Poverty, not inequality, should be the target

VancouverSun.com – opinion
January 10, 2012.   By Don Cayo, Vancouver Sun

Magna International chairman Frank Stronach’s $61.8-mil-lion salary and bonuses last year add up to more than twice the $28 million that went to the best-paid NHLer ever, Sergei Fedorov, for his very good year with the Detroit Red Wings back in 1997-98.

Yet I don’t wring my hands over the plight of poor Fedorov, or the many other NHL super-stars who have to scrape by on even fewer millions. This kind of “income inequality” – the kind where everybody’s doing just fine, even though some cats are fatter than others – worries me not at all.

That’s not to say I don’t welcome the recent surge of public interest in inequality. Given the times – this era when not everyone is doing just fine, and some are doing bloody awful – the well-documented increase in inequality, both domestically and internationally, signals an issue that really needs attention.

But this urgent issue is poverty, not inequality per se. In other words, it doesn’t matter much how high the top end soars; what public policy ought to concern itself with is how low the bottom drops.

This quibble isn’t just theoretical.

In a report compiled not long before the onset of the recession in 2008, the World Bank noted that income inequalities were worsening in 46 countries worldwide, and improving in only 13. Yet in those dismal-sounding numbers was both quite a lot of good news and a little well-disguised bad news.

The fact is that in 26 of those 46 gap-widening countries, the rich were getting richer at a faster pace, but people of all income levels were coming out ahead. Conversely, in three of the 13 gap-narrowing countries, the driving factor was that everybody’s income was going down, but the rich were losing even faster than the poor. So a widening gap can be positive, and a narrowing gap can be negative.

In Canada today, however, there’s little doubt that a widening gap reflects bad news for people lower down on the income scale. These are tough times rife with unemployment and investment risk.

But just how bad is that news? The answer depends on who you ask, because Canada has no generally accepted poverty definition.

The result is that we hear low numbers from those who advocate minimal state intervention, and high ones from those who want evermore programs for the poor.

Christopher Sarlo, an academic who has written extensively for the Fraser Institute, typifies the first group. He has developed a market-basket measure that, in essence, estimates the cost of warehousing poor people in basic accommodation with no hint of frills.

Those at the other end of the political spectrum usually cite the LICO, Statistics Canada’s complex-to-calculate, region-ally varying Low Income Cut Off figure. The federal agency notes time and again, usually in vain, that this isn’t and was never intended to be a poverty measure. But it works out to a much higher figure than Sar-lo’s market basket, or even the more generously filled market basket that the feds compile, at great expense, from time to time. So poverty activists like it.

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