by Errol Black and Shauna MacKinnon
The Canadian Centre for Policy Alternatives has been documenting the rise in inequality in Canada since 2006. More recently, the Conference Board of Canada and the OECD have confirmed this trend. These organizations also report that inequality in Canada is now increasing faster than is the case in many other countries. In their highly acclaimed 2009 book The Spirit Level: Why More Equal Societies Almost Always Do Better, Wilkinson and Pickett showed the impact of inequality on a variety of measures such as levels of crime, teenage pregnancies, life expectancy and educational achievement (to name a few). The study concluded that countries that are most equal do best.
If Canada wants to measure up to more equal countries, the growing gap between rich and poor will need to be addressed. While we know that the federal government is the key player, provincial governments also have a responsibility.
In the report titled Income Inequality in Canada: How does Manitoba compare? Can we do better? we look at the trend in inequality across Canada with a focus on measuring progress in Manitoba for individuals earning market incomes. We conclude that a number of policy tools can be used to reduce inequality
How Manitoba compares
Using the Gini coefficient we show an increase in inequality (before tax) across Canada. Manitoba is the only province to have seen a slight decline in inequality when after tax market incomes are considered.
In 2010, Manitoba was the most equal province before taxes and third most equal after taxes. Greater income equality is in part due to minimum wage increases each year since 2000. But it is also likely due to the fact that high-income earners in Manitoba earn less on average than those in other provinces.
But there is more to the story.
It is also useful to know the before- and after-tax income share of the highest and lowest income earners. This comparison shows the impact of tax redistribution on earners at different income levels. The lowest income earners in Manitoba benefit less from tax redistribution than those in several other jurisdictions. For example, the lowest quintile in PEI saw an increase in share of after tax income of 4.7 percent. On the other end of the spectrum, Saskatchewan earners in this quintile saw an increase of a mere 0.5 followed by Manitoba and Alberta first quintile earners who saw an increase of 0.7. Manitobans in the second quintile did marginally better with a 1 percent increase.
When we look at the top 20 percent of income earners in Canada after-tax, only Newfoundland/Labrador, Prince Edward Island, Ontario and British Columbia saw decreases in income share for the second highest quintile earners. The highest income earners (5th quintile) in Prince Edward Island saw the largest decrease in income share at 9.9 percent. This quintile of earners in New Brunswick saw the lowest share decrease, down by 2.7 percent, closely followed by Alberta and Saskatchewan (2.8 percent) and Manitoba (2.8 percent).
While Manitoba has consistently done a fairly good job compared with other provinces, it has not done as much as it might to redistribute income through taxation. Prince Edward Island is more equal after tax than all other provinces and they have accomplished this by transferring income share from the top quintile (by 9.9 percent) to the bottom two quintiles (by 4.4 and 4.5 respectively). This suggests room for Manitoba to set the bar higher.
Poverty and social exclusion
While the Gini is a useful measure to compare inequality across jurisdictions and over time, it does not tell the inequality story for specific demographics. It also doesn’t capture how individuals not participating in the formal labour market fare. For example in Canada, and in Manitoba more specifically, Aboriginal people are over represented among those with the lowest share of income. Women, newcomers and persons with disabilities are also over represented at the bottom. Individuals and families reliant on social assistance and other government assistance are the poorest of the poor and they have seen very little if any improvement in incomes. Calls on the Manitoba government to increase income assistance rates are steadfastly ignored.
Why we should be concerned and what we can do
In our report we make the case, as does the OECD, that inequality leads to instability and this affects us all. We describe what governments can and must do but we also describe how Manitoba’s balanced budget legislation is blocking the road toward equality in our province.
There are things that we can do in Manitoba but it will require bold measures on the part of the NDP government. Do they have the courage?
Errol Black is a founding member of CCPA-MB and a CCPA-MB Research Associate and Shauna MacKinnon is the Director of CCPA-MB.