Journal des Alternatives

The Rising Tide Has Stopped Lifting Our Boats

Ceyda Turan, 10 June 2008

On Labour Day, Statistics Canada released its not so celebratory income report based on the 2006 Census. Accordingly, between 1980-2005, a growing economy did nothing to reverse the gap between the rich and the rest. Against a background of doubling GDP, median income among full-time Canadian workers has stagnated, while that of the top fifth rose by 16 per cent and the bottom fifth fell by 21 per cent. According to scholars Frenette, Green and Milligan, these figures under-estimate the gravity of the inequality, since they miss changes in the tails of the income distribution where much of the changes have occurred.

The overall living standards of Canadians have not declined since family incomes have increased during the same period. Economist Erin Weir argues that the latter have increased only because more family members are working, which does not excuse stagnant pay rates for workers. Canadian workers are still “deprived of the proceeds from a quarter-century of rising labour productivity.”

“Canada’s gap is growing at a time when Canadian families are playing by all the rules – working harder, contributing to a growing economy – but most aren’t getting payback,” says Armine Yalnizyan, research fellow with the Canadian Centre for Policy Alternatives.

For immigrants, the situation is worse. According to the report, male immigrants today are getting 63 cents for every dollar earned by Canadian-born men compared to 85 cents in 1980. The corresponding numbers for female immigrants are even worse; immigrant women earn 56 cents for every dollar earned by their Canadian-born counterparts, down from 85 in 1980.

Education levels do not explain the divergent earnings. Despite the much faster increase in the educational attainment of immigrant workers, the income gap between recent immigrant workers and that of their Canadian-born counterparts has widened. Interestingly, immigrant university graduates who have obtained their highest level of education in Canada have lower earnings than Canadian-born workers. The trend is similar for non-skilled workers. Among workers with no university degrees, the gap in median earnings between recent immigrants and their Canadian-born counterparts has widened just the same.

The Wake up Siren

Things weren’t always this way in Canada. Economic growth was said to be a “rising tide lifting all boats”, from the end of World War II through the 1970s. Real incomes rose as the economy grew, and income inequality was relatively stable and even improved at certain periods. It appears that the Canadian dream has succumbed to neo-liberalism. For the last three decades, successive governments have been dismantling the institutions of the Canadian welfare state; sacrificing workers’ rights for the sake of international competitiveness, cutting corporate taxes and other policies that maximize profits and transfer income from the poor to the rich.

Dalhousie Professor Lars Osberg in his Reality Check- Economic Inequality in Canada, argues that “By cutting the transfer payments that partly offset inequality, and by backing away from the specific needs (like affordable housing) of the least fortunate, federal and provincial governments have helped to make Canada a nastier place- particularly for the least well-off, and indirectly for all of us.”

This fact has not changed. According to the NDP’s Jack Layton, “The fact is the economic agenda of the government is unbalanced, unsustainable and it is leaving working families behind.” If it weren’t for the remnants of the Canadian welfare state, i.e., social programs and the progressive income tax, some Canadians would have sunk down to absolute poverty. In the aforementioned study, Frenette et al. argue that it was the tax and transfer system that offset the increases in pre-tax and transfer income inequality during the 1980s, while not performing so well in the 1990s.

Leaving matters to the market forces is highly unlikely to reverse the growing income disparity. It would be even more unrealistic to expect Stephen Harper, a fiscal conservative, to reform the tax system for the benefit of the underprivileged. Rather, Canadian workers who have been working to improve the lot of the rich need to challenge the deeply political processes that have been reducing their lot. Only then will the wide range of policies needed to re-build the Canadian welfare state, e.g., increased taxation of the most affluent to finance government services be back on the policy agenda.