Growing Gap

I am trying to imagine the conversation I may one day have with my grandchildren about how my generation squandered $60 billion in tax cuts within the space of a single federal budget without investing a cent of it in something that will last for future generations.

We are living in very surreal times in Canada.

We have a minority federal government that has once again ‘stumbled' upon a ‘surprise' budget surplus of hallucinogenic proportions -- $13.8 billion, with projections of billions more to come - but we have a finance minister who is hellbent on frittering it away.

Let's put this windfall into perspective, if only for the sake of our grandchildren.
The surplus comes on the heels of a 10-year economic hot streak, where our nation's economy has grown to become the ninth largest economy on the planet.
These are prosperous, heady days. But what are we doing with our prosperity?
The federal government has decided, against mainstream economic wisdom, to cut the GST by another percentage point. This will yield the average family enough extra cash to order in a pizza once a month. Money well spent?

Taking all of the income tax changes announced in the pre-Halloween mini-budget, it is easy to conclude that Canadians have been handed a trick in the guise of a treat.

For all the bluster, a single parent will save up to $298 this year, $184 in 2008, and $94 in 2009. And that is the maximum possible gain.

These gains will be lower for anyone making less than $38,000 a year - and considering that's the average wage in Canada, we're talking about a lot of working families who have very little to gain from $60 billion in tax cuts.

By 2009, a single individual will get back 39 cents a day and a single parent will get back a measly 25 cents a day from these tax cut announcements.
It's time we start asking ourselves whether all the pomp and pageantry around tax cuts is really worth it.

Do we think our public health care system came from a tax cut? How about clean water, safe borders, and childhood education - do these things come from tax cuts?

When, not if, our economy takes a turn for the worse and we look back at the billions of dollars this government squandered on tax cuts, our children and their children may rightly ask: what did our parents' generation leave behind for us?
Crumbling infrastructure. A polluted planet. Housing, tuition, and child care that's unaffordable to the majority. An ever-growing gap between the rich and the rest of us. Abject poverty and utter despair among our neglected First Nations.

Think of what that $60 billion could buy that could benefit the majority of Canadians for years and decades to come. Opportunity lost, squandered.

As consumer citizens, we could all decide to take our tax cut money and run, but as caring, civic-minded citizens there is much to learn from the generations that came before us.

They took the fruits of economic growth and invested it in public health care, education, social programs, roads and railways that benefited the majority and served as an investment in future generations.

They could have just worried about themselves, but they had bigger dreams, a longer-term vision that helped fuel the growth of the middle class, affluent nation my generation enjoys today.

Instead of planning ahead 10, 20, 100 years from now, we have a federal government that is spending our money like drunken sailors giddy with shore leave, thinking only in terms of the next election.

I suspect our children and grandchildren will wish dearly that our generation demanded more, not less, of our government.
Theirs will be a far more sobering reality.

-- Bruce Campbell is the executive director of the Canadian Centre for Policy Alternatives.

An op-ed in the October 11, 2007 Saskatoon Star Phoenix suggests studies showing the rich are getting richer make "misleading" claims and are merely "cliche".

The opinion, by the Fraser Institute's Herbert Grubel, is clearly written with the hope that Canadians will overlook the inconvenient truth that the majority of Canadians are not benefiting from economic growth -- growth they are helping create.

The author draws on Canadian and American studies that tell the story going up to the late-1990s to make his point, dismissing more recent findings from Statistics Canada and others.

The newer research converges on disturbing facts: long-term trends in income distribution have changed markedly since the late-1990s.

The rich are indeed getting richer, but what's new is that the vast majority of Canadians' incomes are stagnating despite the fact that they are better educated and working more than their predecessors.

This is occurring in a period of strong sustained economic growth unlike any time in the past 40 years.

Mr. Grubel says the system works just fine, and points to mobility in individual earnings over the life cycle.

He omits the fact that about 80 percent of Canadians have seen no improvement in their wages since 1982, which is astounding, since 1982 was a recession year.

Mr. Grubel thinks the story is about individual pathways to success. The statistics tell a cautionary tale about class polarization.

Though there are more rich people, and those people are increasingly richer, most Canadians are running harder just to stay in place.

Which leads to this question: Why has more than a decade of red-hot economic growth failed to trickle down to the majority of Canadians?

-- Armine Yalnizyan

Broken promises are something we normally associate with politicians at election time.

But what about the broken promise of economic growth?

For years we've been urged to work smarter and harder, repeatedly reminded that a strong and growing economy is the fastest route to prosperity for all.

But the most recent Statistics Canada report on incomes puts the lie to that promise.

In a study that opens the vault on information that we rarely get to see - incomes of the richest Canadians - it's clear the spoils of economic growth have gone to those at the top of the heap.

Shockingly, up to 90% of Canadians are taking home a smaller share of the economic pie they helped bake - a little detail that might get lost in the news that the rich are getting richer.

It's official: there are more millionaires in our midst. Those at the very top have seen their incomes double in the past two decades. The share of incomes going to the top 1% has soared - rising from 8.5% in 1982 to 12.2% in 2004 (a 43% increase in their piece of the pie). The higher up the income spectrum you go, the better the story gets.

But what about the rest of us?

It's constantly dangled out there, that you and I can get rich. But the stats show a more sobering reality. They say only the rich are getting richer.

