Poor today, rich tomorrow: Permanent underclass in Canada is a myth, study reveals
NationalPost.com – Canada
Nov 20, 2012. Kathryn Blaze Carlson
As a 12-year-old boy, Charles Lammam earned his first paycheque delivering newspapers on Wednesday and Saturday mornings. As a teenager, he worked part-time in the food and hotel industries. He juggled a part-time position at a financial institution with his undergraduate degree at Simon Fraser University, and then worked as an intern at a think-tank while completing his graduate studies. Mr. Lammam parlayed that internship into a full-time position, eventually becoming an associate director at the Fraser Institute.
As it happens, the latest achievement on his résumé — a study measuring income mobility in Canada — found his experience represents the norm: Over the span of a decade, 83% of Canada’s lowest income earners moved up the income ladder, according to a Fraser Institute report released Tuesday.
“Lower-income Canadians are not permanently stuck with a low income — that’s a myth,” Mr. Lammam said. “Where you are today is not where you’re going to be five, 10 or 20 years down the road.”
The 60-page report is based on Statistics Canada income data for more than one million Canadians, today aged 39 through 64, whose tax returns were linked with Social Insurance Numbers to track their earnings over the course of five, 10 and 19 years. And the findings, Mr. Lammam said, are remarkable: In the 19-year period between 1990 and 2009, one in five Canadians in the lowest of five income groups eventually moved up to the highest-income camp, and nine out of 10 people in the lowest-income group rose out of the bottom.
“The results are extremely encouraging, especially when we’re bombarded with myths of stagnating Canadian incomes or that the rich are getting richer and the poor are getting poorer,” he said, adding that more than a third of top earners in 1990 slipped to a lower income category by 2009. “This study blows those myths out of the water.”
The American dream, it seems, is alive in Canada — and that, he said, should turn the income inequality debate on its head, challenging the underlying assumption that Canada’s poor and rich are the same people, year in and year out. Last year’s Occupy movement, for example, called for higher taxes on higher-income earners, but those very protesters — many young and still in university — might well become those wealthier taxpayers in the not-so-distant future.
“Maybe the Occupy movement needs to be careful what it wishes for,” said Gregory Thomas, a director at the Canadian Taxpayers Federation. “People making tax policy need to be looking at the life cycles of the taxpayers. … We don’t have a permanent underclass.”
I’m not hearing anybody in the public debate say that those at the bottom never get out of the bottom or increase their income
“The natural conclusion for some folks is to tax the rich more,” echoed Mr. Lammam. “But if you understand that the people at the bottom gradually transition from low to high income over time, then you realize that you’re actually doing people at the lower end of the scale a disservice because they’re going to get there in due time.”
NDP finance critic Peggy Nash called that a “convoluted argument,” saying income mobility and income inequality are two separate issues that should not be intertwined.
“I’m not hearing anybody in the public debate say that those at the bottom never get out of the bottom or increase their income,” she said, adding that today’s youth and families face unprecedented challenges, such as record unemployment and household debt. “What I hear is that there is a growing gap between those at the top and those at the bottom.”
What this tells us is that there isn’t a caste society in Canada — that people are continuously transitioning from low to middle to high income over time, and that’s natural
But Mr. Lamman said that when mobility is taken into account, income inequality is actually on the wane: In 1990, the average income of people in the top 20% was 13 times that of the bottom 20%, but 19 years later the people in the top 20% were earning only twice as much as those who were initially in the bottom 20%.
“What this tells us is that there isn’t a caste society in Canada — that people are continuously transitioning from low to middle to high income over time, and that’s natural,” he said. “My own experience is the normal Canadian experience.”
Susan Quipp, an Occupy Lanark County, Ont., member, called the study “malarky” published by a “right-wing group” that “represents higher-income earners.”
Several social justice groups were unavailable to comment on the Fraser Institute’s report at deadline, including the Council on Canadians and Canada Without Poverty.
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