Study confirms what many Canadians believe – there’s a growing inequality and polarization when it comes to family incomes
Despite putting in more time at work, a majority of Canadian families are getting a smaller share of Canada’s growing economy. In fact, 80 per cent of families raising children under the age of 18 are losing out because most of the country’s prosperity is going to the richest 10 per cent of families.
“When we look at the whole continuum of Canadian family incomes, we see a dynamic that is bigger than individual luck or success, lack of training, or effort or motivation. We see how Canadian families are all engaged and interrelated in an economic system that is failing the majority while disproportionately benefiting a select few,” states The Rich and the Rest of Us: The Changing Face of Canada’s Growing Gap, a new study by the Canadian Centre for Policy Alternatives (CCPA), a Toronto-based research institute that looks at social and economic justice.
“This is no longer a story about the rich and poor, it’s a story about what’s happening to the extreme top-end compared to everybody else,” says author Armine Yalnizyan. “The only group that did get ahead is the top, substantially.”
The 54-page report looks at the earnings and after-tax incomes of Canadian families with children under 18 (which makes up half of the population) and compares the late 1970s to the early 2000s because of similarities in the economy. It finds the richest 10 per cent of families earned 82 times more than the poorest 10 per cent, which is significantly higher than in 1976 when they earned 31 times more.
“The after-tax income gap is the highest it’s been in 30 years and growing most rapidly in the last few years when, in almost anybody’s view, it should be shrinking, given the economic growth,” says Yalnizyan.
Between 1976 and 1979, the bottom half of Canada’s population earned 27 per cent of total earnings but a look at the years 2001 to 2004 shows that number dropped to 20 per cent, even though the group worked more.
“The majority of Canadian families raising children have had to invest more of their most precious resource — time — into the labour market simply to stay afloat, if not get ahead,” says the study.
All but the richest 10 per cent of families are working more weeks and more hours in the paid workforce (200 hours more on average since 1996) yet the top group saw an increase in earnings of 30 per cent, compared to minus 85 per cent for the bottom 10 per cent (who worked six more weeks per year compared to 30 years ago).
“Two things we’re told are work harder and get a better education,” says Yalnizyan. “This generation is better educated and working more and yet 80 per cent of families are standing still or sharing a smaller share of the economy, which is astonishing.”
Having divided the population into 10 deciles, the CCPA report defines the richest 10 per cent as those with earned incomes of more than $131,201 and the poorest 10 per cent as those earning less than $9,400. The middle 60 per cent earned between $23,500 and $102,000, “a span that renders ‘middle-class’ almost meaningless, since the spread between upper and lower middle class is so great,” states the study. “Canada very much sees itself as a middle-class nation, but the share of income going to the middle class has been shrinking, slowly and steadily.”
The study found that rates of pay, not amounts of work, are driving the greater inequality and polarization. Since 1998, Canada’s top 100 CEOs saw a 262-per-cent increase in compensation while the average worker saw just a 15-per-cent increase.
“Average incomes may be about the same but that doesn’t change the fact they’re getting a decreasing share of it,” says Brian Murphy, an economist with Statistics Canada.
The study finds the biggest benefit to families came through income supports or transfers. And since employment insurance and social assistance have been scaled back, workers’ compensation has not substantially increased and refundable GST tax credits have less of an impact high up in the income spectrum, the biggest change that has taken place is the Canada Child Tax Benefit (CCTB). Evolved from the universal family allowances, the CCTB began in 1993 and has been enhanced since 1998. In 2005, it was about a $9-billion-a-year program, says the study.
Murphy says the CCTB is a good mechanism to deliver money to families in need but he stresses that there is a lot of churn in all income groups.
“Quite often people talk about these groups as if they are static groups. No, the whole composition changes, people are in and out, it’s constantly fluctuating,” he said.
Rich get richer
Working harder isn’t paying off for families with kids
Percentage change in average annual weeks worked and earnings, comparing 1976-1979 and 2001-04
Source: Canadian Centre for Policy Alternatives
Ideas from Canadians
What can be done about the gap?
The recent study by the Canadian Centre for Policy Alternatives (CCPA), The Rich and the Rest of Us: The Changing Face of Canada’s Growing Gap, follows the release of a November 2006 poll by Environics Research of 2,021 Canadians. It found three quarters strongly believe the gap between the rich and poor is growing.
“You’ve got this narrative of concern all that time, regardless of the income spectrum,” with people very worried about their financial and economic security, says Armine Yalnizyan, author of the study. But the question was whether this anecdotal evidence is also empirically driven and the results of the study confirm that, she says. “I was blown away (that) the perceptions were mirrored by reality.”
The CCPA paper looks at the who and what but doesn’t attempt to explain the why or how or “what we should do about it,” she says. However, the second part of the Environics poll recently released by the CCPA does reveal how Canadians feel the government should respond.
Almost nine in 10 (86 per cent) feel the government should take action on the income gap between rich and poor. In addition:
• 90 per cent say the government should reduce tuition fees and give out more grants;
• 88 per cent say the minimum wage should be raised;
• 85 per cent say more subsidized affordable housing should be created for low-income Canadians;
• 80 per cent think more affordable child care is needed;
• 82 per cent say tax loopholes should be closed so wealthy Canadians and corporations pay more tax; and
• 70 per cent say the government should increase taxes on wealthier Canadians to pay for programs that benefit the rest of the population.
“When we look at the whole continuum of Canadian family incomes, we see a dynamic that is bigger than individual luck or success, lack of training, or effort or motivation. We see how Canadian families are all engaged and interrelated in an economic system that is failing the majority while disproportionately benefiting a select few,” states The Rich and the Rest of Us: The Changing Face of Canada’s Growing Gap, a new study by the Canadian Centre for Policy Alternatives (CCPA), a Toronto-based research institute that looks at social and economic justice.
