“There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” – Warren Buffett, Chairman and CEO of Bershire Hathaway.
How is it that Canada has seen years of consistent economic growth and yet money for public services appears to be drying up and after-inflation wages for ordinary citizens in both the public and private sectors have remained stagnant for 30 years?
The question is not “if” there is enough money, but how wealth is actually distributed.
Between 2000 and 2006 real income per capita grew in Canada by 15.5 per cent, but this was not distributed equally. In fact, most workers saw no increase at all in their inflation-adjusted income.
Over the last three decades the top 20 per cent of Canadian earners found their after-inflation salaries rise by 16 per cent to an average of $86,200. That is far from the whole story. The top one per cent of Canadians almost doubled their share of the nation’s economic output, rising from 7.7 per cent of Gross Domestic Product (GDP) to 13.8 per cent. The richest 0.01 per cent more than quintupled their share, averaging a staggering $3.8 million annually.
According to Toronto research agency “Investor Economics,” the richest 3.8 per cent of Canadian households controlled 66.6 per cent of all financial wealth (excluding real estate) by 2009, up from 60.6 per cent in 2005 – just prior to Stephen Harper taking power in Ottawa. Investor Economics predicts this group will control 70 per cent of all financial wealth by 2018.
While middle income earners remained stagnant over the last 30 years, the median income of the bottom 20 per cent fell from $19,300 in 1980 to $15,300 in 2010.
Economists measure the income inequality of nations through a formula called the “Gini Coefficient.” The scales runs from zero to one, zero representing total equality, one representing the maximum inequality. In 2004-05 Canada scored .317 on the scale, much lower than the United States at .381, but much higher than many European countries, including Denmark at .232, Sweden at .234, or Germany at .298. However, Canada’s rate of inequality was rising second fastest only to Germany.
Studies have shown that social inequality is about more than who drives at Lamborghini and who takes the bus.
There is a very real cost to society for higher levels of inequality, including increased health care costs and social unrest. Given Britain’s recent experiences, is it any wonder Stephen Harper is planning for more prisons?
Unequal societies are more likely to wrestle with issues of obesity, mental illness, and teenage births.
On the other hand, countries with lower levels of inequality experience stronger community life, higher levels of trust, less violence, better mental health, longer life expectancy, more social mobility and better education. Author Linda McQuaig recently pointed out that if you really wanted to pursue the American dream, you would be better off moving to Sweden.
In the coming election we need to look at issues through the filter of the growing economic gap.
PC Leader Tim Hudak says he cares about pocketbook issues. While he wants to make modest reductions in costs to families, he is more than willing to take a cleaver to the revenue side of the equation. Will a few dollars less in hydro bills be offset by cuts to your wages or the loss of your job?
When Tim Hudak wants to bring the compensation of public sector workers down to private sector levels, or to make the workplace less secure through his desire for competitions, these policies have a direct impact on social inequality.
Reducing public sector wages will not improve wages in the private sector – in fact, it will likely set new benchmarks towards a downward trend for all workers, public and private.
When all three parties are promising corporate tax cuts – the NDP at least limiting these cuts to companies that deliver new job creation – this will also have an effect on the widening income gap. The less corporations pay, either we cut services or pay more to compensate for lost revenue.
Should it be the role of government to reduce the standard of living for the majority of Ontarians? Perhaps this is the question we most need to ask at all-candidate forums and at the doorstep.
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Where is the money? Deloitte says US millionaire households have at least $38.6 trillion in wealth, with an estimated $6.3 trillion more hidden in offshore accounts. This wealth is held by one tenth of one per cent of the population. Deloitte predicts these households will see an 225 per cent increase in wealth to $87.1 trillion by 2020, or more than $100 trillion when offshore accounts are figured into the calculation. In an analysis by Amped Status’ David DeGraw, he points out the richest 400 people in the US have as much wealth as 154 million Americans combined – that’s half the US population.
Among leaders in income are the CEOs of US health insurance companies. DeGraw writes: “Leaders of Cigna, Humana, UnitedHealth, WellPoint and Aetna received nearly $200 million in compensation in 2009… while the companies sought rate increases as high as 39 per cent.”
The richest 400 Americans paid 30 per cent in income taxes in 1995, but now pay only 18 per cent. Americans who earned more than $1 million in 2009 didn’t pay any taxes: 1,470.