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Canada must get serious about income inequality. But how?

To avoid the tumult afflicting America and Britain, we need to get serious. Sadly, there no consensus on how


 
Liberal Members of Parliament give Minister of Finance Bill Morneau a standing ovation as he delivers the federal budget in the House of Commons on Parliament Hill in Ottawa, Wednesday March 22, 2017. (Sean Kilpatrick/CP)

Liberal Members of Parliament give Minister of Finance Bill Morneau a standing ovation as he delivers the federal budget in the House of Commons on Parliament Hill in Ottawa, Wednesday March 22, 2017. (Sean Kilpatrick/CP)

At the end of April, Finance Minister Bill Morneau spoke at a semi-private event at the Montreal offices of Power Corp. His audience was alumni of INSEAD, the fancy business school that charges around $120,000 for its one-year MBA. Everyone sat around dinner tables that had been set up in a long, rectangular room that featured Roman columns and a half a dozen large paintings by Jean-Paul Riopelle.

Morneau, who got his MBA from INSEAD in 1990, mostly talked about his short experience as a member of Parliament and a cabinet minister. In his previous life, he led an exponential expansion of the family business, Morneau Shepell Inc., enriching himself along the way. But Morneau said his personal milestones no longer involved spreadsheets. As a politician, “you are forced to look beyond your bubble,” Morneau said. “Middle-class anxiety is real.”

Our princeling prime minister and his millionaire finance minister are forever talking and tweeting about the middle class and those seeking to join its ranks. Their relentless messaging long ago became tedious. And yes, there is something disagreeable about Richy Rich politicians lecturing about the middle class while visiting the offices of billionaires, surrounded by privately held art worth tens of millions of dollars.

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But for those of you who haven’t, it’s time to get past all of that and admit that Trudeau and Morneau were onto something in 2016 when they wrote a budget that punished the wealthiest and handed out sops to almost everyone else. They saw something that most of us missed. Income inequality has spread beyond those countries that vote to quit Europe and elect Donald Trump. Canada is frustrated and angry too.

There is a glimpse of that frustration in the results of the Canada Project, a joint effort by Maclean’s and Abacus Data to survey Canadian attitudes ahead of the 150th anniversary of Confederation. In the poll of some 1,500 people, 75 per cent said they disagreed with the statement, “The rich in Canada pay enough taxes.” That is an incredible number for a capitalist society. Even more remarkable, the results were consistent across regions, genders and age groups.

It explains why Trudeau and Morneau raised the top marginal income-tax rate in their first budget. Overall, it wasn’t the smartest move. Higher taxes will hurt their efforts to attract and retain talented entrepreneurs. Yet the vast majority of voters wanted the richest to share their frustration, so their newly elected government obliged. There are better ways to punish the rich, such as forcing boards of directors to stop approving obscene pay increases for executives. But there would be no immediate payoff. So the government went for instant gratification, in part because currying favour with voters is what they do, but also because the public’s anger is such that something visible was necessary to keep it from turning into something worse.

Income inequality is a legitimate threat to the economy and the social fabric. Brexit and Trump are Exhibits A and B. If you are looking for evidence closer to home, consider Canada’s slower growth trajectory. Demand will suffer in the years ahead because the population is getting older, but also because wages are stagnant for all but the wealthiest. Disenchantment could lead to political upheaval, and political upheaval causes uncertainty, and uncertainty weighs on investment. If budget deficits are cause for legitimate worry, then surely income inequality qualifies, too.

Yet there is no consensus that it does. The editors of Income Inequality: The Canadian Story, a collection of essays published earlier this year by the Institute for Research on Public Policy, say “inequality Cassandras” and “inequality deniers” impede serious debate. The country’s poverty rates look good compared with other countries, and our safety net is relatively strong. That dulls the urgency to make sense of who is more right, the Cassandras or the deniers. “We don’t have the fire under our asses like other countries,” says Oana Branzei, a professor at the University of Western Ontario’s Ivey School of Business, who studies inequality.

Between 1982 and 2010, the “market incomes” of the bottom 90 per cent of taxpayers increased two per cent, while those of the top 10 per cent surged 75 per cent, according to editors of that IRPP collection, David Green, W. Craig Riddell and France St-Hilaire. (Market income excludes government transfers and capital gains.) It’s unlikely those trends have changed. Wages are barely keeping up with inflation. Also, the commodity boom would have allowed lower skilled workers to obtain good salaries for a while. The collapse of oil prices in 2014 wiped out thousands of those jobs, and the economy was still struggling to regain its pre-crisis momentum when Canadians voted in 2015.

The Canada Project

Now, Trudeau and Morneau must deliver. Green, Riddell and St-Hilaire conclude that a little more of the same won’t narrow the income gap: they urge the government to go big and think long-term. Branzei worries that slower economic growth will mean less money for charities and other groups that have helped plug gaps between the rich and the poor in the past. She would like to see help for entrepreneurs who seek to aid marginalized people.

Morneau might also take inspiration from the academic achievements of his fellow INSEAD graduates.

Income inequality will shrink when more people have the educations needed to get jobs at companies such as Power Corp., or start the next great Canadian firm. A favourite policy of the federal government is to subsidize student loans. But that only eases income inequality on the margins, in part because it is often richer students who grab the subsidies. Experts say education must improve at the primary level, and through high school so students are ready to excel at university.

That will require a long-term investment of effort and resources that won’t show results while Trudeau and Morneau are politicians. If they truly want to reverse income inequality, they will have to look beyond their bubbles.


 

Canada must get serious about income inequality. But how?

