Social Policy in Ontario

Who wants to talk about income inequality?

Posted on November 23, 2011 in Equality Debates

Source: Globe & Mail — Authors: Jeffrey Simpson

TheGlobeandMail.com – news/commentary/opinion
Published Wednesday, Nov. 23, 2011.   Jeffrey Simpson

The Occupy movement – if movement is the proper word – fizzled after a brief burst of artificial importance in the media.

The souls who camped out were a disparate lot, with rather inchoate ideas about how to change society, let alone challenge seriously the capitalist system. Their camps are now being dismantled, sometimes by court order.

They did point, however, to a challenge few politicians want to address: growing income inequality and the verifiable fact that, within that growing inequality, the very, very rich are pulling away from the rest of society. You can see this at work within the upper reaches of the corporate sector, where the gap between what bosses and employees make has widened. No longer do compensation committees look at this metric; instead, they compare CEOs’ compensation with that of other CEOs’, so that the vortex of higher pay continues within the narrow confines of cozy cross-comparisons.

The Occupy movement began in the United States, where the recession started, courtesy of the major financial institutions – a collapse that plunged the country into a nightmarish combination of large deficits, swelling debt and high unemployment.

Long before the recession, however, the U.S. was becoming a significantly more unequal society, as the Congressional Budget Office explained in a recent report. The CBO looked at the years 1979 to 2007. It found that, whereas average household income after inflation grew by 62 per cent, the top 1 per cent of the population had enjoyed income growth of 275 per cent. The bottom 20-per-cent’s after-tax income had grown 18 per cent. Said the CBO: “As a result of uneven income growth, the distribution of after-tax household income in the United States was substantially more unequal in 2007 than in 1979.”

Market income was increasingly concentrated in fewer hands, said the CBO. Government transfer programs, combined with weaker redistribution of income through the tax system, could not counterbalance the fact that the market was putting more and more income in fewer and fewer hands.

Put another way, market income for the top 1 per cent tripled from 1979 to 2007, whereas for a household at the mid-point of the income ladder, market income rose only 19 per cent. Not surprisingly, therefore, the share of total market income for the top 1 per cent rose to 20 per cent from 10 per cent.

In the budget debates of Washington, the Republicans want to keep the tax system intact – the one that contributed to this inequality. Almost no one in the U.S. political system talks about redistribution of income.

The Occupy movement tried to shine the light of publicity on the big incomes of the wealthiest, especially in the financial sector. Through no fault of the movement, however, Americans weren’t much interested. For example, a recent Ipsos poll asked people in various countries for their top three issues. The share of Americans – 19 per cent – who identified “poverty/income inequality” as a top-three item was the lowest among the seven countries surveyed.

In Canada, the share concerned about poverty/income inequality was 30 per cent, behind health care (of course) at 47 per cent, unemployment/jobs at 39 per cent and taxes at 37 per cent. That ranking showed an increase in concern about poverty/income inequality, since it now ranks well above crime, immigration, environment and climate change.

One reason for the increase in Canada might be that income inequality has risen here, too. Inequality is not as severe as in the United States, but it is higher than everywhere in continental Europe. Indeed, the so-called “anglosphere” countries of the U.S., Britain, Canada and Australia are the places in the industrialized world where income inequality is most pronounced.

Well-intentioned philanthropy, much in the news lately, cannot do much against these market trends and inadequate government programs to offset those market trends. Nor does political attention much fall on the problem, since all parties now pitch their appeals to the actual or fictional “middle class.” The poor don’t vote much, are often hidden, don’t get much media attention and are usually not unionized.

Income inequality within countries also seems to be a worldwide phenomenon. The so-called BRICs – Brazil (with the exception of its “Bolsa Familia” program), Russia, India and China – are tremendously unequal societies, and getting more unequal all the time.

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Tags: economy, globalization, ideology, standard of living, tax

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