Target the poor, not the rich, for real solutions to income inequality
TheGlobeandMail.com – ROB/Economy/EconomyLab
Nov. 27 2013. Alan Broadbent
The problem with poor people is they don’t have enough money, someone once said. With the recent attention on income inequality in The Globe and Mail and The Economist, it is important to shift the conversation from problems to solutions.
Some have focused on the 1 per cent at the top, so successfully highlighted by the Occupy movement. Proposals range from moderating extreme CEO pay packages, to taxing high incomes, to urging the rich toward robust philanthropy. Defenders of the rich in right-wing think tanks point out, accurately, that the results would be modest.
But attention is beginning to shift to what is the basis of the problem, and that is that too many people have too little money. Even working Canadians have too little money. Many of them are victims of decades of driving down wage rates as a way of finding efficiency in the production of goods and services, leading to low levels of family income.
The increase of service jobs, many of them seasonal, part-time and badly paid, reflects the daily grind for many of the working poor. Dreams of iPads, warm winter vacations and luxury cars turn into reality for only one-third of Canadian families. Ambitions to own a home within reasonable distance of work are becoming harder and take longer to turn into reality, because it is taking longer to accumulate the needed savings.
What has become crystal clear is the cost of doing nothing. There is growing evidence that links the social outcomes of poverty to increased costs in health care, the criminal justice system, education, and labour market absenteeism and turnover.
While some are keen to discipline excessive salaries at the top of the range, the real problem is the low incomes at the bottom, and that is where the solutions must begin. The good news is that there is a range of ideas and interventions that are ready to be implemented.
Here are five ideas that would go a long way to addressing the problem:
- Increase the amount of Canada Child Tax Benefit to a maximum $5,400 per child, as suggested by the Caledon Institute of Social Policy. This puts money directly into the pockets of low-income people.
- Enhance the value of the Working Income Tax Benefit that is paid to low-income workers, and extend coverage to more of the working poor.
- Restore collective bargaining. The creation of labour unions and collective bargaining was a major factor in the creation of the middle class, the same middle class that so many observe is now disappearing. While many business people love to hate unions, diminishing their presence has produced unintended consequences that damage business by eliminating customers.
- Borrow a good idea from the United Kingdom. In London, 432 employers including the City of London, Oxfam, KPMG, Barclays, Lloyd’s of London and the National Portrait Gallery have committed to paying a “living wage” of £8.80 ($15.17 Canadian) per hour. In addition, they make a commitment to “rolling out the living wage in the supply chain.” One prominent champion is London Mayor Boris Johnson, who has said that “paying the London Living Wage ensures hard-working Londoners are helped to make ends meet.” In Canada, community leaders in Vancouver, Hamilton and Toronto are agitating for wages ranging from $19.62 an hour in Vancouver to $14.95 in Hamilton.
- Protect workers at the lower end of the wage scale from unscrupulous employers. The Workers’ Action Centre in Toronto has urged governments to improve their monitoring of workplace abuses such as withholding pay or firing workers just before the end of a pay period and refusing to pay them, knowing the worker is unlikely to pursue the employer in court. Such abuses are disappointingly common, and governments under fiscal constraints have often cut back the monitoring and enforcement of labour laws.
The problem is complex, but solutions are at hand.