Time to reverse the downward spiral of income inequality
October 4, 2011
By James Clancy
There is a broadly-held perception that Canada is a kinder and gentler country with greater economic and social equality than most other countries, particularly the United States. However, a recently released report by the Conference Board of Canada, combined with data from Statistics Canada, shows a large and growing gap between the rich and poor in this country.
The recent Conference Board report highlights the dramatic rise in inequality that Canada and Canadians are facing. In less than ten years, Canada has moved from the middle of the pack in income equality to 22nd place out of 32 OECD countries.
According to Statistics Canada, between 1980 and 2005, the income of the richest one-fifth of Canadians grew 16.4 percent while the poorest fifth saw their income drop 20.6 percent. Income was stagnant for almost everyone else in the middle. The reality is that millions of Canadians are not making any more today than they did 30 years ago.
Our inequality rate has been increasing faster than even the United States and this occurred when our economy was growing and creating new jobs. What will it be like when our economy stagnates for several years as many economists are predicting? We don’t have to guess at the answer because the consequences of growing inequality are well documented.
The economic impact means working families have less money to buy goods and services and to upgrade their skills and education. They rely on cheap credit to borrow money to pay their bills and maintain their quality of life. But this is an unsustainable course and a sudden change in interest rates or housing prices means disaster.
The human and social costs include higher crime rates, more homelessness, poorer educational outcomes, higher rates of mental illness and diminished child well-being. Inequality undermines social cohesion – rather than going forward together with a common purpose, we become a society full of diverse economic groups suspicious of each other and our future together.
The past ten years have seen an almost complete abdication of the public policies and institutions that would allow us to reverse course – progressive taxation, universal public services, strong labour rights and decent pensions. The public service as an institution has been under a full frontal assault by politicians and right wing foundations. Sensible proposals like a national drug plan or child care program have been denied. Other good ideas like a guaranteed annual income have been put to the torch. And it’s not unusual to see articles claiming that minimum wage laws actually hurt the poor.
As a result, people feel increasingly powerless and lose hope. Insecurity grows. Aspirations dampen. Trust erodes. People compete for the tiny scraps left behind. Resentment and bitterness increase. Nobody wants to pay taxes. And inequality soars. And everybody loses. This is the downward spiral our country is in today.
Reversing this inequality spiral is the greatest challenge facing our country. It’s not going to be easy. But there are other countries that enjoy much greater equality than Canada, like Sweden and Japan, and all the benefits that come with it. They’ve taken different approaches in getting there and offer a buffet of policy options our governments could choose from.
But what’s clear is that political and public will is a precondition for the adoption of any effective policies to tackle inequality. It’s time for true political leaders in Canada to emerge and rise to the challenge of addressing inequality. And the rest of us must be more demanding of our governments to justify their policy choices – will they reduce inequality or make the problem worse?
Growing income inequality isn’t inevitable. It’s preventable. It shouldn’t be tolerated in a country with as much wealth as Canada. We can be among the most equal societies in the world if we make the right choices. This is our challenge. We cannot and must not fail.
James Clancy is the National President of 340,000-member National Union of Public and General Employees.