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