“This is no longer a story about the rich and poor, it’s a story about what’s happening to the extreme top-end compared to everybody else,” says author Armine Yalnizyan. “The only group that did get ahead is the top, substantially.”
The 54-page report looks at the earnings and after-tax incomes of Canadian families with children under 18 (which makes up half of the population) and compares the late 1970s to the early 2000s because of similarities in the economy. It finds the richest 10 per cent of families earned 82 times more than the poorest 10 per cent, which is significantly higher than in 1976 when they earned 31 times more.
“The after-tax income gap is the highest it’s been in 30 years and growing most rapidly in the last few years when, in almost anybody’s view, it should be shrinking, given the economic growth,” says Yalnizyan.
Between 1976 and 1979, the bottom half of Canada’s population earned 27 per cent of total earnings but a look at the years 2001 to 2004 shows that number dropped to 20 per cent, even though the group worked more.
“The majority of Canadian families raising children have had to invest more of their most precious resource — time — into the labour market simply to stay afloat, if not get ahead,” says the study.
All but the richest 10 per cent of families are working more weeks and more hours in the paid workforce (200 hours more on average since 1996) yet the top group saw an increase in earnings of 30 per cent, compared to minus 85 per cent for the bottom 10 per cent (who worked six more weeks per year compared to 30 years ago).
“Two things we’re told are work harder and get a better education,” says Yalnizyan. “This generation is better educated and working more and yet 80 per cent of families are standing still or sharing a smaller share of the economy, which is astonishing.”
Having divided the population into 10 deciles, the CCPA report defines the richest 10 per cent as those with earned incomes of more than $131,201 and the poorest 10 per cent as those earning less than $9,400. The middle 60 per cent earned between $23,500 and $102,000, “a span that renders ‘middle-class’ almost meaningless, since the spread between upper and lower middle class is so great,” states the study. “Canada very much sees itself as a middle-class nation, but the share of income going to the middle class has been shrinking, slowly and steadily.”
The study found that rates of pay, not amounts of work, are driving the greater inequality and polarization. Since 1998, Canada’s top 100 CEOs saw a 262-per-cent increase in compensation while the average worker saw just a 15-per-cent increase.
“Average incomes may be about the same but that doesn’t change the fact they’re getting a decreasing share of it,” says Brian Murphy, an economist with Statistics Canada.
The study finds the biggest benefit to families came through income supports or transfers. And since employment insurance and social assistance have been scaled back, workers’ compensation has not substantially increased and refundable GST tax credits have less of an impact high up in the income spectrum, the biggest change that has taken place is the Canada Child Tax Benefit (CCTB). Evolved from the universal family allowances, the CCTB began in 1993 and has been enhanced since 1998. In 2005, it was about a $9-billion-a-year program, says the study.
Murphy says the CCTB is a good mechanism to deliver money to families in need but he stresses that there is a lot of churn in all income groups.
“Quite often people talk about these groups as if they are static groups. No, the whole composition changes, people are in and out, it’s constantly fluctuating,” he said.
Rich get richer
Working harder isn’t paying off for families with kids
Percentage change in average annual weeks worked and earnings, comparing 1976-1979 and 2001-04
| Decile | Average annual weeks worked 1976-79 | Average annual weeks worked 2001-04 | Average change in weeks worked | % change | % change in annual earnings |
| Up to $9,380 | 39 | 45 | 6 | 15 | -85 |
| $9,381 - $23,450 | 60 | 64 | 4 | 7 | -31 |
| $23,451 - $36,000 | 66 | 74 | 9 | 14 | -17 |
| $36,001 - $48,600 | 69 | 82 | 12 | 18 | -8 |
| $48,601 - $60,200 | 75 | 90 | 15 | 20 | 2 |
| $60,201 - $71,500 | 79 | 96 | 17 | 21 | 8 |
| $71,501 - $85,200 | 85 | 100 | 14 | 17 | 13 |
| $85,201 - $102,300 | 94 | 108 | 14 | 15 | 17 |
| $102,301 - $131,200 | 103 | 113 | 9 | 9 | 22 |
| Over $131,201 | 120 | 114 | -6 | -5 | 30 |
| Average | 81 | 91 | 11 | 13 | 5 |
Source: Canadian Centre for Policy Alternatives
Ideas from Canadians
What can be done about the gap?
The recent study by the Canadian Centre for Policy Alternatives (CCPA), The Rich and the Rest of Us: The Changing Face of Canada’s Growing Gap, follows the release of a November 2006 poll by Environics Research of 2,021 Canadians. It found three quarters strongly believe the gap between the rich and poor is growing.
“You’ve got this narrative of concern all that time, regardless of the income spectrum,” with people very worried about their financial and economic security, says Armine Yalnizyan, author of the study. But the question was whether this anecdotal evidence is also empirically driven and the results of the study confirm that, she says. “I was blown away (that) the perceptions were mirrored by reality.”
The CCPA paper looks at the who and what but doesn’t attempt to explain the why or how or “what we should do about it,” she says. However, the second part of the Environics poll recently released by the CCPA does reveal how Canadians feel the government should respond.
Almost nine in 10 (86 per cent) feel the government should take action on the income gap between rich and poor. In addition:
• 90 per cent say the government should reduce tuition fees and give out more grants;
• 88 per cent say the minimum wage should be raised;
• 85 per cent say more subsidized affordable housing should be created for low-income Canadians;
• 80 per cent think more affordable child care is needed;
• 82 per cent say tax loopholes should be closed so wealthy Canadians and corporations pay more tax; and
• 70 per cent say the government should increase taxes on wealthier Canadians to pay for programs that benefit the rest of the population.