About 80% of Canadians have seen no improvement in their incomes since 1982. That's astounding, because 1982 was during the worst recession since the Great Depression of the 1930s.

Since the mid-1990s, the economy has been firing on all cylinders. After a decade of strong and sustained growth, our time should have arrived.

All the markers of economic success - low inflation, low unemployment, low interest rates, strong currency, no deficit budgets - are better than they've been for over 30 years. Our real output, as measured by inflation-adjusted GDP, is twice as big as it was in 1981. On the global stage, Canada's economic performance over the past decade has been the envy of the richest industrialized nations (the G7). This is as good as it gets.

All factors would lead us to assume that the majority of Canadians should be doing better than ever financially. That was, after all, the promise.

Instead, the inverse is happening: a surging economy has coincided with a process of redistributing incomes from the less affluent to the richest.

This is disconcerting, given that Canadians are playing by all the rules.

This generation of workers is better educated than the labour market of the early 1980s. People are working more. The average family raising children is clocking in 200 hours more a year than a decade ago.

Still, as the numbers show, the vast majority of people are just pedaling faster to stay put.

Few would begrudge the rich. But it's hard to argue the system is working when only the richest 5% enjoy the spoils of economic progress.....and this is in the best of economic times.

Something significant is shifting in Canada. A generation ago, the gains from economic growth were more widespread, and the taxes generated by that era of prosperity financed investments across the country, in every neighbourhood, that enhanced the quality of life of all citizens.

Not only did more Canadians find their paycheques improved in good economic times, our governments made sure we all benefited from prosperity by investing in things that help us get on with our day: decent housing options, quality child care, affordable university tuition, and good public transit.

Today, the majority of Canadians are losing on all counts. Their incomes aren't rising to match their increased work effort, and they're facing affordability problems for more of the basics in life.

So what does this mean for Canada? The findings in this statistical portrait aren't merely a product of the economy. They are a product of our culture. They reflect what is socially sanctioned, and what is considered worrisome for our future.

Do these arguments sound familiar? The rich should get more because they deserve it. The middle - particularly those represented by unions - shouldn't ask for too much because that is inflationary. And if we raise the minimum wage it will kill jobs.

As in all relationships, we get what we expect.

The Statistics Canada study has lifted the veil on where we are headed as a society. That gives us the chance to ask ourselves if we are expecting the right things from economic prosperity, and ourselves. The promise of prosperity for all need not be an empty one.

-- Armine Yalnizyan

When people hear that Canada's after-tax income gap between rich and poor families is at a 30-year high, they ask: what can we do about it?

There is no magic bullet solution, but Campaign 2000 is offering a thoughtful way forward to tackle Canada's persistent poverty problem.

If you don't think Canada has a poverty problem, think again. As Campaign 2000 writes in an op-ed published today in the Toronto Star:

"In Canada, child and family poverty are not receding; the child poverty rate in Canada was higher in 2005 than it was in 1989. Child poverty rates are disproportionately high among aboriginals, visible minorities, those with disabilities and recent immigrants. This is not the Canada that most
Canadians want."

So what do we do? Campaign 2000 is urging Canada's Premiers to commit to a poverty reduction strategy now. They write:

 "A comprehensive poverty reduction strategy would include indicators for measuring poverty; measurable targets and timelines; a co-ordinated plan of action, including budget commitments; and a mechanism for monitoring and evaluating progress to ensure accountability."

Other countries are doing it, with great success. Canada has the resources to tackle its poverty problem -- all we're waiting for now is the political will to make it happen.

-- Trish Hennessy

In a compelling read today, Toronto Star columnist Christopher Hume makes the case that North Americans are complacently letting their society crumble while other nations are rebuilding to meet today's challenges.

He writes, "Empires don't collapse overnight and certainly for many North Americans, everything's just fine, thank you very much. But the signs are there. In ways big and small, local and global, we are falling behind. It's not just that we have let the environment go ... or that we live in a culture of reruns, it's more that we have lost the capacity to deal with these issues. We are paralyzed, inert."

For the better part of a year, the Canadian Centre for Policy Alternatives has been bringing to light the many and varied aspects of Canada's growing gap between the rich and the rest of us.

We have shown how exorbitant CEO pay is climbing in tandem with stagnant workers' wages and poverty-level minimum wages.

In fact, workers' wages have been in a holding pattern for 30 long years while corporations are banking 40-year high profit shares.

The richest 10% of families in Canada now make 82 times more than the poorest 10% -- in 1976 they earned only 31 times more.

And it's not just a problem for the poor. The middle class is feeling it too. When 80% of Canadian families are taking home a smaller share of Canada's economic pie than families did a generation ago, it's time to sit up and take note.

We could fiddle while North America burns. Or we could do something about it. What can we do? For starters, see our poll showing what Canadians think our governments should do about rising income inequality. They want to see our governments raise the minimum wage so that a full-time, full-year worker isn't living in poverty. They want affordable housing, child care and university tuition.

These are just for starters.

Why does it matter if we do something about income inequality? A growing gap between rich and poor is a sign of societal decline. It is a red flag in an otherwise red-hot economy. The sooner we act to address this inconvenient truth, the better off all Canadians will be.

-- Trish Hennessy