Falling Behind

Major Findings

Long-Term Trends

• Real GDP per person in Canada - which is divided between households, businesses and governments - grew by an average of just 1.05% per year in the 1990s, down from an annual average increase of 1.9% in the 1980s, 2.2% in the 1970s, and 3.7% in the 1960s.
• Real personal disposable (after tax) income per person fell by an average of 0.33% per year in the 1990s, down from an annual average increase of 1.1% in the 1980s, 3.0% in the 1970s, and 3.9% in the 1960s. Thus, in 1999, real personal disposable income per Canadian was 3.3% lower than in 1989.
• There has been no increase for more than 20 years in the real annual earnings of Canadian men working on a full-time, full year basis. In 1997, such men earned an average $42,626, compared to $42,635 in 1975 (expressed in constant 1997 dollars.)
• Between 1981 and 1995, only the top 10% of male earners experienced any increase at all in their real annual earnings (up 6.2% over the entire period). The real annual earnings of the bottom 90% of men fell, and they fell the most for lower earners, with the real annual earnings of the bottom 10% of men falling by 31.7%. This fall was the result of declining real weekly wages, and a major reduction in the number of weeks worked in the year by lower paid workers.
• The annual pay gap between men and women working full-time on a full- year basis narrowed between 1975 and 1997, with the average earnings of such women rising from 60% to 72% of those of comparable men. However, the real annual earnings of such women rose by just 12.8% in the entire period from 1980 to 1997, despite some increase in weekly hours worked, and only half of all women in the labour force work on a full-time, full year basis.
• The average annual national unemployment rate has increased from 5.0% in the 1960s, to 6.7% in the 1970s, to 9.3% in the 1980s, to 9.6% in the 1990s. The average length of a spell of unemployment has increased from 14 weeks in 1976, to 18 weeks in 1989, to more than 20 weeks in the 1990s. On a brighter note, by the end of 1999 the national unemployment rate had finally fallen below 7%.
• Between 1983 and 1992, the median real annual earnings of young women workers aged 20 to 24 fell by 24%, and those of young men by 22%.
• Between 1980 and 1996, because of flat or falling wages and rising unemployment, lower income families came to rely more on transfer payments from governments (UI, social assistance, public pensions etc.) Transfer payments made up 59% of the income of the lowest income 20% of Canadian families in 1996, up from 46% in 1980; and 25% of the income of the next 20% of families in 1996, compared to 14% in 1980.
• Transfer payments make a huge difference to income inequality. In 1997, the most affluent 20% of Canadian families had 21 times the income of bottom 20% when only pre tax "market" income (wages, salaries and investment income) is considered, but just 5 times as much income after taxes and transfers had redistributed income.
• The overall poverty (low income) rate in Canada rose from 16.0% in 1980 to 17.5% in 1997. However, this was the combined result of declining rates of poverty among the elderly (down from 34% to 19%) because of improvements to public pensions, and of increasing poverty rates for younger families with heads aged 25 to 34 (up from 12% to 19%.) As a result, the child poverty rate also rose, from 16% to 20%. Child poverty rates have remained stubbornly high even during the 1990s recovery because of deep cuts to social assistance and UI benefits.

Trends in the 1990s

• Job growth in the 1990s was, until very late in the decade, heavily tilted towards "precarious" jobs. Between 1989 and 1998, the total number of self-employed workers grew by 40%, part-time paid jobs grew by 16%, and full-time, paid jobs grew by just 2%. 70% of the increase in self- employment was in "own account" businesses with no employees. On average, in 1996, these "own account" jobs paid men $27,200 per year, and women just $14,800 per year. Fortunately, strong growth of full-time, paid jobs resumed at the end of the decade.
• Over the entire period from 1989 to 1998, average weekly earnings adjusted for inflation increased by 2.8%, while real output per hour worked rose by 9.4%. Despite strong economic growth, real average weekly earnings did not increase in 1999.
• Between 1989 and 1997, the average "market" income of Canadian families from wages, salaries, self-employment earnings and investments (adjusted for inflation) fell from $53,937 to $50,672, and average family income after taxes and government transfers fell by 5.6% from $48,311 to $45,605. Poorer families experienced the most serious decline in both market and after tax/transfer incomes. The real after tax/transfer incomes of the least well-off 40% of families with children fell by 12% over this period.
• Between 1990 and 1998, private health care spending per person rose by 19.6% to $733, while public health care spending per person fell by 5.1% to $1680. As a result, the private share of all health care spending rose from 24% to 30%. Over the same period, undergraduate tuition fees rose by 126%.