Income Inequality: A Ticking Time Bomb

By Max Singh

Canada is held up as beacon of light around the globe, one of the most desirable places to live in the world, with an enviable standard of living. However, as anyone who lives in Canada knows, the picture is not so rosy. Federal and provincial, and stealth taxes take almost 50 percent of declared income, Young people cannot afford housing, luxury multi – million dollar apartments displace low income renters, while homeless people sleep in the doorway of expensive designer shops in downtown Vancouver, and other cities. Across the country, rising income inequality continues to be a social and political concern in Canada, as economic forces continues to squeeze the working poor, and middle class even tighter, whilst concentrating both income and wealth among Canada’s richest. As the gap between rich and poor continues to accelerate, an increasingly anxious middle class is being entrenched by the might of the capitalism system.

That old cliché – that most people are, “just a few weeks’ paycheck away from facing bankruptcy, is indeed true for many Canadians as credit becomes the only way most people can afford to keep their heads above water — high levels of inequality are a serious concern – acting as dampers on personal wealth growth, upward mobility, and is a threat to the social fabric of the country, and as a barrier to future economic growth.

As the inequality gap between rich and poor continues to accelerate, an increasingly anxious middle class is being entrenched by the might of the capitalism system.

Wealth is coagulating at the top of society

However income inequality is a very complex matter. Globally, substantial social and economic changes have happened over the past few decades that have execrated the crisis. Although families incomes have risen since the 1950;s, in the last four decades or so they have not kept pace with inflation, and actually declined as taxes, housing costs and inflation have eaten any gains. Meanwhile, since 1980, the very rich have seen their own wealth increase at a phenomenal rate. Wealth is now coagulating at the top of society, not filtering down. In 2015, the richest 20 per cent of Canadians held more than 12 times the share of total incomes than the poorest 20 per cent. The middle class, not only in Canada, but around the Western world is slowly disappearing, as their “real” incomes, and that of the working poor continue to plummet.

 

 The Age of Increasing Inequality

The figures are staggering- A 2019 Canadian study found that the net worth of Canada’s ultra-rich, – those defined as having $30 million or more in assets, rose by nearly 15 per cent since 2018 alone. For Canadians as a whole, net worth shrank by 0.2 per cent over the past year. For those who have all their worth sunk in vastly overvalued property that’s been taking a soaking lately, the picture is not rosy either. Want more evidence of inequality?  The Canadian Centre for Policy Alternatives reports annually on CEO salaries; in 2018, the 100 highest paid CEOs made 209 times more than the average worker.  And remuneration for CEO and Corporate bankers is often wholly or in part in the form of stock options, taxed for   capital gains  at half the rate of ordinary income in Canada.

Income inequality is a trend seen internationally, and widely reported on. Perhaps one of the best academics to  research and explain rising inequality with a Canadian perspective is  Lars Osberg, a professor of economics at Dalhousie University, his recent book “The Age of Increasing Inequality,” explores The growth of economic disparities in Canada over the past 40 years and issues that are cause for concern as a result of the phenomenon..

In “The Age of Increasing Inequality: The Astonishing Rise of Canada’s 1%,” Osberg presents his finding from a decades-long career studying economic inequality. He shows that since 1980, the bottom half of Canada’s earners have actually seen their earnings in the workforce shrink, when adjusted for inflation. He says that, it is only through government transfers — in the form of welfare, disability, child and other benefits — that have saved the bottom half of society from being materially worse off today than a generation ago.

Osberg argues that the growing inequality not only in Canada, but around the world will lead to unstable societies, as the struggling 99 per cent watch the wealthy one per cent leave then far behind economically. He argues that the disenchanted 99% are rich fodder for advertisers who sell them luxury or disposable consumer goods and unattainable lifestyles as material relief-to  people who feel it is the only way they can feel validation of their worth. The result is record levels of Canadian household debt in the last few years, among the highest in the developed world.

The Canadian Centre for Policy Alternatives reports annually on CEO salaries; in 2018, the 100 highest paid CEOs made 209 times more than the average worker in 2016.

Inequality had grave social implications 

More worryingly Osberg sees rising inequality causing “authoritarian social movements [to emerge, selling dreams of a return to “good old days” and finding scapegoats when that does not materialize.” As validation of this hypothesis, one only has to see the United States under the presidency of Donald Trump – where f authoritarianism, demagoguery and minority scapegoating are the hallmarks of his rule…  The same situation is happening n such countries, think Turkey, Brazil, Hungary and Europe, and the UK where right wing movements and their leaders exhort a racist xenophobic rhetoric, blaming refugees a, immigrants and other groups for economic woes than have really been a result of globalization income inequality and other factors.

 

What can be done to stem inequality?

Osberg says there is no easy answer to rising inequality but offers as few ideas. Firstly he advocates that  the national bank start targeting the jobless rate instead of focusing on just controlling inflation. Other possible solution Osberg contends is to introduce a basic income guaranteed to all, Osberg also suggests tax reforms that close loopholes the rich use to keep far more of their wealth. He advocates other measures to stop the super wealthy and rich, corporations to pay their fair share of taxes. He also also zeroes in on issues such as Canada’s lack of an inheritance tax that allow the rich to pass wealth on without paying tax. Osberg also advocates taxing the top one per cent at a much higher rate to raise significant revenues that could be used to tackle issues such as: climate change, poverty, investing in tuition-free universities and other public services.

Professor Lars Osberg, a professor of economics at Dalhousie University, advocates taxing the top one per cent at a much higher rate to raise significant revenues that could be used to tackle issues such as: climate change, poverty, investing in tuition-free universities and other public services.

Politicians are finally taking notice

These ideas are not as outlandish as they sound – In the last federal Canadian election in October 2019, along with other leaders, the New Democrat Party under leader Jagmeet Singh campaigned  on the issue of raising taxes on the very wealthy to raise  public revenues. In the U.S 202 Democrat Presidential candidates Bernie Sanders and Elizabeth Warren have also presented the idea  of raising taxes on the ultra-rich and corporations to fund university tuitions and other social programs. Their platforms suggested that taxing the people, corporations and entities that should pay extra tax could make life much better for millions of people.

There is no one stop, easy fix solution to the issue of income inequality. It is an intricate, complex issue that cuts across all lines of gender, race, -discrimination. There are so many moving part to the problem that at best it would take a massive shift in thinking, and a can do attitude to tackle the problem. With a realization that inequality in all its forms is a true problem, people are beginning to understand, this is problem we have to fix.

Sources: Lars Osberg, “The Age of Increasing Inequality,”   The Canadian Centre for Policy Alternatives. Fraser Institute, Stats Canada

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