Canada's growing income gap: It isn't the size of the pie, it's the size of the pieces

According to the Conference Board of Canada's report How Canada Performs, we are becoming a more unequal society. Although, in the period 1976 to 2009, all Canadians were better off in real dollars, the poor and the middle class have gained only marginally. The rich, on the other hand, are getting a lot richer. This is largely due to the "super rich"—the richest one per cent of Canadians. From 1998 to 2007—the decade of greatest economic expansion in this generation—they took home almost a third of all income growth. In the 1950s and 60s, the last time the economy grew so fast, they received only eight per cent of income growth. The graph below shows the Gini index for Canada (the share of total income that would need to be redistributed to achieve exact income equality) for 1976 to 2009.

As to what effect income inequality has on the well-being of a country, the report states, "High inequality can diminish economic growth if it means that the country is not fully using the skills and capabilities of all its citizens or if it undermines social cohesion, leading to increased social tensions. Second, high inequality raises a moral question about fairness and social justice."

How should our government react to this trend? The "fairness and social justice" bit may have little influence on the present office-holders—conservatives, after all, believe in privilege—but they should pay close attention to the "economic growth" and "social cohesion" bits. There is a growing body of evidence, summarized nicely in Richard Wilkinson and Kate Pickett's book The Spirit Level: Why More Equal Societies Almost Always Do Better, that more equitable societies are healthier societies. The evidence shows that more equal societies have lower rates of heart disease, crime, drug abuse, obesity, mental illness and other social ills than less equal societies, and the rates are lower not only for the poor but for the rich as well, i.e. everyone benefits from equality. The determining factor is the relative levels of incomes within a society, not the absolute levels. The reason, as the report states, is that less equality results in less social cohesion. This in turn results in increased insecurity, more stress and a greater obsession with status.

The Conservatives claim to want a stronger economy and less crime. An excellent step toward achieving both these goals would be to act forcefully to end this disturbing trend toward greater inequality.