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«WHY INEQUALITY MATTERS, IN 1,000 WORDS OR LESS ISBN  978-0-88627-588-4 Canadian Centre for Policy Alternatives ...»

-- [ Page 1 ] --

December  2007

WHY INEQUALITY

MATTERS, IN 1,000

WORDS OR LESS

ISBN  978-0-88627-588-4

Canadian Centre for Policy Alternatives

2 Carlton Street, Suite 1001

Toronto, Ontario

(416) 263-9896

www.GrowingGap.ca

CAW

OTTAWA

Introduction

Trish Hennessy              5

Why Should We Care About Inequality?  Jon Kesselman             10 Why Does Inequality Matter?  Charles M. Beach             13 Income Inequality and Democracy  John Myles              16 Meet the New Risks, Same As the Old Risks   Michael Orsini              19 What’s Wrong With Inequality?  Frank Cunningham            22 Reality Check – Economic Inequality in Canada  Lars Osberg              25 Thoughts on Inequality in Canada  David A. Green              28 Trish Hennessy Foreword We live in an affluent nation during prosperous times.

Canada is now the 9th richest nation in the world. Unemployment is at a 35-year low, more Canadian families raising children are working, and they’re working more.

And yet the income gap between the richest 10% and the poorest 10% of Canadian families keeps growing. The richest 10% now make 82 times more than the poorest— in 1976 they only made 31 times more.

A new phenomenon is also at play; one that goes beyond the extremes of the very rich and the very poor. Compared to a generation ago, 80% of Canadian families are taking home a smaller share of the economic pie they helped make. The concentration of incomes and wealth at the very top is accelerating.

Dropping poverty rates may signal a recent shift from welfare poor to working poor, but that shift has not lifted people out of the struggle to make ends meet. Their struggle is very real and it is shared by many Canadians. The growing gap in Canada is no longer ‘just’ about the rich and poor—it’s about the rich and the rest of us.

The majority of Canadians say they worry about a growing gap. About half of Canadians told Environics Research they feel they are one or two missed paycheques from poverty. Economic insecurity is rife across most of the income spectrum.

Yet there is an unsettling silence among our governments when it comes to this issue. Some provincial governments have begun talking about poverty reduction strategies, which is welcome news but much is yet to be done on this file.

Then there are those who maintain the economy is working asit should: Some Canadians are doing better and poverty rates are improving. But the reality is that rates why Inequalit y Mat ters, in 1,000 words or less 5 have improved only slightly over the past decade of tremendous economic growth.

Canada’s child poverty rates are no better today than they were in 1989 when parliamentarians of every political stripe declared child poverty was a national disgrace and needed to be eliminated.

Some maintain that growing concern about income inequality and poverty is much ado about nothing. I would say we ignore the growing gap at our peril—but don’t just take my word for it. In this powerful collection of essays, seven of Canada’s sharpest thinkers make a compelling case for why income inequality matters. And each makes the case in about 1,000 words or less.

The contributors to this essay series come from all kinds of academic backgrounds.

Though all the contributors are distinguished and well-respected for their academic work, they are not of like mind. They have differing ideological starting points and differing intellectual approaches.

But they agree on this: Income inequality is a problem that should be addressed, right here in Canada.

They warn that income inequality and persistent poverty could have serious and adverse effects on our nation.

In this series we present the opinions of four economists—Lars Osberg, Charles Beach, Jon Kesselman and David Green; a political scientist— Michael Orsini; a sociologist—John Myles; a philosopher—Frank Cunningham.

Queen’s University Professor Charles Beach is past editor of Canadian Public Policy magazine and is Director of the John Deutsch Institute at Queen’s University. He points to the ‘historic change’ in Canadian incomes of late, noting that “the benefits of economic growth have no longer been broadly shared. A rising tide has no longer been raising all boats.” Beach worries a growing gap could affect Canadians’ living standards, erode Canada’s ‘middle class consensus’ and reduce social cohesion. He warns, “a more economically polarized Canada may be more fractious and less stable; it could function less efficiently politically.” John Myles is a long-standing visiting research scholar with Statistics Canada. He is also a Canada Research Chair in the Social and Ethical Context of Health, and is a Fellow of the Royal Society of Canada. The University of Toronto professor zeroes in on the threat growing inequality can have on democracy itself. He writes, “If I were observing trends in Inequality Land, I would suspect I was observing a failed democracy. And I place a high value on democratic political institutions.” He says markets “need democracy to make market economies viable for people.





Quite reasonably, more economic growth isn’t of much interest to the bottom half of the electorate if all of the gains are going to the top half.” University of Toronto Professor Frank Cunningham is a former Principle of Innis College, University of Toronto and past President of the Canadian Philosophical Association.

He shares similar concerns about Canadian democracy, writing that 6 growing gap project ‘inequality is an enemy of democracy.’ His essay explores a myriad of ways inequality can undermine democracy and public spirit, including:

• The creation of two publics, one mainly concerned with making ends meet, the other with keeping and enhancing its wealth.

• With reduction of public resources, the charity of the rich must increasingly be relied on. One effect is that their priorities get privileged attention. Another is that catering to the wealthy to maintain social services defines these not as rights but as privileges conferred by a minority as they see fit.

• Inequalities foster elitism and resentment.

Political Scientist Michael Orsini is principle scientist with the Institute of Population Health, University of Ottawa. He links income inequality with Canadian policy makers’ increasing penchant to talk in terms of ‘risk management’.

He laments that the focus on risk management is ‘depoliticizing’. Talk of risk factors focus away from promoting the welfare of others, away from social injustice, away from economic insecurity.

