Why Canada's income gap will continue to grow
The destabilizing divide between rich and poor in Canada is a self-perpetuating phenomenon.
The gap between rich and poor is certainly nothing new. But the evidence that it's rapidly growing wider in Canada — especially given our traditional conviction that we're a kinder, gentler place than most — is worth a serious ponder.
The Conference Board of Canada, which is known for thorough and dispassionate economic analysis, has just issued a report that shows income inequality has grown faster in Canada since the mid-1990s than it has in the U.S.
This isn't new either: based on 2006 census results, Statistics Canada has already established that earnings among the richest fifth of Canadians grew 16.4 per cent between 1980 and 2005, while the poorest one-fifth of the population saw earnings fall by 20.6 per cent in that period. Meanwhile, earnings among people in the middle stagnated.
That middle ground erosion has become entrenched to the point where Wal-Mart Canada recently confirmed that it is adapting its retail strategy to reflect pronounced polarization between affluent shoppers (who have drifted there during the recession) and the lowest economic strata. The middle class is no longer the market it once was.
The overall impact of globalization gets much of the rap, but there's no question that the economic recession — and the way government stimulus was spent — hasn't helped buck the trend.
The Conference Board data shows that the largest income gap is still in the U.S. and it has also risen in 10 of 17 countries in the past 15 years. So Canada is hardly alone in facing this issue. But what we do have to figure out on our own is what the numbers actually mean to us and our society — and what to do about it.
One of the first things to consider is what this portends for our relationship with Big Government.
Historically, Canadians have been much more comfortable with a significant state presence in their lives than American. Arguably, however, the recent rise of the Conservative party and its more laissez faire credo, signals a change in attitude and expectations.
In the U.S., the income gap has certainly been exacerbated by the economic downturn and by a deep-rooted mistrust of Big Government, something which has only increased with the rise of the Tea Party movement.
There, the political aversion to raising taxes for even the wealthiest, along with the tax cuts that occurred for those high-income earners during the years of Republican government, has made it an insolvable problem in the short term.
The growth of the income gap in countries like Canada, however, means that as public spending is cut, only the rich can afford things like private security services, gated estates and privately run airports. The result? The infrastructure that provides a meeting point between various income classes becomes even more frayed — with all that implies.
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