1. A Quarter Century of Economic Inequality in Canada: 1981 - 2006 Lars Osberg Economics Department Dalhousie University Dec. 14, 2007

2. What has been happening to Economic Inequality in Canada in recent years?  1980: “economic inequality has remained roughly constant since the Second World War”  (Osberg, 1981:205)  Surprising – given massive changes in Canadian economy 1946-1979  Increased Inequality 1981-2006 middle 90%: ‘new normal’ = nil growth real income pulling away of top percentiles - @ increasing rate cutbacks – a nastier reality at bottom  1995 – watershed year in tax/transfer system  Are these trends sustainable?

3. Unambiguous Increase in Income Inequality 1980 – 2005 CANSIM v21151621

4. Changes in real income largest in top percentiles

5. Little change in real median income 1980-2004

6. Real equivalent after-tax income by income percentile

7. Inequality – the price ‘we’ pay for growth? 1980 – 2000: a ‘new normal’ in Canada

8. Density of log hourly wages of employees aged 25-64, 1981-2004

9. Individual Hourly Wage inequality - only part of the picture  Individual Net Annual Income = Capital Income + Labour Earnings + Net Transfer Income  = (rate of return) * (Stock of wealth owned)  + (hourly wage)*(hours worked weekly)*(weeks worked per year)  + Government Transfer Income – Taxes Paid  Net Annual Family Income = Net Annual Income of Family Head + Net Annual Income of Spouse (if any) + Net Annual Income of any other family members  Change in inequality, or correlations, of any component will affect inequality

10. The rise & fall of labour’s share - now about 51% of GDP

11. 4 crucial issues  “The other 49% of GDP” the rate of return to capital; inequality of wealth ownership;  Income share of top percentiles Why such large increases?  the least well-off now a much nastier reality for those at the bottom

12. Real interest rate increase 1954-80: 0.94%1980-2000: 4.42%

13. Shares of Wealth – The Net Worth of Canadian Family Units 1970 to 2005

14. Median Net Worth by Decile - why so little accumulation below top 10%?

15. The BIG NEWS in Canada & USA – sharply rising income share at very top

16. Direct effect of transfers and taxes on Gini index of inequality All families, 1976 to 2004

17. Alberta Welfare Income Couple + 2 Kids - 2005 $ 30% real cut by provincial SA 1986-2005

18. Income Gains concentrated at the top of the hierarchy – is this sustainable?  Top 0.1% 1992-2004 Family Income = $2.493M Annual growth = 6.1% Annual $ increase = $152K  ‘Pulling Away’ Large % gains at top on large base imply increasingly conspicuous gulf Middle 90% - nil gain? Nastier @ bottom  Benefits of Growth largely received by top percentiles  Is this socially sustainable?

20. 54 years of quintile shares

21. TAA not TINA “There Are Alternatives”

22. Canada in mid-range of OECD