Orsini writes, “This focus on risk factors all too conveniently shifts the responsibility from the state to the individual citizen to take charge of their own productive destinies as worker citizens. It individualizes the problem, and conveniently sidesteps its structural underpinnings.” He says the language of risk masks “inequality in society—and government inaction to address this problem.

“And this is key,” he writes, “because economic risk does not just happen to people.

It is not something that can simply be managed. Governments all too often today exhort us to avoid or manage our exposure to risk, but neglect the fact that our ability to do this is affected by factors beyond our individual control.” What to do about income inequality? What is within our collective control?

Simon Fraser University Professor Jon Kesselman is two-time winner of the Doug Purvis Prize in economic policy—perhaps the most valued prize in the Canadian economics profession. He is the Canada Research Chair on Public Finance and a research fellow of the C.D. Howe Institute.

Kesselman also co-edited a book on income inequality with 1,000 words contributor David Green, a professor at the University of British Columbia. (The book, Dimensions of Inequality in Canada by UBC Press, is a must-read for serious students of income inequality.) Kesselman’s essay harkens us back to the Dickensian era, noting how extremes of destitution and wealth that were prevalent in the 1850s are an example of where Canadian society might head if income inequality is allowed to grow unchecked.

He talks about the costs of inequality—the social, political and economic costs of leaving some Canadians behind as others soar into the heady stratosphere of wealth.

why Inequalit y Mat ters, in 1,000 words or less 7 He writes, “There is no need for Canada to drift toward a twenty-first century version of a Dickensian world. Policies to mitigate the extremes of inequality will benefit not only those at the bottom but Canadians more broadly.” David Green is also a winner of the Doug Purvis Prize in Economic Policy and is an international research associate with the Institute for Fiscal Studies, University College London (England). In his essay, Green draws on Adam Smith for inspiration, writing: “To build a society on sympathy—the society that polls suggest many Canadians have in their heads—there is no substitute for providing real help to those who are faring worst in our society.” John Myles urges Canadians not to ‘rest on the laurels of those who preceded us’.

He writes, “Times have changed, and as the inequality trends indicate, Canadians face new distributive challenges. … The viability of our society requires efficient markets; but it also requires effective democracy.” Lars Osberg is chair of the economics department at Dalhousie University and past president of the Canadian Economics Association. Osberg calls on those who debate how much income inequality is growing to take a reality check and ask: “‘Just when did the homeless first appear in such significant numbers on the streets of Canada’s cities?’ “They weren’t always so commonplace—during the 1980s, Canadians who traveled across the border could smugly contrast the ‘kinder and gentler’ streets of Toronto or Vancouver to the nastier realities of New York and LA.” Osberg observes: “The implied social message of homelessness is that Canada very clearly does not care what happens to some of its citizens.

“In the same way as broken windows and graffiti are a visible indicator of the physical neglect of a neighbourhood, the homeless are a highly visible indicator of Canada’s social neglect of the less fortunate.” Can Osberg be right? Could it be true that Canadians don’t care about income inequality, about poverty, about the homeless walking like ghosts among us?

Asked by Environics Research last Fall, 86% of Canadians said they would like our governments to act to reduce the gap and 85% want government to tackle Canada’s poverty problem.

Though growing income inequality is a regular topic of debate in the United States, Canada’s political and media institutions lag behind public opinion on this issue.

Osberg points to the responsibility of our governments to ensure our collective well-being.

He writes: “By cutting the transfer payments that partly offset inequality, and by backing away from the specific needs (like affordable housing) of the least fortunate, federal and provincial governments have helped to make Canada a nastier place— particularly for the least well-off, and indirectly for all of us.

“It is time to both check and change that reality.” 8 growing gap project Trish Hennessy is director of the Canadian Centre for Policy Alternatives’ Inequality Project. The project focuses on trends in income and wealth distribution in Canada.

For more information, visit the project’s dedicated website www.growinggap.ca.

–  –  –

It was the best of times, it was the worst of times. For those with the highest incomes, the past generation has seen an unprecedented bonanza. For those at the very bottom, the pickings have been as slim as ever. Income inequality has become more marked in Canada, particularly in the tails of the distribution.

Recent research finds that individuals at very low relative incomes have been undercounted, and this group has grown between 1980 and 2000. Individuals at the fifth percentile from the bottom actually suffered declining real market incomes over this period; even with the redistributive effects of taxes and transfers their incomes have stagnated, at just $6,900 per capita in 2000.

We are no longer in the 1850s when Dickens chronicled the extremes of destitution and wealth. Yet our society has been drifting in that direction, which some observers find distressing to their sense of fairness. But all Canadians have compelling reasons of self-interest to be concerned about growing inequality.

Most widely noted are the costs that people at the lowest incomes impose on the rest of society—the drain on tax revenues through income support, health care, and other social programs. These costs raise our tax burdens and displace funding from public services that we all rely on such as highways, schools, and hospitals.

All of us also bear increased costs of property crime, personal safety, home security, and perceived risks related to criminal acts resulting from poverty and limited options. These risks affect our ability to enjoy our desired lifestyles and personal possessions.

10 growing gap project These costs go still further with individuals who never had the opportunity to develop their innate abilities. Their market earnings are permanently blighted, with a resultant loss of economic productivity and tax revenues. Society cannot tap their potential work and civic contributions, and they are excluded from the mainstream.

Moreover, empirical research has found that inequality and resulting economic insecurity make voters more resistant to supporting public policies that improve the operation of labour and product markets. All Canadians lose when policymaking discretion is constrained and the economy is rigidified.



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