  1. ‘Between 1982 and 2010, the “market incomes” of the bottom 90 per cent of taxpayers increased two per cent, while those of the top 10 per cent surged 75 per cent, according to editors of that IRPP collection, David Green, W. Craig Riddell and France St-Hilaire. (Market income excludes government transfers and capital gains.) ‘

    Income is income, no? What is the justification of excluding these? I could *maybe* understand excluding non-recurring capital gains such as sale of a home or property, but why exclude CG when looking at those who periodically sell non-dividend paying stock, for example; their counterparts with dividend paying stocks presumably see that income included. And why exclude government transfers, which are recurring and possibly bolster income significantly?

  2. Actually there is a consensus. It is called the Economic Inequality Rating App (EIRA). It is the way for Canadians and all other countries to stop economic inequality now. Here is how it works:

    ECONOMIC INEQUALITY RATING APP (EIRA)

    Part One-The General Concept

    FirstRateCrowd has developed an idea for an Economic Inequality Rating App for handheld or other uses. This will essentially become a way to economically boycott select aspects the 1%. The Rating App will provide clear guidelines as to which products and services, or which individuals providing these products or services, are aligned with the 99%-Crowd in contrast to those aligned with the 1%. By following these ratings, the 99% can not only capture the revenue normally lost to the 1% through Economic Inequality, but also redirect this revenue back to themselves.

    This technology will make economic choices in support of the 99% simple and convenient to use; individuals can then change the economic equation back in favor of the 99%. This freedom of choice in the marketplace completely bypasses the usual political, tax, and judicial gridlock by placing the power directly back into the hands of the 99% to decrease economic inequality.

    By way of example, if a product such as a teapot is produced by a company with a high Inequality Rating, then we know the company producing the item is more aligned with the 1%. This purchase should be boycotted in favor of a teapot produced by another company with a lower Inequality Rating. Given the choice of purchase between the two different teapots of similar design, color, durability, and price, the teapot with the lower Inequality Rating should be chosen; this decision favors the well-being of the 99%. If one financial institution is to be chosen over another with similar services and value, then the one with a lower Inequality Rating is more in line with the 99% and should be chosen. Moreover, an individual in a position to influence an economic decision, but with a high Inequality Rating, as expressed by their views and actions, should be discarded in favor of an individual who supports the 99%.

    Moreover, an individual in a position to influence an economic decision, but with a high Inequality Rating, as expressed by their views and actions, should be discarded in favor of an individual who supports the 99%.

    This is a concept only. Our community will not actually develop the working app but will only discuss and develop the concept. We believe the concept is invaluable in our mission to stop economic inequality. Our goal in this matter is to create the demand for the concept such that a third party outside our organization, such as an individual, company, or another entity, would want to develop the actual app or a similar item.

    This is provided by the FirstRateCrowd website. I recommend anyone who wants to stop income and economic inequality participate on this website before it is too late.

    Sincerely,

    Dr. Lipkowitz

  3. The average world income is less than $10k per year – how popular is that going to be as a goal for any Canadian politician to aim at?

  4. Sadly, income is related to status, giving the wealthy an often undeserved bonus in being seen as intelligent, simply because they have money. It also enable the wealthy to be able to access better healthcare, not only because of their wealth but because of the status that comes with that and the willingness of secretaries and doctors to do more for them than for the rest of us.

    I propose a new way of dealing with the income inequality problem as well as the problem of an overburdened healthcare system. Instead of the focus being on the wealthy, when it comes to access to better healthcare – especially as they age and are in need of more, we need a new way of thinking, instead of the old rationale that the wealthy are worth more. The real issue is, do they have any more to offer Canada, that is not based simply on their past reputation, and thus given honours that may not always be deserved. If they have already given their best, and their new ideas are simply old ones dressed up in a more fanciful way, while many others who never had the same opportunities in life are feeling unfulfilled and frustrated with life in Canada (and may not even be receiving good healthcare), I believe the time has come to ration out the healthcare that goes to the “spent rich”, allowing them to fade away gradually, so their presence will not be missed or questioned. Meanwhile, those who never had such opportunities in life, or support to gain access to them, might finally be observed and their qualities and potential for contribution acknowledged, as well as the healthcare they receive increasing so that they are able to contribute to society with full attention to the work they need to do rather than on how to get doctors to see there is a problem here that needs to be dealt with and their not getting it.

    This idea will take a while to result in real change, but it would be a start. And it would involve a whole new way of thinking that is based upon the belief that there are many individuals out there who have it in them to do something good for society, and they’re not always the rich ones. In fact, those who have it too easy in life, as far as career is concerned, or gaining access to decent healthcare, are often the most narrow-minded, I have noticed. While through conforming to those above, or providing support for the status quo, they are unable to fathom that is may not be the thinking person’s fault that they are unable to get decent healthcare. Rather, having to deal with such backwards thinking in society, that causes people to look up to those with money and down on those who have much less, it puts some individuals at a disadvantage that gets to be nigh impossible to recover from. As an example, women who stayed home to raise a family and look after hubby, during that era many years ago, may have looked forward to having a life of her own, one of contribution and fulfillment, of providing meaning to life other than raising children and being there for the man of the family. And yet, our society discourages people from acknowledging that contribution to society, seeing it as a lesser contribution than what working women contribute, or women who find a place as matriarch of the wider family. And so this is what I propose. Over time, with older, wealthier individuals dying off, there might eventually be some need for the older and wiser members of society, who can contribute from their experience, while gaining status in their community and perhaps increased income too. And farther on, in another time in the future, the balance between the rich and the poor might recede, as all have their chance to contribute through the skills gained, and their knowledge, to a better society based on equality over the lifetime.

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