Inequality on the rise in BC

(Vancouver) BC's rich got richer and our poor got poorer, according to a new report on inequality. And that is before the sweeping policy changes undertaken by the current provincial government.

New Perspectives on Income Inequality in BC, released today by the Canadian Centre for Policy Alternatives, looks at three data sources on inequality - survey data, tax data and census data - to assess inequality trends in the 1990s.

"Higher inequality was primarily driven by changes in market incomes," said economist Marc Lee, the report's author. "But the tax and transfer system also became less effective in mitigating the rise in market income inequality."

Tax data, from a special Statistics Canada run, provide a level of detail over the 1992 to 2000 period not previously available for BC. These new data show a clearer picture of inequality changes and enable a more detailed look at the top and bottom of the income distribution.

As a result of gains at the top and losses at the bottom, the ratio of market incomes of the top 5% to the bottom 5% grew dramatically over the 1992-2000 period. In 1992, the top 5% made 57 times the income of the bottom 5%. By 2000, this had grown to 94 times.

While inequality trends for BC look bad, for Canada as a whole they are truly grim. Canadian incomes grew by more at the top of the income ladder and fell by more at the bottom than in BC. And Canadian incomes were lower to begin with back in 1992.

"This research should be a wake-up call for the provincial government," said Lee. "Early signs suggest that this inequality picture has worsened in recent years by policy changes such as income tax cuts favouring high-income earners, higher medical service plan premiums that place a higher burden on low-income earners, and measures taken to reduce welfare incomes and eligibility."

The report notes that government policy failed to stem the tide of rising inequality in both Canada and BC. Given a number of policy measures implemented in the 1990s with regard to labour markets, monetary policy, federal and provincial government cutbacks, and changes to social safety nets (such as cuts to EI and welfare), the increase in inequality does not come as a surprise.

"We spent much of the 1990s fretting about the confidence of upper-income earners," said Lee. "It turns out they were doing just fine. The real story should have been growing inequality and the decline of incomes at the bottom."

-30-

To arrange an interview with Marc Lee, call Avi Goldberg at 604-801-5121 ext 229.

This report was produced with support from the Social Sciences and Humanities Research Council of Canada (SSHRC).