Canadian Income Inequality, Is Canada becoming more unequal?

Rapport du Conference Board sur la distribution de richesse au Canada


Key Messages

  • Income inequality in Canada has increased over the past 20 years.
  • The richest group of Canadians increased its share of total national income between 1993 and 2008, while the poorest group lost share. Middle-income Canadians also lost share.
  • Although the gap between the rich and poor widened, Canadians in the poorest income group still saw their income levels rise, albeit minimally.

Voici les liens directs sur les sujets.


What is income inequality and why does it matter?

Income inequality is the extent to which income is distributed unevenly in a country. It’s an important companion statistic to income per capita, which measures how much income a country has, but not how this income is distributed. Income inequality within a country is often masked by the national average.

High inequality raises two questions. First, what is the impact on the economic well-being of a country? The answer is that 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.

There is, however, no consensus on when income inequality reaches this tipping point.



Certains graphiques

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Canada is not alone in experiencing an increase in income inequality. Global inequality is rising and most of Canada’s peer countries have also experienced rising inequality. But rising inequality among developed countries is not inevitable. Other countries with similar levels of income per capita have lower income inequality.


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Some analysts suggest using median income instead. Median income is the amount that divides the income distribution into two equal groups—half having income above that amount, and half having income below that amount. The average income can be distorted by the highest and lowest values. The median—the middle value of the group—is not affected by the actual level of the highest or lowest values.

 

Median income increased from $45,800 in 1976 to $48,300 in 2009. This increase has been very modest—just 5.5 per cent over 33 years. Moreover, the gap between average and median income has been growing, which is not good news. The growing gap signals that income growth is distributed unequally


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In Canada, only the fifth quintile—the group of richest Canadians—has increased its share of national income. All other quintile groups have lost share. This was particularly evident in the 1990s, when the income share for this top group jumped from 36.5 per cent in 1990 to 39.1 per cent in 2000.


We can see this by dividing the population into five groups (quintiles) from poorest (first quintile) to richest (fifth quintile) and calculating the share of income that accrues to each group. If each of the five income groups had the same share of total national income—that is, 20 per cent—the distribution could be described as equal.

 

The pie chart shows that the richest income group (fifth quintile) has by far the largest share of Canada’s economic pie—with 39.2 per cent of total national income.

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While the poor did not get poorer according to absolute real income levels, they did get poorer in a relative sense. The gap between the real average income of the richest group (fifth quintile) of Canadians and the poorest group (first quintile) grew from $92,300 in 1976 to $117,500 in 2009. Thus, while the poor are minimally better off in an absolute sense, they are significantly worse off in a relative sense.


Of Canada’s larger cities, Vancouver had the highest share of its population in low income in 2009, followed by St. John’s and Halifax. Toronto had the fourth largest low-income rate. Québec City and Regina had the lowest population shares in low income.

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