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March 18, 2011 / mike54martin

The Inequality Gap: A Growing Problem

A recent issue of the Economist magazine highlighted a concern that countries across the world are grappling with; how to deal with the growing income inequality in modern society. This is a problem that is particularly acute in both developed and developing countries from China to Brazil and from Britain to right here in Canada. Why is it a problem?

There may always be rich and poor among us but for the last twenty years the gap between the groups has been growing at a pace that according to the Economist, even the bankers and industrialists in Davos are worried about. When one segment of the economy moves so far ahead of the others that you cannot no longer see the smoke from their caboose then there is a real and pressing concern that the others might react unfavourably through labour unrest or even revolution. Certainly that is an issue in places like China and other newly emerging economies. Even the steel-willed rulers of the Communist regime know that there must be a strong middle class to ensure continued growth and stability.

In Canada we seem to have forgotten these lessons. It’s not likely that Canadian workers are poised to revolt but if you look at the data then you could understand their unhappiness. The Canadian economic pie has undergone a radical re-slicing in the last ten years and while we have had a period of unprecedented growth the richest Canadians have taken the lion’s share of the profit and glory. According to the Canadian Centre for Policy Alternatives the richest 1% of our population accumulated one third of all income gains during this period, leaving the rest of us to scrabble over the remains. To add to their economic gains they also got to keep more of it thanks to generous personal and corporate tax reductions that far outstripped the minimal tax cuts for middle class Canadians.

How bad is it in Canada? Pretty bad. In fact Canada has one of the worst records in the world when it comes to the equality gap. In 2008 the respected Organization of Economic Cooperation and Development warned Canada that we were on a slippery slope and that the income gap in Canada between rich and poor was growing faster than almost all of the other developed countries in the world and that we had to take steps to deal with it.

This massive wealth transfer has already had an enormous impact on our social cohesiveness, one of the major sustaining pillars of our Canadian society. Those who fall out of work because of a downsizing, privatization or globalization of the economy have few supports to help them get back in the game and find themselves and their families just barely surviving. They join the structural poor including but not limited to aboriginal peoples both on and off reserve, people with disabilities and seniors, especially senior women all whom are struggling to stay alive at incomes of less than $20,000 a year.

If there was ever a sign that we have a problem with inequality in Canada one only needs to look at the growth in the new industry of food banks. In 2009 close to 800,000 people accessed food banks every month in Canada and 37% of these were children.  A stark and depressing reality is that 14% of all people who went to the food bank in 2009 actually had a job.

These poor within us are more likely to face life situations with higher murder rates and lower life expectancy and according to the Equality Project in the United Kingdom fare worse in all manners of social indicators from poorer health to more likelihood of drug dependency to the weaker educational performance of their children. These are not simply other people’s problems that we can ignore. They show up in crime statistics, in our prison population and in our health facilities. Together we pay for the costs of the growing inequality.

But perhaps it is the Canadian middle class who have paid the most for the growing inequality in our society. As each economic tsunami moves through our society we are working harder, longer, for less. At least in comparison to our richer and usually corporate cousins. Despite being better educated than any generation in history our median pre-tax incomes are about the same level today as they were in 1980. Where did all of the wealth that was created during this period go? It went to the richest among us. 

So what can we do about the situation? How can we get the tide to start flowing in the right direction again? It is clear that the status quo will not help, in fact this trickle up theory of peanuts for the poor and tax cuts for the wealthy doesn’t work at all and unless you are a banking executive, a corporate bigwig, or a cabinet minister you can look forward to having less in your pocket for retirement, assuming and hoping you get there.

Canadians know that this situation is unfair and untenable. A recent Focus Canada survey by Environics Research pointed out the obvious. Two-thirds of Canadians believe the disparities in income between rich and poor in this country are growing and eighty percent believe that government has a responsibility to reduce such disparities. So what can governments do? At a very minimum they should follow the Hippocratic Oath and first do no harm. Maybe that should be do no further harm. A welcome and overdue step in the right direction would be for the Conservative Government to cancel the latest round of corporate tax cuts. They simply reward wealthy corporations at a direct cost to taxpayers who will have to pay the money back.

But there is much more to do in both the short and long term. Investment in infrastructure, income supports for the unemployed and low income Canadians and housing initiatives have a direct impact on not only reducing income disparities but even according to Finance Department officials are better for job creation and economic growth than another round of tax giveaways to the corporate rich. In the longer term the Federal Government needs to revamp the taxation system to restore some semblance of fairness and to launch a clear poverty reduction strategy with targets and timelines in partnership with the provinces and territories.

It’s more than time to develop and implement strategies to deal with our growing inequality gap and a Federal Budget is a good place to begin that debate. If not then there will be a Federal Election some time soon and Canadians should demand and not just ask their political leaders what they are doing to make Canada a fair place to work and live.

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